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S-4
CHARTER COMMUNICATIONS HOLDINGS CAPITAL CORP filed this Form S-4 on 01/25/2000
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<PAGE>   1
 
    AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 25, 2000
 
                                                      REGISTRATION NO. 333-77499
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
 
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------
 
                                    FORM S-4
                          REGISTRATION STATEMENT UNDER
                           THE SECURITIES ACT OF 1933
                            ------------------------
 
                      CHARTER COMMUNICATIONS HOLDINGS, LLC
 
                                      AND
                        CHARTER COMMUNICATIONS HOLDINGS
                              CAPITAL CORPORATION
           (EXACT NAME OF REGISTRANTS AS SPECIFIED IN THEIR CHARTERS)
 

<TABLE>
<S>                                  <C>                                  <C>
              DELAWARE                               4841                              43-1843179
              DELAWARE                               4841                              43-1843177
    (STATE OR OTHER JURISDICTION         (PRIMARY STANDARD INDUSTRIAL              (FEDERAL EMPLOYER
 OF INCORPORATION OR ORGANIZATION)       CLASSIFICATION CODE NUMBER)             IDENTIFICATION NUMBER)
</TABLE>

 
                            12444 POWERSCOURT DRIVE
                           ST. LOUIS, MISSOURI 63131
                                 (314) 965-0555
                  (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
                  NUMBER, INCLUDING AREA CODE, OF REGISTRANTS'
                          PRINCIPAL EXECUTIVE OFFICES)
 
                              CURTIS S. SHAW, ESQ.
              SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
                            12444 POWERSCOURT DRIVE
                           ST. LOUIS, MISSOURI 63131
                                 (314) 965-0555
                    (NAME, ADDRESS, INCLUDING ZIP CODE, AND
                          TELEPHONE NUMBER, INCLUDING
                        AREA CODE, OF AGENT FOR SERVICE)
 
                                   COPIES TO:
 

<TABLE>
<S>                                                   <C>
              DANIEL G. BERGSTEIN, ESQ.                               ALVIN G. SEGEL, ESQ.
                 LEIGH P. RYAN, ESQ.                                   IRELL & MANELLA LLP
              PATRICIA M. CARROLL, ESQ.                        1800 AVENUE OF THE STARS, SUITE 900
        PAUL, HASTINGS, JANOFSKY & WALKER LLP                  LOS ANGELES, CALIFORNIA 90067-4276
                   399 PARK AVENUE                                       (310) 277-1010
              NEW YORK, NEW YORK 10022
                   (212) 318-6000
</TABLE>

 
                           -------------------------
 
    APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED EXCHANGE OFFER:  As soon as
practicable after this Registration Statement becomes effective.
 
    If any of the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
 
    If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
 
    If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
                        CALCULATION OF REGISTRATION FEE
 

<TABLE>
<CAPTION>
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                                                                       PROPOSED              PROPOSED
                                                  AMOUNT               MAXIMUM               MAXIMUM              AMOUNT OF
         TITLE OF EACH CLASS OF                   TO BE             OFFERING PRICE          AGGREGATE            REGISTRATION
       SECURITIES TO BE REGISTERED              REGISTERED             PER NOTE           OFFERING PRICE            FEE(1)
---------------------------------------------------------------------------------------------------------------------------------
<S>                                        <C>                   <C>                   <C>                   <C>
10.00% Senior Notes due 2009.............      $675,000,000              100%              $675,000,000          $178,000.00
---------------------------------------------------------------------------------------------------------------------------------
10.25% Senior Notes due 2010.............      $325,000,000              100%              $325,000,000          $ 85,800.00
---------------------------------------------------------------------------------------------------------------------------------
11.75% Senior Discount Notes due 2010....    $532,300,000(2)           56.448%             $300,303,360          $ 79,280.09
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

 
(1) Calculated pursuant to Rule 457.
 
(2) Based on the aggregate principal amount at maturity.
                           -------------------------
 
     THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

<PAGE>   2
 
                 SUBJECT TO COMPLETION, DATED JANUARY 25, 2000
                                 $1,532,000,000
                               Offer to Exchange
                         10.00% Senior Notes due 2009,
     10.25% Senior Notes due 2010 and 11.75% Senior Discount Notes due 2010
                          for any and all outstanding
                         10.00% Senior Notes due 2009,
    10.25% Senior Notes due 2010 and 11.75% Senior Discount Notes due 2010,
                                respectively, of
 
                      CHARTER COMMUNICATIONS HOLDINGS, LLC
                                      and
                        CHARTER COMMUNICATIONS HOLDINGS
                              CAPITAL CORPORATION
                           -------------------------
 
     - This exchange offer expires at 5:00 p.m., New York City time, on February
          , 2000, unless extended.
 
     - No public market exists for the original notes or the new notes. We do
       not intend to list the new notes on any securities exchange or to seek
       approval for quotation through any automated quotation system.
                           -------------------------
 
     SEE "RISK FACTORS" BEGINNING ON PAGE 16 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY HOLDERS WHO TENDER THEIR ORIGINAL NOTES IN THE
EXCHANGE OFFER AND BY PURCHASERS OF THE NOTES FROM PERSONS ELIGIBLE TO USE THIS
PROSPECTUS FOR RESALES.
 
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
 
     The information in this prospectus is not complete and may be changed. We
may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any State in which the offer or sale would be unlawful.
 
                       NOTICE TO NEW HAMPSHIRE RESIDENTS
 
     NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A
LICENSE HAS BEEN FILED UNDER CHAPTER 421-b OF THE NEW HAMPSHIRE UNIFORM
SECURITIES ACT WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS
EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE
CONSTITUTES A FINDING BY THE SECRETARY OF STATE THAT ANY DOCUMENT FILED UNDER
RSA 421-b IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE
FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION
MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR
QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY, OR
TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE
PURCHASER, CUSTOMER, OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE
PROVISIONS OF THIS PARAGRAPH.
 
               The date of this prospectus is February    , 2000.

<PAGE>   3
 
                               TABLE OF CONTENTS
 

<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
Summary.....................................................    1
Risk Factors................................................   16
Forward-Looking Statements..................................   31
Use of Proceeds.............................................   32
Capitalization..............................................   33
Unaudited Pro Forma Financial Statements....................   36
Selected Historical Financial Data..........................   59
Management's Discussion and Analysis of Financial Condition
  and Results of Operations.................................   60
The Exchange Offer..........................................   84
Business....................................................   93
Regulation and Legislation..................................  123
Management..................................................  130
Principal Equity Holders....................................  142
Certain Relationships and Related Transactions..............  144
Description of Certain Indebtedness.........................  159
Description of Notes........................................  175
Material United States Federal Income Tax Considerations....  216
Plan of Distribution........................................  224
Legal Matters...............................................  224
Experts.....................................................  225
Index to Financial Statements...............................  F-1
</TABLE>

 
                                        i

<PAGE>   4
 
                                    SUMMARY
 
     The following summary contains a general discussion of our business, the
exchange offer and summary financial information. It likely does not contain all
the information that is important to you in making a decision to tender original
notes in exchange for new notes. For a more complete understanding of the
exchange offer, you should read this entire prospectus and the other documents
to which we refer.
 
     Unless stated otherwise, the discussion of our business in this prospectus
includes Charter Holdings and its direct and indirect subsidiaries after giving
effect to the transactions described on page 3 of this prospectus.
 
                                  OUR BUSINESS
 
     We are the fourth largest operator of cable television systems in the
United States, serving approximately 6.2 million customers, after giving effect
to the pending Bresnan acquisition, described below.
 
     We offer a full range of traditional cable television services and have
begun to offer digital cable television services to customers in some of our
systems. Digital technology enables cable operators to increase the number of
channels a cable system can carry by permitting a significantly increased number
of video signals to be transmitted over a cable system's existing bandwidth.
Bandwidth is a measure of the information-carrying capacity of a communication
channel. It is the range of usable frequencies that can be carried by a cable
system.
 
     We have also started to introduce a number of other new products and
services, including interactive video programming, which allows information to
flow in both directions, and high-speed Internet access to the World Wide Web.
We are also exploring opportunities in telephony, which will integrate telephone
services with the Internet through the use of cable. The introduction of these
new services represents an important step toward the realization of our Wired
World(TM) vision, where cable's ability to transmit voice, video and data at
high speeds will enable it to serve as the primary platform for the delivery of
new services to the home and workplace. We are accelerating the upgrade of our
systems to more quickly provide these new services.
 
     We have grown rapidly over the past five years. During this period, our
management team has successfully completed 31 acquisitions, including eleven
acquisitions closed in 1999. We also merged with Marcus Cable Holdings, LLC in
April 1999. We have also expanded our customer base through significant internal
growth. For the 12 months ended September 30, 1999, our internal customer
growth, without giving effect to the cable systems we acquired during that
period, was 3.9%, compared to the national industry average of 1.8%. In 1998,
our internal customer growth, without giving effect to the cable systems we
acquired in that year, was 4.8%, more than twice the national industry average
of 1.7%.
 
     Our principal executive offices are located at 12444 Powerscourt Drive, St.
Louis, Missouri 63131. Our telephone number is (314) 965-0555 and our web site
is located at www.chartercom.com. The information on our web site is not part of
this prospectus.
                                        1

<PAGE>   5
 
                               BUSINESS STRATEGY
 
     Our objective is to increase our operating cash flow by increasing our
customer base and the amount of cash flow per customer. To achieve this
objective, we are pursuing the following strategies:
 
     - rapidly integrate acquired cable systems and apply our core operating
       strategies to raise the financial and operating performance of these
       acquired systems;
 
     - expand the array of services we offer to our customers through the
       implementation of our Wired World vision;
 
     - upgrade the bandwidth capacity of our systems to 550 megahertz or greater
       to enable greater channel capacity and add two-way capability to
       facilitate interactive communication. Two-way capability is the ability
       to have bandwidth available for upstream, or two-way, communication;
 
     - maximize customer satisfaction by providing reliable, high-quality
       service offerings, superior customer service and attractive programming
       choices at reasonable rates;
 
     - employ innovative marketing programs tailored to local customer
       preferences to generate additional revenues;
 
     - emphasize local management autonomy to better serve our customers while
       providing support from regional and corporate offices and maintaining
       centralized financial controls; and
 
     - improve the geographic clustering of our cable systems by selectively
       trading or acquiring systems to increase operating efficiencies and
       improve operating margins. Clusters refer to cable systems under common
       ownership which are located within geographic proximity to each other.
                                        2

<PAGE>   6
 
                        CHARTER ORGANIZATIONAL STRUCTURE
 
     The chart on the following page sets forth our organizational structure and
that of our direct and indirect parent companies and assumes the occurrence of
the following transactions, referred to in this prospectus as the "Pending
Transactions":
 
     - all of the Avalon 9.375% senior subordinated notes have been repurchased
       pursuant to a pending change of control offer for these notes and none of
       the Avalon 11.875% senior discount notes have been put to Avalon pursuant
       to a pending change of control offer for these notes;
 
     - all of the Falcon 8.375% senior debentures and 9.285% senior discount
       debentures have been repurchased pursuant to pending change of control
       offers for these debentures;
 
     - the acquisition of the Bresnan cable systems by Charter Communications
       Holding Company has closed and the equity interests of the affiliated
       companies which then own the cable systems acquired in this acquisition
       have been contributed to Charter Holdings by Charter Communications
       Holding Company;
 
     - specified sellers in the Bresnan acquisition have received $1 billion of
       their consideration in Charter Communications Holding Company membership
       units rather than in cash and these membership units have not been
       exchanged for shares of Class A common stock of Charter Communications,
       Inc.;
 
     - all of the Bresnan 8% senior notes and 9.250% senior discount notes have
       been repurchased pursuant to change of control offers for these notes
       that will be required after the Bresnan acquisition; and
 
     - none of the outstanding options to purchase membership units of Charter
       Communications Holding Company have been exercised.
 
     The Avalon change of control offer and the Falcon change of control offers
are scheduled to close on or about January 28, 2000 and February 4, 2000,
respectively. We expect to commence the Bresnan change of control offers within
30 days of the closing of the Bresnan acquisition.
 
     The following transfers occurred on January 1, 2000:
 
     - the equity interests of the affiliated company which owns the cable
       systems acquired by our direct 100% parent, Charter Communications
       Holding Company, LLC, in the Avalon acquisition were transferred to
       Charter Holdings;
 
     - the equity interests of the affiliated companies which own the cable
       systems acquired by Charter Communications Holdings Company in the Falcon
       acquisition were transferred to Charter Holdings; and
 
     - the equity interests of the affiliated company which owns the cable
       systems acquired by Charter Communications Holdings Company in the Fanch
       acquisition were transferred to Charter Holdings.
                                        3

<PAGE>   7
 
                        CHARTER ORGANIZATIONAL STRUCTURE
 
     The new notes to be issued in the exchange offer will be issued by Charter
Communications Holdings, LLC and Charter Communications Capital Corporation, the
co-issuers of the original notes. Our cable systems, which are managed by
Charter Communications, Inc., are owned by our wholly owned subsidiaries. The
chart below sets forth our corporate structure and that of our direct and
indirect parent companies.
 
                      [CHARTER COMMUNICATIONS FLOW CHART]
 
     For a more detailed description of each entity and how it relates to us,
see "Business -- Charter Organizational Structure."
                                        4

<PAGE>   8
 
                                 RECENT EVENTS
 
1999 ACQUISITIONS
 
     In 1999, we completed eleven acquisitions of cable systems. The systems
acquired during 1999 had revenues of approximately $1.0 billion for 1998. Other
information regarding the acquisitions is as follows:
 

<TABLE>
<CAPTION>
                                                                              AS OF AND FOR
                                                                          THE NINE MONTHS ENDED
                                                    PURCHASE PRICE         SEPTEMBER 30, 1999
                                   ACQUISITION        (INCLUDING       ---------------------------
                                     CLOSING        ASSUMED DEBT)                      REVENUE
      ACQUISITIONS IN 1999             DATE         (IN MILLIONS)      CUSTOMERS    (IN THOUSANDS)
      --------------------         ------------   ------------------   ---------    --------------
<S>                                <C>            <C>                  <C>          <C>
Renaissance Media Group LLC......      4/99          $       459         132,000      $   46,589
American Cable Entertainment,
  LLC............................      5/99                  240          69,000          27,540
Cable systems of Greater Media
  Cablevision, Inc. .............      6/99                  500         174,000          63,749
Helicon Partners I, L.P. and
  affiliates.....................      7/99                  550         172,000          63,784
Vista Broadband Communications,
  L.L.C..........................      7/99                  126          27,000          10,610
Cable system of Cable Satellite
  of South Miami, Inc............      8/99                   22           9,000           3,106
Rifkin Acquisition Partners,
  L.L.L.P. and InterLink
  Communications Partners,
  LLLP...........................      9/99                1,460         464,000         159,465
Cable systems of InterMedia
  Capital Partners IV, L.P.,
  InterMedia Partners                                        873+        413,000
  and affiliates.................     10/99          system swap        (142,000)(a)      152,789
                                                                       ---------
                                                                         271,000
Cable systems of Fanch
  Cablevision L.P. and
  affiliates.....................     11/99                2,400         538,000         155,626
Falcon Communications, L.P. .....     11/99                3,481       1,004,000         320,228
Avalon Cable LLC.................     11/99                  845         261,000(b)       81,559
                                                     -----------       ---------      ----------
  Total..........................                    $    10,956       3,121,000      $1,085,045
                                                     ===========       =========      ==========
</TABLE>

 
-------------------------
 
(a) Represents the number of customers served by cable systems that we agreed to
    transfer to InterMedia in connection with the InterMedia acquisition. This
    number includes 30,000 customers served by an Indiana cable system that we
    did not transfer at the time of the InterMedia closing because some of the
    necessary regulatory approvals were still pending. We are obligated to
    transfer this system to InterMedia upon receipt of such regulatory
    approvals. We will have to pay approximately $88.2 million to InterMedia if
    we do not obtain timely regulatory approvals for our transfer to InterMedia
    of the Indiana cable system and we are unable to transfer replacement
    systems.
 
(b) Includes approximately 5,400 customers served by cable systems that we will
    acquire from certain former affiliates of Avalon. We expect the acquisition
    of these systems to be completed in January 2000. The $845 million purchase
    price for Avalon includes the purchase price for these systems of
    approximately $13 million.
                                        5

<PAGE>   9
 
PENDING BRESNAN ACQUISITION
 
     In June 1999, Charter Communications Holding Company entered into an
agreement to purchase Bresnan Communications Company Limited Partnership. The
Bresnan cable systems had revenues of approximately $262 million for 1998. Other
information regarding the Bresnan acquisition is as follows:
 

<TABLE>
<CAPTION>
                                                                               AS OF AND FOR THE NINE
                                                               PURCHASE             MONTHS ENDED
                                                                 PRICE           SEPTEMBER 30, 1999
                                                              (INCLUDING     ---------------------------
                                        ANTICIPATED          ASSUMED DEBT)                   REVENUES
PENDING ACQUISITION               ACQUISITION CLOSING DATE   (IN MILLIONS)   CUSTOMERS    (IN THOUSANDS)
-------------------               ------------------------   -------------   ---------    --------------
<S>                               <C>                        <C>             <C>          <C>
Bresnan Communications Company
Limited Partnership.............      1st Quarter 2000          $3,100        687,000(a)     $209,749
</TABLE>

 
-------------------------
 
(a) Includes approximately 23,800 customers served by cable systems acquired by
    Bresnan since September 30, 1999 or to be acquired by Bresnan in
    acquisitions not yet completed.
 
     We expect that the Bresnan purchase price will be paid with a portion of
the net proceeds of Charter Communications, Inc.'s initial public offering, $1
billion of equity of Charter Communications Holding Company issued to specified
sellers in the acquisition, assumed debt (comprised of the existing Bresnan
credit facilities and publicly held notes) and borrowings under credit
facilities. We cannot assure you that the Bresnan acquisition will be completed.
 
     We expect to assume and amend the existing Bresnan credit facilities and
increase the borrowing availability thereunder. We expect to borrow
approximately $635 million under these credit facilities in connection with the
closing of the Bresnan acquisition. The $635 million represents $512 million in
outstanding borrowings under the Bresnan credit facilities and $123 million in
additional borrowings under these credit facilities that we anticipate using to
fund a portion of the Bresnan purchase price. In addition, we expect that we
will have to repurchase outstanding Bresnan notes at prices equal to 101% of
their principal amount, plus accrued and unpaid interest, or their accreted
value, as applicable, in connection with required change of control offers for
these notes. As of the anticipated closing date of the Bresnan acquisition, the
total amount of principal and accreted value of the Bresnan notes will be
approximately $362.3 million. We intend to fund the repurchase of a portion of
the Bresnan notes with a portion of the net proceeds from the sale of the
original notes.
 
PENDING SWAP TRANSACTION
 
     On December 1, 1999, Charter Communications, Inc. entered into a
non-binding letter of intent with AT&T Broadband & Internet Services to exchange
certain cable systems (the "Swap Transaction"). The contemplated Swap
Transaction involves cable systems owned by AT&T located in municipalities in
Alabama, Georgia, Illinois and Missouri serving approximately 701,000
subscribers and certain of our cable systems located in municipalities in
California, Connecticut, Kentucky, Massachusetts, Texas and Tennessee serving
approximately 631,000 subscribers. If the Swap Transaction is completed, it will
allow us to improve the clustering of our cable systems in certain key markets.
For example, upon completion of the Swap Transaction we would serve
approximately 800,000 customers in St. Louis and the surrounding areas of
Missouri and Illinois. We believe that improved clustering will allow us to gain
operating efficiencies and economies of scale, as well as to accelerate the
roll-out of enhanced broadband technology and services to more customers. The
agreed value of the AT&T systems is $2.5 billion and the agreed value of the
Charter systems is $2.4 billion. As part of the Swap Transaction, we will pay
AT&T approximately $108 million in cash, which represents the difference in the
agreed values of the systems being exchanged. The Swap
                                        6

<PAGE>   10
 
Transaction is subject to the negotiation and execution of a definitive exchange
agreement, regulatory approvals and other conditions typical in transactions of
this type. We cannot assure you that the Swap Transaction will be completed.
 
INITIAL PUBLIC OFFERING OF COMMON STOCK OF CHARTER COMMUNICATIONS, INC.
 
     Charter Holdings is a subsidiary of Charter Communications Holding Company.
Charter Communications, Inc.'s principal asset is an approximate 38% equity
interest and 100% voting interest in Charter Communications Holding Company. In
November 1999, Charter Communications, Inc. completed an initial public offering
of 195,500,000 shares of its Class A common stock at $19.00 per share for total
net proceeds of $3.57 billion. At that time, Paul G. Allen purchased 50,000
shares of high vote Class B common stock of Charter Communications, Inc. at the
initial public offering price. In addition, at the closing of the initial public
offering, Paul G. Allen through Vulcan Cable III Inc. invested $750 million to
purchase membership units from Charter Communications Holding Company at the
initial public offering price, net of underwriters' discounts. All of the
proceeds from the offering were used, directly or indirectly, by Charter
Communications, Inc. to purchase membership units in Charter Communications
Holding Company, which used a portion of the funds received from Charter
Communications, Inc. and Vulcan Cable III Inc. to pay a portion of the purchase
prices of the Fanch, Falcon and Avalon acquisitions.
 
RECENT AND PENDING TRANSFER TRANSACTIONS
 
     On January 1, 2000, Charter Holdings and Charter Communications Holding
Company effected a number of transactions to transfer recently acquired cable
systems to Charter Holdings. As a result of these transactions, Charter Holdings
became the indirect parent of the Fanch, Falcon and Avalon cable systems. We
anticipate that the transfer of the Bresnan cable systems to Charter Holdings
will occur shortly after the consummation of the pending Bresnan acquisition,
which we expect to complete in the first quarter of 2000.
 
APRIL 1999 MERGER WITH MARCUS HOLDINGS
 
     On April 23, 1998, Mr. Allen acquired approximately 99% of the non-voting
economic interests in Marcus Cable Company, L.L.C., and agreed to acquire the
remaining interests in Marcus Cable. The total purchase price was approximately
$3.2 billion, including $1.8 billion in assumed debt. On February 22, 1999,
Marcus Holdings was formed, and all of Mr. Allen's interests in Marcus Cable
were transferred to Marcus Holdings on March 15, 1999. On March 31, 1999, Mr.
Allen completed the acquisition of all remaining interests of Marcus Cable. On
April 7, 1999, Mr. Allen merged Marcus Holdings into Charter Holdings, with
Charter Holdings surviving the merger. The operating subsidiaries of Marcus
Holdings became subsidiaries of our subsidiary, Charter Communications
Operating, LLC.
 
     MARCH 1999 CHARTER HOLDINGS NOTES.  On March 17, 1999, Charter Holdings and
Charter Capital issued $3.6 billion principal amount of senior notes, referred
to in this prospectus as the "March 1999 Charter Holdings notes," consisting of
$600 million in aggregate principal amount of 8.250% senior notes due 2007,
referred to in this prospectus as the "March 1999 8.250% Charter Holdings
notes," $1.5 billion in aggregate principal amount of 8.625% senior notes due
2009, referred to in this prospectus as the "March 1999 8.625% Charter Holdings
notes," and $1.475 billion in aggregate principal amount at maturity of 9.920%
senior discount notes due 2011, referred to in this prospectus as the "March
1999 9.920% Charter Holdings notes." The net proceeds of approximately $2.99
billion, combined with borrowings under our credit facilities, were used to
consummate tender offers for publicly held debt of several of our subsidiaries,
to refinance borrowings under our previous credit facilities, for working
capital purposes and to finance a number of acquisitions.
                                        7

<PAGE>   11
 
                               THE EXCHANGE OFFER
 
Resales Without Further
  Registration.............  We believe that the new notes issued pursuant to
                             the exchange offer may be offered for resale,
                             resold or otherwise transferred by you without
                             compliance with the registration and prospectus
                             delivery provisions of the Securities Act of 1933,
                             as amended, provided that:
 
                               - you are acquiring the new notes issued in the
                                 exchange offer in the ordinary course of your
                                 business;
 
                               - you have not engaged in, do not intend to
                                 engage in, and have no arrangement or
                                 understanding with any person to participate
                                 in, the distribution of the new notes issued to
                                 you in the exchange offer, and;
 
                               - you are not our "affiliate," as defined under
                                 Rule 405 of the Securities Act.
 
                             Each of the participating broker-dealers that
                             receives new notes for its own account in exchange
                             for original notes that were acquired by such
                             broker or dealer as a result of market-making or
                             other activities must acknowledge that it will
                             deliver a prospectus in connection with the resale
                             of the new notes.
 
Expiration Date............  5:00 p.m., New York City time, on February   , 2000
                             unless we extend the exchange offer.
 
Exchange and Registration
  Rights Agreements........  You have the right to exchange the original notes
                             that you hold for new notes with substantially
                             identical terms. This exchange offer is intended to
                             satisfy these rights. Once the exchange offer is
                             complete, you will no longer be entitled to any
                             exchange or registration rights with respect to
                             your original notes.
 
Accrued Interest on the New
  Notes and Original
  Notes....................  The new notes will bear interest from January 12,
                             2000. Holders of original notes which are accepted
                             for exchange will be deemed to have waived the
                             right to receive any payment in respect of interest
                             on such original notes accrued to the date of
                             issuance of the new notes.
 
Conditions to the Exchange
  Offer....................  The exchange offer is conditioned upon certain
                             customary conditions which we may waive and upon
                             compliance with securities laws.
 
Procedures for Tendering
  Original Notes...........  Each holder of original notes wishing to accept the
                             exchange offer must:
 
                               - complete, sign and date the letter of
                                 transmittal, or a facsimile of the letter of
                                 transmittal; or
                                        8

<PAGE>   12
 
                               - arrange for the Depository Trust Company to
                                 transmit certain required information to the
                                 exchange agent in connection with a book-entry
                                 transfer.
 
                             You must mail or otherwise deliver such
                             documentation together with the original notes to
                             the exchange agent.
 
Special Procedures for
  Beneficial Holders.......  If you beneficially own original notes registered
                             in the name of a broker, dealer, commercial bank,
                             trust company or other nominee and you wish to
                             tender your original notes in the exchange offer,
                             you should contact such registered holder promptly
                             and instruct them to tender on your behalf. If you
                             wish to tender on your own behalf, you must, before
                             completing and executing the letter of transmittal
                             for the exchange offer and delivering your original
                             notes, either arrange to have your original notes
                             registered in your name or obtain a properly
                             completed bond power from the registered holder.
                             The transfer of registered ownership may take
                             considerable time.
 
Guaranteed Delivery
  Procedures...............  You must comply with the applicable procedures for
                             tendering if you wish to tender your original notes
                             and:
 
                               - time will not permit your required documents to
                                 reach the exchange agent by the expiration date
                                 of the exchange offer; or
 
                               - you cannot complete the procedure for
                                 book-entry transfer on time; or
 
                               - your original notes are not immediately
                                 available.
 
Withdrawal Rights..........  You may withdraw your tender of original notes at
                             any time prior to 5:00 p.m., New York City time, on
                             the date the exchange offer expires.
 
Failure to Exchange Will
  Affect You Adversely.....  If you are eligible to participate in the exchange
                             offer and you do not tender your original notes,
                             you will not have further exchange or registration
                             rights and your original notes will continue to be
                             subject to some restrictions on transfer.
                             Accordingly, the liquidity of the original notes
                             will be adversely affected.
 
Material United States
  Federal Income Tax
  Consideration............  The disclosure in this prospectus represents our
                             legal counsel's opinion as to the material United
                             States Federal income tax consequences of
                             participating in the exchange offer and in
                             connection with the ownership and disposition of
                             the new notes. The exchange of original notes for
                             new notes pursuant to the exchange offer will not
                             result in a taxable event. Accordingly, it is our
                             legal counsel's opinion that:
 
                               - no gain or loss will be realized by a U.S.
                                 holder upon receipt of a new note;
                                        9

<PAGE>   13
 
                               - a holder's holding period for new notes will
                                 include the holding period for original notes;
                                 and
 
                               - the adjusted tax basis of the new notes will be
                                 the same as the adjusted tax basis of the
                                 original notes exchanged at the time of such
                                 exchange.
 
                             Paul, Hastings, Janofsky & Walker LLP has rendered
                             the above-referenced opinion in connection with the
                             exchange offer. See "Material United States Federal
                             Income Tax Consideration."
 
Exchange Agent.............  Harris Trust and Savings Bank is serving as
                             exchange agent.
 
Use of Proceeds............  We will not receive any proceeds from the exchange
                             offer.
                                       10

<PAGE>   14
 
                           SUMMARY TERMS OF NEW NOTES
 
Issuers.......................   Charter Communications Holdings, LLC and
                                 Charter Communications Holdings Capital
                                 Corporation.
 
Notes Offered.................   $675.0 million in principal amount of 10.00%
                                 senior notes due 2009.
 
                                 $325.0 million in principal amount of 10.25%
                                 senior notes due 2010.
 
                                 $532.3 million in principal amount at maturity
                                 of 11.75% senior discount notes due 2010.
 
                                 The form and terms of the new notes will be the
                                 same as the form and terms of the outstanding
                                 notes except that:
 
                                 - the new notes will bear a different CUSIP
                                   number from the original notes;
 
                                 - the new notes will have been registered under
                                   the Securities Act of 1933 and, therefore,
                                   will not bear legends restricting their
                                   transfer; and
 
                                 - you will not be entitled to any exchange or
                                   registration rights with respect to the new
                                   notes.
 
                                 The new notes will evidence the same debt as
                                 the original notes. They will be entitled to
                                 the benefits of the indentures governing the
                                 original notes and will be treated under the
                                 indentures as a single class with the original
                                 notes.
 

<TABLE>
<CAPTION>
                       MATURITY
                         DATE                ISSUE PRICE                   INTEREST
                   ----------------  ---------------------------  ---------------------------
<S>                <C>               <C>                          <C>
10.00% Notes.....  April 1, 2009     100.00% plus accrued         10.00% per annum, payable
                                     interest, if any, from       every six months on April 1
                                     January 12, 2000             and October 1, beginning
                                                                  April 1, 2000
10.25% Notes.....  January 15, 2010  100.00%, plus accrued        10.25% per annum, payable
                                     interest, if any, from       every six months on January
                                     January 12, 2000             15 and July 15, beginning
                                                                  July 15, 2000
11.75% Notes.....  January 15, 2010  56.448%, with original       Interest to accrete at a
                                     issue discount to accrete    rate of 11.75% per annum to
                                     from January 12, 2000        an aggregate amount of
                                                                  $532.0 million by January
                                                                  15, 2005; thereafter, cash
                                                                  interest will be payable
                                                                  every six months on January
                                                                  15 and July 15 at a rate of
                                                                  11.75% per annum, beginning
                                                                  July 15, 2005
</TABLE>

 
Ranking....................  The new notes will be senior debts. They will rank
                             equally with the current and future unsecured and
                             unsubordinated debt of Charter Holdings, including
                             the March 1999 senior notes and senior discount
                             notes and trade payables, which are accounts
                             payable to vendors,
                                       11

<PAGE>   15
 
                             suppliers and service providers. Charter Holdings
                             is a holding company and conducts all of its
                             operations through its direct and indirect
                             subsidiaries. If it defaults, your right to payment
                             under the new notes will rank below all existing
                             and future liabilities, including trade payables,
                             of the subsidiaries of Charter Holdings. As of
                             September 30, 1999, all of our outstanding debt,
                             other than the March 1999 Charter Holdings notes
                             and the original notes, but including our credit
                             facilities, was incurred by our subsidiaries. As of
                             that date, as adjusted to give effect to the sale
                             of the original notes, acquisitions completed since
                             that date, the recent transfer to us of the Fanch,
                             Falcon and Avalon cable systems and the Pending
                             Transactions as if such transactions had occurred
                             on that date, debt of Charter Holdings and its
                             subsidiaries would have totaled approximately $10.7
                             billion, $6.4 billion of which would have ranked
                             senior to the new notes.
 
Optional Redemption........  We will not have the right to redeem the 10.00%
                             notes prior to their maturity date on April 1,
                             2009.
 
                             On or after January 15, 2005, we may redeem some or
                             all of the 10.25% notes and the 11.75% discount
                             notes at any time at the redemption prices listed
                             in the "Description of Notes" section under the
                             heading "Optional Redemption."
 
                             Before January 15, 2003, we may redeem up to 35% of
                             the 10.25% notes and the 11.75% discount notes with
                             the proceeds of certain offerings of equity
                             securities at the prices listed in the "Description
                             of Notes" section under the heading "Optional
                             Redemption."
 
Mandatory Offer to
Repurchase.................  If Charter Holdings, Charter Communications Holding
                             Company or Charter Communications, Inc. experiences
                             certain changes of control, we must offer to
                             repurchase any then-outstanding notes at 101% of
                             their principal amount plus accrued and unpaid
                             interest or accreted value, as applicable.
 
Basic Covenants of
Indentures                   The indentures governing the notes will, among
                             other things, restrict our ability and the ability
                             of certain of our subsidiaries to:
                               - pay dividends on stock or repurchase stock;
                               - make investments;
                               - borrow money;
                               - create certain liens;
                               - sell all or substantially all of our assets or
                                 merge with or into other companies;
                               - sell assets;
                               - in the case of our restricted subsidiaries,
                                 create or permit to exist dividend or payment
                                 restrictions with respect to us; and
                               - engage in certain transactions with affiliates.
 
                             These covenants are subject to important
                             exceptions. See "Description of Notes -- Certain
                             Covenants."
 
                                  RISK FACTORS
 
     You should carefully consider all of the information in this prospectus. In
particular, you should evaluate the specific risk factors under "Risk Factors"
for a discussion of risks associated with an investment in the new notes.
                                       12

<PAGE>   16
 
                   UNAUDITED SUMMARY PRO FORMA FINANCIAL DATA
 
     You should read the following unaudited summary pro forma financial data of
Charter Holdings in conjunction with the historical financial statements and
other financial information appearing elsewhere in this prospectus, including
"Capitalization," "Unaudited Pro Forma Financial Statements" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
 

<TABLE>
<CAPTION>
                                                            UNAUDITED SUMMARY PRO FORMA STATEMENT OF OPERATIONS
                                                                   NINE MONTHS ENDED SEPTEMBER 30, 1999
                                          ---------------------------------------------------------------------------------------
                                                                 1999                       BRESNAN      OFFERING
                                          CHARTER HOLDINGS   ACQUISITIONS    SUBTOTAL     ACQUISITION   ADJUSTMENTS      TOTAL
                                          ----------------   ------------   -----------   -----------   -----------   -----------
                                                                          (DOLLARS IN THOUSANDS)
<S>                                       <C>                <C>            <C>           <C>           <C>           <C>
Revenues................................    $   970,362       $  974,776    $ 1,945,138   $  217,370     $     --     $ 2,162,508
                                            -----------       ----------    -----------   ----------     --------     -----------
Operating expenses:
 Operating, general and
   administrative.......................        505,041          481,917        986,958      121,089           --       1,108,047
 Depreciation and amortization..........        505,058          587,184      1,092,242      164,936           --       1,257,178
 Stock option compensation expense......         59,288               --         59,288           --           --          59,288
 Corporate expense charges(a)...........         18,309           46,156         64,465       10,850           --          75,315
 Management fees........................             --           11,677         11,677          221           --          11,898
                                            -----------       ----------    -----------   ----------     --------     -----------
   Total operating expenses.............      1,087,696        1,126,934      2,214,630      297,096           --       2,511,726
                                            -----------       ----------    -----------   ----------     --------     -----------
Loss from operations....................       (117,334)        (152,158)      (269,492)     (79,726)          --        (349,218)
Interest expense........................       (310,650)        (295,280)      (605,930)     (67,619)     (22,804)       (696,353)
Interest income.........................          2,284            1,308          3,592           26           --           3,618
Other income (expense)..................           (335)            (455)          (790)          --           --            (790)
                                            -----------       ----------    -----------   ----------     --------     -----------
Loss before extraordinary item..........    $  (426,035)      $ (446,585)   $  (872,620)  $ (147,319)    $(22,804)    $(1,042,743)
                                            ===========       ==========    ===========   ==========     ========     ===========
OTHER FINANCIAL DATA:
EBITDA(b)...............................    $   387,389       $  434,571    $   821,960   $   85,210                  $   907,170
EBITDA margin(c)........................           39.9%            44.6%          42.3%        39.2%                        41.9%
Adjusted EBITDA(d)......................    $   465,321       $  492,859    $   958,180   $   96,281                  $ 1,054,461
Cash flows from operating activities....        292,557          289,830        582,387       97,534                      679,921
Cash flows used in investing
 activities.............................       (504,922)        (500,680)    (1,005,602)     (69,303)                  (1,074,905)
Cash flows from financing activities....        645,632          299,797        945,429       15,410                      960,839
Cash interest expense...................                                                                                  564,959
Capital expenditures....................        442,358          348,403        790,761       59,645                      850,406
Total debt to annualized EBITDA.........                                                                                     8.89x
Total debt to annualized adjusted
 EBITDA.................................                                                                                     7.64
EBITDA to cash interest expense.........                                                                                     1.61
EBITDA to interest expense..............                                                                                     1.30
Deficiency of earnings to cover fixed
 charges(e).............................                                                                              $ 1,042,743
BALANCE SHEET DATA (AT END OF PERIOD):
Total assets............................    $11,235,191       $7,419,671    $18,654,862   $3,116,319     $ 47,228     $21,818,409
Total debt..............................      6,244,632        3,420,397      9,665,029    1,035,000       47,228      10,747,257
Member's equity.........................      4,514,306        3,793,149      8,307,455    2,048,721           --      10,356,176
OPERATING DATA (AT END OF PERIOD, EXCEPT
 FOR AVERAGES):
Homes passed(f).........................      5,541,000        3,183,000      8,724,000    1,022,000                    9,746,000
Basic customers(g)......................      3,426,000        2,074,000      5,500,000      687,000                    6,187,000
Basic penetration(h)....................           61.8%            65.2%          63.0%        67.2%                        63.5%
Premium units(i)........................      2,039,000          785,000      2,824,000      302,000                    3,126,000
Premium penetration(j)..................           59.5%            37.8%          51.3%        44.0%                        50.5%
Average monthly revenue per basic
 customer(k)............................                                                                              $     38.84
</TABLE>

 
                                       13

<PAGE>   17
 

<TABLE>
<CAPTION>
                                                        UNAUDITED SUMMARY PRO FORMA STATEMENT OF OPERATIONS
                                                                    YEAR ENDED DECEMBER 31, 1998
                                   ----------------------------------------------------------------------------------------------
                                    CHARTER                      1999                       BRESNAN      OFFERING
                                    HOLDINGS      MARCUS     ACQUISITIONS    SUBTOTAL     ACQUISITION   ADJUSTMENTS      TOTAL
                                   ----------   ----------   ------------   -----------   -----------   -----------   -----------
                                                                       (DOLLARS IN THOUSANDS)
<S>                                <C>          <C>          <C>            <C>           <C>           <C>           <C>
Revenues.........................  $  601,953   $  457,929   $ 1,352,370    $ 2,412,252   $  279,252     $     --     $ 2,691,504
                                   ----------   ----------   -----------    -----------   ----------     --------     -----------
Operating expenses:
  Operating, general and
    administrative...............     304,555      236,595       663,870      1,205,020      154,695           --       1,359,715
  Depreciation and
    amortization.................     370,406      258,348       854,661      1,483,415      224,983           --       1,708,398
  Stock option compensation
    expense......................         845           --            --            845           --           --             845
  Corporate expense charges(a)...      16,493       17,042        42,313         75,848        5,768           --          81,616
  Management fees................          --           --        20,803         20,803           --           --          20,803
                                   ----------   ----------   -----------    -----------   ----------     --------     -----------
    Total operating expenses.....     692,299      511,985     1,581,647      2,785,931      385,446           --       3,171,377
                                   ----------   ----------   -----------    -----------   ----------     --------     -----------
Loss from operations.............     (90,346)     (54,056)     (229,277)      (373,679)    (106,194)          --        (479,873)
Interest expense.................    (200,794)    (137,627)     (489,077)      (827,498)     (90,764)     (32,521)       (950,783)
Other income (expense)...........         518           --       (11,462)       (10,944)          --           --         (10,944)
                                   ----------   ----------   -----------    -----------   ----------     --------     -----------
Loss before extraordinary
  items..........................  $ (290,622)  $ (191,683)  $  (729,816)   $(1,212,121)  $ (196,958)    $(32,521)    $(1,441,600)
                                   ==========   ==========   ===========    ===========   ==========     ========     ===========
OTHER FINANCIAL DATA:
EBITDA(b)........................  $  280,578   $  204,292   $   613,922    $ 1,098,792   $  118,789                  $ 1,217,581
EBITDA margin(c).................        46.6%        44.6%         45.4%          45.6%        42.5%                        45.2%
Adjusted EBITDA(d)...............  $  297,398   $  221,334   $   688,500    $ 1,207,232   $  124,557                  $ 1,331,789
Cash flows from operating
  activities.....................     141,602      135,466       345,766        622,834      102,361                      725,195
Cash flows used in investing
  activities.....................    (206,607)    (217,729)     (430,290)      (854,626)     (77,276)                    (931,902)
Cash flows from (used in)
  financing activities...........     210,265      109,924       164,457        484,646      (25,406)                     459,240
Cash interest expense............                                                                                         776,147
Capital expenditures.............     213,353      224,723       256,469        694,545       58,601                      753,146
Total debt to EBITDA.............                                                                                            8.51x
Total debt to adjusted EBITDA....                                                                                            7.78
EBITDA to cash interest
  expense........................                                                                                            1.57
EBITDA to interest expense.......                                                                                            1.28
Deficiency of earnings to cover
  fixed charges(e)...............                                                                                     $ 1,441,600
BALANCE SHEET DATA (AT END OF
  PERIOD):
Total assets.....................  $4,335,527   $2,900,129   $11,249,769    $18,485,425   $3,122,144     $ 47,228     $21,654,797
Total debt.......................   2,002,206    1,520,995     5,754,433      9,277,634    1,035,000       47,228      10,359,862
Member's equity..................   2,147,379    1,281,912     5,251,461      8,680,752    2,048,721           --      10,729,473
OPERATING DATA (AT END OF PERIOD,
  EXCEPT FOR AVERAGES):
Homes passed(f)..................   2,149,000    1,743,000     4,701,000      8,593,000    1,009,000                    9,602,000
Basic customers(g)...............   1,255,000    1,061,000     3,098,000      5,414,000      681,000                    6,095,000
Basic penetration(h).............        58.4%        60.9%         65.9%          63.0%        67.5%                        63.5%
Premium units(i).................     845,000      411,000     1,372,000      2,628,000      267,000                    2,895,000
Premium penetration(j)...........        67.3%        38.7%         44.3%          48.5%        39.2%                        47.5%
Average monthly revenue per basic
  customer(k)....................                                                                                     $     36.80
</TABLE>

 
                                       14

<PAGE>   18
 
(a) For all of 1998 and through the date of the initial public offering of
    Charter Communications, Inc. in November 1999, Charter Investment, Inc.
    provided management services to subsidiaries of Charter Operating and,
    beginning in October 1998, to subsidiaries of Marcus Holdings. From and
    after the initial public offering of Charter Communications Inc., such
    management services were provided by Charter Communications, Inc. See
    "Certain Relationships and Related Transactions."
 
(b) EBITDA represents earnings (loss) before extraordinary item before interest,
    income taxes, depreciation and amortization. EBITDA is presented because it
    is a widely accepted financial indicator of a cable company's ability to
    service indebtedness. However, EBITDA should not be considered as an
    alternative to income from operations or to cash flows from operating,
    investing or financing activities, as determined in accordance with
    generally accepted accounting principles. EBITDA should also not be
    construed as an indication of a company's operating performance or as a
    measure of liquidity. Management's discretionary use of funds depicted by
    EBITDA may be limited by working capital, debt service and capital
    expenditure requirements and by restrictions related to legal requirements,
    commitments and uncertainties.
 
(c) EBITDA margin represents EBITDA as a percentage of revenues.
 
(d) Adjusted EBITDA means EBITDA before stock option compensation expense,
    corporate expense charges, management fees and other income (expense).
    Adjusted EBITDA is presented because it is a widely accepted financial
    indicator of a cable company's ability to service its indebtedness. However,
    adjusted EBITDA should not be considered as an alternative to income from
    operations or to cash flows from operating, investing or financing
    activities, as determined in accordance with generally accepted accounting
    principles. Adjusted EBITDA should also not be construed as an indication of
    a company's operating performance or as a measure of liquidity. In addition,
    because adjusted EBITDA is not calculated identically by all companies, the
    presentation here may not be comparable to other similarly titled measures
    of other companies. Management's discretionary use of funds depicted by
    adjusted EBITDA may be limited by working capital, debt service and capital
    expenditure requirements and by restrictions related to legal requirements,
    commitments and uncertainties.
 
(e) Earnings include net income (loss) plus fixed charges. Fixed charges consist
    of interest expense and an estimated component of rent expense.
 
(f) Homes passed are the number of living units, such as single residence homes,
    apartments and condominium units, passed by the cable television
    distribution network in a given cable system service area.
 
(g) Basic customers are customers who receive basic cable service.
 
(h) Basic penetration represents basic customers as a percentage of homes
    passed.
 
(i) Premium units represent the total number of subscriptions to premium
    channels.
 
(j) Premium penetration represents premium units as a percentage of basic
    customers.
 
(k) Average monthly revenue per basic customer represents revenues divided by
    the number of months in the period divided by the number of basic customers
    at period end.
                                       15

<PAGE>   19
 
                                  RISK FACTORS
 
     The new notes, like the original notes, entail the following risks. You
should carefully consider these risk factors, as well as the other information
in this prospectus, before exchanging the original notes for new notes.
 
                                  OUR BUSINESS
 
WE HAVE SUBSTANTIAL EXISTING DEBT AND WILL INCUR SUBSTANTIAL ADDITIONAL DEBT,
WHICH COULD ADVERSELY AFFECT OUR FINANCIAL HEALTH AND OUR ABILITY TO OBTAIN
FINANCING IN THE FUTURE AND REACT TO CHANGES IN OUR BUSINESS.
 
     We have a significant amount of debt. As of September 30, 1999, pro forma
for the sale of the original notes, acquisitions completed since that date, the
recent transfer to us of the Fanch, Falcon and Avalon cable systems and the
Pending Transactions, our total debt would have been approximately $10.7
billion, our total member's equity would have been approximately $10.4 billion
and the deficiency of our earnings available to cover fixed charges would have
been approximately $1.0 billion.
 
     Our significant amount of debt could have important consequences to you.
For example, it could:
 
     - make it more difficult for us to satisfy our obligations to you under the
       notes, to our lenders under our credit facilities and to our other public
       noteholders;
 
     - increase our vulnerability to general adverse economic and cable industry
       conditions, including interest rate fluctuations, because much of our
       borrowings are and will continue to be at variable rates of interest;
 
     - require us to dedicate a substantial portion of our cash flow from
       operations to payments on our debt, which will reduce our funds available
       for working capital, capital expenditures, acquisitions of additional
       systems and other general corporate expenses;
 
     - limit our flexibility in planning for, or reacting to, changes in our
       business and the cable industry generally;
 
     - place us at a disadvantage compared to our competitors that have
       proportionately less debt; and
 
     - limit our ability to borrow additional funds in the future, if we need
       them, due to applicable financial and restrictive covenants in our debt.
 
     The agreements and instruments governing our debt do not prohibit us from
incurring additional debt, although they do place certain limitations on such
additional debt. Further, the agreements and instruments governing our debt
allow for the incurrence of debt by our subsidiaries, all of which would rank
senior to the notes. We anticipate incurring significant additional debt in the
future to fund the expansion, maintenance and upgrade of our cable systems. We
will also incur debt to finance the Bresnan acquisition, and may incur debt to
finance additional acquisitions. If new debt is added to our current debt
levels, the related risks that we and you now face could intensify.
 
                                       16

<PAGE>   20
 
THE AGREEMENTS AND INSTRUMENTS GOVERNING OUR DEBT CONTAIN RESTRICTIONS AND
LIMITATIONS WHICH COULD SIGNIFICANTLY IMPACT THE HOLDERS OF THE NOTES AND OUR
ABILITY TO OPERATE OUR BUSINESS.
 
     Our credit facilities and the indentures governing the notes and our other
public debt contain a number of significant covenants that could adversely
impact the holders of the notes and our business. These covenants, among other
things, restrict our ability and the ability of our subsidiaries to:
 
     - pay dividends or make other distributions;
 
     - make certain investments or acquisitions;
 
     - dispose of assets or merge;
 
     - incur additional debt;
 
     - issue equity;
 
     - repurchase or redeem equity interests and debt;
 
     - create liens; and
 
     - pledge assets.
 
     Furthermore, in accordance with our credit facilities, we are required to
maintain specified financial ratios and meet financial tests. The ability to
comply with these provisions may be affected by events beyond our control. The
breach of any of these covenants will result in a default under the applicable
debt agreement or instrument, which could place us in default under the
indentures governing the notes.
 
OUR ABILITY TO GENERATE THE SIGNIFICANT AMOUNT OF CASH NEEDED TO REPAY THE
NOTES, SERVICE OUR OTHER DEBT AND GROW OUR BUSINESS DEPENDS ON MANY FACTORS
BEYOND OUR CONTROL.
 
     Our ability to make payments on the notes and our other debt and to fund
our planned capital expenditures for upgrading our cable systems and our ongoing
operations will depend on our ability to generate cash and to secure financing
in the future. This, to a certain extent, is subject to general economic,
financial, competitive, legislative, regulatory and other factors beyond our
control. If our business does not generate sufficient cash flow from operations,
and sufficient future borrowings are not available to us under our credit
facilities or from other sources of financing, we may not be able to repay the
notes or our other debt, to grow our business or to fund our other liquidity
needs.
 
IF WE DEFAULT UNDER OUR CREDIT FACILITIES, WE MAY NOT HAVE THE ABILITY TO MAKE
PAYMENTS ON THE NOTES, WHICH WOULD PLACE US IN DEFAULT UNDER THE INDENTURES
GOVERNING THE NOTES.
 
     In the event of a default under our credit facilities, lenders could elect
to declare all amounts borrowed, together with accrued and unpaid interest and
other fees, to be due and payable. In any event, when a default exists under our
subsidiaries' credit facilities, funds may not be distributed by our
subsidiaries to Charter Holdings to pay interest or principal on the notes. If
the amounts outstanding under such credit facilities are accelerated, thereby
causing an acceleration of amounts outstanding under the notes, we may not be
able to repay such amounts or the notes. Any default under any of our credit
facilities or our debt instruments may adversely affect the holders of the notes
and our growth, financial condition and results of operations.
 
                                       17

<PAGE>   21
 
CHARTER HOLDINGS IS A HOLDING COMPANY WHICH HAS NO OPERATIONS AND WILL DEPEND ON
ITS OPERATING SUBSIDIARIES FOR CASH. OUR SUBSIDIARIES MAY BE LIMITED IN THEIR
ABILITY TO MAKE FUNDS AVAILABLE FOR THE PAYMENT OF THE NOTES AND OUR OTHER
OBLIGATIONS.
 
     As a holding company, Charter Holdings will depend entirely on its
operating subsidiaries for the cash necessary to satisfy its obligations to you
as a holder of the notes. These operating subsidiaries may not be able to make
funds available to Charter Holdings.
 
     Charter Holdings will not hold any significant assets other than its direct
and indirect interests in its subsidiaries which conduct all of its operations.
Charter Holdings' cash flow will depend upon the cash flow of its operating
subsidiaries and the payment of funds by these operating subsidiaries to Charter
Holdings. This may adversely affect the ability of Charter Holdings to meet its
obligations to the holders of the notes.
 
     Our operating subsidiaries are not obligated to make funds available for
payment of these obligations in the form of loans, distributions or otherwise.
In addition, our operating subsidiaries' ability to make any such loans,
distributions or other payments to Charter Holdings will depend on their
earnings, business and tax considerations and legal restrictions. Covenants in
the indentures and credit agreements governing the debt of Charter Holdings'
subsidiaries restrict their ability to make loans, distributions or other
payments to Charter Holdings. This could adversely impact our ability to pay
interest and principal due on the notes. See "Description of Certain
Indebtedness."
 
BECAUSE OF OUR HOLDING COMPANY STRUCTURE, THE NOTES WILL BE SUBORDINATED TO ALL
LIABILITIES OF OUR SUBSIDIARIES.
 
     The borrowers and guarantors under the Charter Operating credit facilities,
the Falcon credit facilities, the Fanch credit facilities and the Avalon credit
facilities are, and after giving effect to the Bresnan transfer, any borrowers
and guarantors under the anticipated Bresnan credit facilities will be, direct
or indirect subsidiaries of Charter Holdings. A number of Charter Holdings'
subsidiaries are also obligors under other debt instruments. As of September 30,
1999, as adjusted to give effect to the sale of the original notes, acquisitions
completed since that date, the recent transfer to us of the Fanch, Falcon and
Avalon cable systems and the Pending Transactions, as if such transactions had
occurred on that date, indebtedness of Charter Holdings and its subsidiaries
would have totaled approximately $10.7 billion, $6.4 billion of which would have
ranked senior to the notes. The lenders under all of these credit facilities and
the holders of the other debt instruments will have the right to be paid before
Charter Holdings from any of our subsidiaries' assets. In the event of
bankruptcy, liquidation or dissolution of a subsidiary, following payment by
such subsidiary of its liabilities, such subsidiary may not have sufficient
assets remaining to make payments to Charter Holdings as a shareholder or
otherwise. This will adversely affect our ability to make payments to you as a
holder of the notes.
 
WE HAVE GROWN RAPIDLY AND HAVE A LIMITED HISTORY OF OPERATING OUR CURRENT
SYSTEMS. THIS MAKES IT DIFFICULT FOR YOU TO COMPLETELY EVALUATE OUR PERFORMANCE.
 
     We commenced active operations in 1994 and have grown rapidly since then
through acquisitions of cable systems. As of September 30, 1999, after giving
effect to acquisitions completed since that date, the recent transfer to us of
the Fanch, Falcon and Avalon cable systems and the Bresnan acquisition and
transfer to us, our systems served approximately 393% more customers than were
served as of December 31, 1998. As a result, historical financial information
about us may not be indicative of the future or of results that we can achieve
with the cable systems which will be under our control. Our recent growth in
revenue over our short operating history is not necessarily indicative of future
performance.
 
                                       18

<PAGE>   22
 
WE HAVE A HISTORY OF NET LOSSES AND EXPECT TO CONTINUE TO EXPERIENCE NET LOSSES.
CONSEQUENTLY, WE MAY NOT HAVE THE ABILITY TO FINANCE FUTURE OPERATIONS.
 
     We have had a history of net losses and expect to continue to report net
losses for the foreseeable future. We expect our net losses to increase as a
result of acquisitions completed in 1999, the recent transfer to us of the
Fanch, Falcon and Avalon cable systems and the Bresnan acquisition and transfer.
We reported net losses from continuing operations before extraordinary items of
$5 million for 1997, $23 million for 1998 and $380 million for the nine months
ended September 30, 1999. On a pro forma basis, giving effect to the merger of
Charter Holdings and Marcus Holdings, acquisitions completed in 1999, the recent
transfer to us of the Fanch, Falcon and Avalon cable systems and the Pending
Transactions, we had net losses from continuing operations before extraordinary
item of $1.4 billion for 1998. For the nine months ended September 30, 1999, on
the same pro forma basis, we had net losses from continuing operations before
extraordinary item of $1.0 billion. We cannot predict what impact, if any,
continued losses will have on our ability to finance our operations in the
future.
 
IF WE ARE UNSUCCESSFUL IN IMPLEMENTING OUR GROWTH STRATEGY, OUR FINANCIAL
CONDITION AND RESULTS OF OPERATIONS COULD BE ADVERSELY AFFECTED.
 
     If we are unable to grow our cash flow sufficiently, we may be unable to
repay the notes or our other debt, to grow our business or to fund our other
liquidity needs. We expect that a substantial portion of our future growth will
be achieved through revenues from new products and services and the acquisition
of additional cable systems. We may not be able to offer these new products and
services successfully to our customers and these new products and services may
not generate adequate revenues.
 
     In addition, we cannot predict the success of our acquisition strategy. In
the past year, the cable television industry has undergone dramatic
consolidation which has reduced the number of future acquisition prospects. This
consolidation may increase the purchase price of future acquisitions, and we may
not be successful in identifying attractive acquisition targets in the future.
Additionally, those acquisitions we do complete are not likely to have a
positive net impact on our operating results in the near future. If we are
unable to grow our cash flow sufficiently, we may be unable to fulfill our
obligations to you under the notes or obtain alternative financing.
 
OUR PROGRAMMING COSTS ARE INCREASING. WE MAY NOT HAVE THE ABILITY TO PASS THESE
INCREASES ON TO OUR CUSTOMERS, WHICH WOULD ADVERSELY AFFECT OUR CASH FLOW AND
OPERATING MARGINS.
 
     Programming has been, and is expected to continue to be, our largest single
expense item. In recent years, the cable industry has experienced a rapid
escalation in the cost of programming, particularly sports programming. This
escalation may continue, and we may not be able to pass programming cost
increases on to our customers. The inability to pass these programming cost
increases on to our customers would have an adverse impact on our cash flow and
operating margins. In addition, as we upgrade the channel capacity of our
systems, add programming to our basic and expanded basic programming tiers and
reposition premium services to the basic tier, we may face additional market
constraints on our ability to pass programming costs on to our customers. Basic
programming includes a variety of entertainment and local programming. Expanded
basic programming offers more services than basic programming. Premium service
includes unedited, commercial-free movies, sports and other special event
entertainment programming.
 
                                       19

<PAGE>   23
 
WE MAY NOT BE ABLE TO OBTAIN CAPITAL SUFFICIENT TO FUND OUR PLANNED UPGRADES AND
OTHER CAPITAL EXPENDITURES. THIS COULD ADVERSELY AFFECT OUR ABILITY TO OFFER NEW
PRODUCTS AND SERVICES, WHICH COULD ADVERSELY AFFECT OUR GROWTH, FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
 
     We intend to upgrade a significant portion of our cable systems over the
coming years and make other capital investments. For the three years ending
December 31, 2002, we plan to spend approximately $5.6 billion for capital
expenditures, approximately $3.1 billion of which will be used to upgrade and
rebuild our systems to bandwidth capacity of 550 megahertz or greater and add
two-way capability so that we may offer advanced services. The remaining $2.5
billion will be used for extensions of systems, development of new products and
services, purchases of converters and system maintenance.
 
     We cannot assure you that these amounts will be sufficient to accomplish
our planned system upgrades, maintenance and expansion. If we cannot obtain the
necessary funds from increases in our operating cash flow, additional borrowings
or other sources, we may not be able to fund our planned upgrades and expansion
and offer new products and services on a timely basis. Consequently, our growth,
financial condition and results of operations could suffer materially.
 
WE MAY NOT BE ABLE TO FUND THE CAPITAL EXPENDITURES NECESSARY TO KEEP PACE WITH
TECHNOLOGICAL DEVELOPMENTS OR OUR CUSTOMERS' DEMAND FOR NEW PRODUCTS AND
SERVICES. THIS COULD LIMIT OUR ABILITY TO COMPETE EFFECTIVELY. CONSEQUENTLY, OUR
GROWTH, RESULTS OF OPERATIONS AND FINANCIAL CONDITION COULD SUFFER MATERIALLY.
 
     The cable business is characterized by rapid technological change and the
introduction of new products and services. We cannot assure you that we will be
able to fund the capital expenditures necessary to keep pace with technological
developments, or that we will successfully anticipate the demand of our
customers for products and services requiring new technology. This type of rapid
technological change could adversely affect our plans to upgrade or expand our
systems and respond to competitive pressures. Our inability to upgrade, maintain
and expand our systems and provide enhanced services in a timely manner, or to
anticipate the demands of the market place, could adversely affect our ability
to compete. Consequently, our growth, financial condition and results of
operations could suffer materially.
 
WE OPERATE IN A VERY COMPETITIVE BUSINESS ENVIRONMENT WHICH CAN ADVERSELY AFFECT
OUR BUSINESS AND OPERATIONS.
 
     The industry in which we operate is highly competitive. In some instances,
we compete against companies with fewer regulatory burdens, easier access to
financing, greater personnel resources, greater brand name recognition and
long-standing relationships with regulatory authorities. Mergers, joint ventures
and alliances among any of the following businesses could result in providers
capable of offering cable television, Internet and other telecommunications
services in direct competition with us:
 
     - cable television operators;
 
     - regional telephone companies;
 
     - long distance telephone service providers;
 
     - electric utilities;
 
     - local exchange carriers, which are local phone companies that provide
       local area telephone services and access to long distance services to
       customers;
 
     - providers of cellular and other wireless communications services; and
 
     - Internet service providers.
 
                                       20

<PAGE>   24
 
     We face competition within the subscription television industry, which
includes providers of paid television service employing technologies other than
cable, such as direct broadcast satellite or DBS, and excludes broadcast
companies that transmit their signal to customers without assessing a
subscription fee. We also face competition from broadcast companies distributing
television broadcast signals without assessing a subscription fee and from other
communications and entertainment media, including conventional off-air
television and radio broadcasting services, newspapers, movie theaters, the
Internet, live sports events and home video products.
 
     We cannot assure you that upgrading our cable systems will allow us to
compete effectively. Additionally, as we expand and introduce new and enhanced
services, including Internet and telecommunications services, we will be subject
to competition from telecommunications providers and Internet service providers.
We cannot predict the extent to which competition may affect our business and
operations in the future. See "Business -- Competition."
 
WE MAY BE UNABLE TO NEGOTIATE CONSTRUCTION CONTRACTS ON FAVORABLE TERMS AND OUR
CONSTRUCTION COSTS MAY INCREASE SIGNIFICANTLY. THIS COULD ADVERSELY AFFECT OUR
GROWTH, FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
 
     The expansion and upgrade of our existing systems and the systems we plan
to acquire will require us to hire contractors and enter into a number of
construction agreements. We may have difficulty hiring civil contractors, and
the contractors we hire may encounter cost overruns or delays in construction.
Our construction costs may increase significantly over the next few years as
existing contracts expire and as demand for cable construction services
continues to grow. We cannot assure you that we will be able to construct new
systems or expand or upgrade existing or acquired systems in a timely manner or
at a reasonable cost. This may adversely affect our growth, financial condition
and results of operations.
 
THERE SHOULD BE NO EXPECTATION THAT MR. ALLEN WILL FUND OUR OPERATIONS OR
OBLIGATIONS IN THE FUTURE.
 
     In the past, Mr. Allen and his affiliates have contributed funds to Charter
Holdings, Charter Communications, Inc. and Charter Communications Holding
Company. There should be no expectation that Mr. Allen or his affiliates will
contribute funds to Charter Holdings, Charter Communications, Inc., Charter
Communications Holding Company or to our subsidiaries in the future.
 
A SALE BY MR. ALLEN OF HIS DIRECT OR INDIRECT EQUITY INTERESTS COULD ADVERSELY
AFFECT OUR ABILITY TO MANAGE OUR BUSINESS.
 
     Mr. Allen is not prohibited by any agreement from selling the shares of
Class B common stock he holds in Charter Communications, Inc. or causing Charter
Investment, Inc. or Vulcan Cable III Inc. to sell their membership units in
Charter Communications Holding Company after the last day of the 180-day lock-up
period following Charter Communications, Inc.'s November 8, 1999 initial public
offering. We cannot assure you that Mr. Allen or any of his affiliates will
maintain all or any portion of his direct or indirect ownership interests in
Charter Communications, Inc. or Charter Communications Holding Company. In the
event he sells all or any portion of his direct or indirect ownership interest
in Charter Communications, Inc. or Charter Communications Holding Company, we
cannot assure you that he would continue as Chairman of Charter Communications,
Inc.'s board of directors or otherwise participate in our management. The
disposition by Mr. Allen or any of his affiliates of these equity interests or
the loss of his services by Charter Communications, Inc. and/or
 
                                       21

<PAGE>   25
 
Charter Communications Holding Company could adversely affect our growth,
financial condition and results of operations.
 
DATA PROCESSING FAILURES RELATED TO THE YEAR 2000 PROBLEM COULD SIGNIFICANTLY
DISRUPT OUR OPERATIONS, CAUSING A DECLINE IN CASH FLOW AND REVENUES AND OTHER
DIFFICULTIES.
 
     The year 2000 problem affects our owned and licensed computer systems and
equipment used in connection with internal operations. It also affects our
non-information technology systems, including embedded systems in our buildings
and other infrastructure. Additionally, since we rely directly and indirectly,
in the regular course of business, on the proper operation and compatibility of
third-party systems, the year 2000 problem could cause these systems to fail,
err or become incompatible with our systems.
 
     Much of our assessment efforts regarding the year 2000 problem have
involved, and depend on, inquiries to third party service providers. Some of
these third parties that have certified the readiness of their products will not
certify that such products have operating compatibility with our systems. If we,
or significant third parties with whom we communicate and do business through
computers, have failed to become year 2000 ready, or if the year 2000 problem
causes our systems to become internally incompatible or incompatible with key
third party systems, our business could suffer material disruptions. We could
also face disruptions if the year 2000 problem causes general widespread
problems or an economic crisis. We cannot now estimate the extent of these
potential disruptions. We cannot assure you that our efforts to date and our
ongoing efforts to prepare for the year 2000 problem will be sufficient to
prevent a material disruption of our operations, particularly with respect to
systems we acquired prior to December 31, 1999. As a result of any such
disruption, our growth, financial condition and results of operations could
suffer materially.
 
THE LOSS OF KEY EXECUTIVES COULD ADVERSELY AFFECT OUR ABILITY TO MANAGE OUR
BUSINESS.
 
     Our success is substantially dependent upon the retention and the continued
performance of Mr. Allen, Chairman of Charter Communications, Inc.'s board of
directors, and Jerald L. Kent, Charter Communications, Inc.'s President and
Chief Executive Officer. The loss of the services of Mr. Allen or Mr. Kent could
adversely affect our growth, financial condition and results of operations.
 
                              CHARTER'S STRUCTURE
 
MR. ALLEN MAY HAVE INTERESTS THAT CONFLICT WITH YOUR INTERESTS.
 
     Mr. Allen controls approximately 93.6% of the voting power of Charter
Communications, Inc. Charter Communications, Inc., in turn, controls Charter
Communications Holding Company, our 100% parent. Accordingly, Mr. Allen has the
ability to control fundamental corporate transactions, including, but not
limited to, approval of merger transactions involving us and the sale of all or
substantially all of our assets. Mr. Allen's control over our management and
affairs could create conflicts of interest if he is faced with decisions that
could have implications both for him and for us and the holders of the notes.
Further, Mr. Allen could cause us to enter into contracts with another entity in
which he owns an interest or cause us to decline a transaction that he or an
entity in which he owns an interest ultimately enters into.
 
     Mr. Allen may engage in other businesses involving the operation of cable
television systems, video programming, high-speed Internet access, telephony or
electronic commerce, which is business and financial transactions conducted
through broadband interactivity and Internet services. Mr. Allen may also engage
in other businesses that compete or may in the future compete with us. In
addition,
 
                                       22

<PAGE>   26
 
Mr. Allen currently engages and may engage in the future in businesses that are
complementary to our cable television business.
 
     Accordingly, conflicts could arise with respect to the allocation of
corporate opportunities between us and Mr. Allen. Current or future agreements
between us and Mr. Allen or his affiliates may not be the result of arm's-length
negotiations. Consequently, such agreements may be less favorable to us than
agreements that we could otherwise have entered into with unaffiliated third
parties. Further, many past and future transactions with Mr. Allen or his
affiliates are informal in nature. As a result, there will be some discretion
left to the parties, who are subject to the potentially conflicting interests
described above. We cannot assure you that the interests of either Mr. Allen or
his affiliates will not conflict with the interests of the holders of the Notes.
We have not instituted any formal plans to address conflicts of interest that
may arise.
 
WE ARE NOT PERMITTED TO ENGAGE IN ANY BUSINESS ACTIVITY OTHER THAN THE CABLE
TRANSMISSION OF VIDEO, AUDIO AND DATA UNLESS MR. ALLEN AUTHORIZES US TO PURSUE
THAT PARTICULAR BUSINESS ACTIVITY. THIS COULD ADVERSELY AFFECT OUR ABILITY TO
OFFER NEW PRODUCTS AND SERVICES OUTSIDE OF THE CABLE TRANSMISSION BUSINESS AND
ENTER INTO NEW BUSINESSES, WHICH COULD ADVERSELY AFFECT OUR GROWTH, FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
 
     Charter Communications, Inc.'s certificate of incorporation and Charter
Communications Holding Company's limited liability company agreement provide
that Charter Communications, Inc. and Charter Communications Holding Company and
their subsidiaries, including Charter Holdings and its subsidiaries, cannot
engage in any business activity outside the cable transmission business except
for the joint venture with Broadband Partners, LLC and incidental businesses
engaged in as of the closing of Charter Communications, Inc.'s initial public
offering. This will be the case unless the opportunity to pursue the particular
business activity is first offered to Mr. Allen, he decides not to pursue it and
he consents to our engaging in the business activity. The cable transmission
business means the business of transmitting video, audio, including telephone
services, and data over cable television systems owned, operated or managed by
us from time to time. These provisions may limit our ability to take advantage
of attractive business opportunities. Consequently, our ability to offer new
products and services outside of the cable transmission business and enter into
new businesses could be adversely affected, resulting in an adverse effect on
our growth, financial condition and results of operations. See "Certain
Relationships and Related Transactions -- Allocation of Business Opportunities
with Mr. Allen."
 
OUR MANAGEMENT MAY BE RESPONSIBLE FOR MANAGING OTHER CABLE OPERATIONS AND MAY
NOT DEVOTE THEIR FULL TIME TO OUR OPERATIONS. THIS COULD GIVE RISE TO CONFLICTS
OF INTEREST AND IMPAIR OUR OPERATING RESULTS.
 
     Mr. Allen and certain other of our affiliates may from time to time in the
future acquire cable systems in addition to those owned by us or to be acquired
by us in the Bresnan acquisition and transfer. We cannot assure you that Charter
Communications, Inc., Charter Communications Holding Company or any of their
affiliates will contribute any future acquisitions to Charter Holdings or to any
of its subsidiaries.
 
     Charter Communications, Inc., as well as some of the officers of Charter
Communications, Inc. who currently manage our cable systems, may have a
substantial role in managing outside cable systems that may be acquired in the
future. As a result, the time they devote to managing our systems may be
correspondingly reduced. This could adversely affect our growth, financial
condition and results of operations. Moreover, allocating managers' time and
other resources of Charter Communications, Inc. and Charter Communications
Holding Company between our systems and outside systems that may be held by our
affiliates could give rise to conflicts of interest. Charter
 
                                       23

<PAGE>   27
 
Communications, Inc. and Charter Communications Holding Company do not have or
plan to create formal procedures for determining whether and to what extent
outside cable television systems acquired in the future will receive priority
with respect to personnel requirements.
 
                                  ACQUISITIONS
 
CHARTER COMMUNICATIONS HOLDING COMPANY MAY BE UNABLE TO OBTAIN SUFFICIENT
CAPITAL TO REPAY DEBT OUTSTANDING UNDER THE BRESNAN CREDIT FACILITIES. THIS MAY
RESULT IN A DEFAULT UNDER THE BRESNAN ACQUISITION AGREEMENT.
 
     The Bresnan acquisition will constitute an event of default under the
Bresnan credit facilities, permitting the lenders to declare all amounts
outstanding to be immediately due and payable. As of September 30, 1999, there
was $512 million outstanding under the Bresnan credit facilities. We cannot
assure you that the Bresnan lenders will waive the event of default or that
Charter Communications Holding Company will be able to amend and assume the
existing Bresnan credit facilities or obtain capital sufficient to refinance the
debt outstanding under these credit facilities. If there is a failure to so
obtain waivers, amend and assume, or refinance, the Bresnan acquisition may not
close. We cannot assure you that the Bresnan acquisition will close.
 
WE MAY BE UNABLE TO OBTAIN SUFFICIENT CAPITAL TO REPURCHASE CERTAIN EXISTING
PUBLIC DEBT. WE MAY AS A RESULT BE IN DEFAULT ON THIS DEBT WHICH COULD LEAD TO
LEGAL PROCEEDINGS BEING INITIATED AGAINST US. THIS COULD IN TURN LEAD TO
DEFAULTS UNDER OUR OTHER OBLIGATIONS, INCLUDING THE NOTES.
 
     We may be required to repurchase the Avalon 11.875% senior discount notes
(which we do not expect will be tendered for repurchase) at 101% of their
accreted value for which a change of control offer has been made. The accreted
value of these notes was $126.1 million as of the closing of the Avalon
acquisition in November 1999. We cannot assure you that we will be able to
obtain capital sufficient to fulfill these repurchase obligations. If we fail to
satisfy these repurchase obligations, the holders of these notes could initiate
legal proceedings against the issuers of the notes, including under bankruptcy
and reorganization laws, for any damages they suffer as a result of
non-performance. This could trigger defaults under our other obligations,
including the notes, our credit facilities and other debt instruments.
 
WE MAY NOT HAVE THE ABILITY TO INTEGRATE THE NEW CABLE SYSTEMS THAT WE ACQUIRE
AND THE CUSTOMERS THEY SERVE WITH OUR EXISTING CABLE SYSTEMS. THIS COULD
ADVERSELY AFFECT OUR OPERATING RESULTS AND GROWTH STRATEGY.
 
     Upon the completion of the Bresnan acquisition and transfer, we will own
and operate cable systems serving approximately 6.2 million customers. We have
grown rapidly through acquisitions of cable systems. We will acquire additional
cable systems if the Swap Transaction is completed and we may acquire more cable
systems in the future, through direct acquisition, system swaps or otherwise.
The integration of the cable systems we have recently acquired and plan to
acquire poses a number of significant risks, including:
 
     - our acquisitions may not have a positive impact on our cash flows from
       operations;
 
     - the integration of these new systems and customers will place significant
       demands on our management and our operations, information services, and
       financial, legal and marketing resources. Our current operating and
       financial systems and controls and information services may not be
       adequate, and any steps taken to improve these systems and controls may
       not be sufficient;
 
                                       24

<PAGE>   28
 
     - our current information systems may be incompatible with the information
       systems we have acquired or plan to acquire. We may be unable to
       integrate these information systems at a reasonable cost or in a timely
       manner;
 
     - acquired businesses sometimes result in unexpected liabilities and
       contingencies which could be significant; and
 
     - our continued growth will also increase our need for qualified personnel.
       We may not be able to hire such additional qualified personnel.
 
     We cannot assure you that we will successfully integrate any acquired
systems into our operations.
 
THE FAILURE TO OBTAIN NECESSARY REGULATORY APPROVALS, OR TO SATISFY OTHER
CLOSING CONDITIONS, COULD IMPEDE THE CONSUMMATION OF A PENDING TRANSACTION. THIS
WOULD PREVENT OR DELAY OUR STRATEGY TO EXPAND OUR BUSINESS AND INCREASE
REVENUES.
 
     The Bresnan acquisition, the transfer to us of the Bresnan systems and the
Swap Transaction are subject to federal, state and local regulatory approvals.
We cannot assure you that we will be able to obtain any necessary approvals.
These transactions are also subject to a number of other closing conditions. We
cannot assure you as to when, or if, each such transaction will be consummated.
Any delay, prohibition or modification could adversely affect the terms of such
transactions or could require us to abandon an otherwise attractive opportunity
and possibly forfeit earnest money.
 
IF CHARTER COMMUNICATIONS, INC. AND CHARTER COMMUNICATIONS HOLDING COMPANY DO
NOT HAVE SUFFICIENT CAPITAL TO FUND POSSIBLE RESCISSION LIABILITIES, THEY COULD
SEEK FUNDS FROM CHARTER HOLDINGS AND ITS SUBSIDIARIES.
 
     The Rifkin and Falcon sellers who acquired membership units in connection
with the respective Rifkin and Falcon acquisitions, the Bresnan sellers who will
acquire membership units in connection with the Bresnan acquisition and the
Helicon sellers who acquired shares of Class A common stock in Charter
Communications, Inc.'s initial public offering may have rescission rights
against Charter Communications, Inc. or Charter Communications Holding Company,
as the case may be, arising out of possible violations of Section 5 of the
Securities Act in connection with the offers and sales of these equity
interests. If all of these equity holders successfully exercise their possible
rescission rights and Charter Communications, Inc. or Charter Communications
Holding Company becomes obligated to repurchase all such equity interests, the
total repurchase obligations could be up to approximately $1.7 billion. We
cannot assure you that Charter Communications, Inc. and Charter Communications
Holding Company would be able to obtain capital sufficient to fund any required
repurchases. If Charter Communications, Inc. and Charter Communications Holding
Company fail to obtain sufficient funds for this purpose, they could seek such
funds from Charter Holdings and its subsidiaries. This could adversely affect
our financial condition and results of operations.
 
                                       25

<PAGE>   29
 
                       REGULATORY AND LEGISLATIVE MATTERS
 
OUR BUSINESS IS SUBJECT TO EXTENSIVE GOVERNMENTAL LEGISLATION AND REGULATION.
THE APPLICABLE LEGISLATION AND REGULATIONS, AND CHANGES TO THEM, COULD ADVERSELY
AFFECT OUR BUSINESS BY INCREASING OUR EXPENSES.
 
     Regulation of the cable industry has increased the administrative and
operational expenses and limited the revenues of cable systems. Cable operators
are subject to, among other things:
 
     - limited rate regulation;
 
     - requirements that, under specified circumstances, a cable system carry a
       local broadcast station or obtain consent to carry a local or distant
       broadcast station;
 
     - rules for franchise renewals and transfers; and
 
     - other requirements covering a variety of operational areas such as equal
       employment opportunity, technical standards and customer service
       requirements.
 
     Additionally, many aspects of these regulations are currently the subject
of judicial proceedings and administrative or legislative proposals. There are
also ongoing efforts to amend or expand the state and local regulation of some
of our cable systems, which may compound the regulatory risks we already face.
We cannot predict whether in response to these efforts any of the states or
localities in which we now operate will expand regulation of our cable systems
in the future or how they will do so.
 
WE MAY BE REQUIRED TO PROVIDE ACCESS TO OUR NETWORKS TO OTHER INTERNET SERVICE
PROVIDERS. THIS COULD SIGNIFICANTLY INCREASE OUR COMPETITION AND ADVERSELY
AFFECT THE UPGRADE OF OUR SYSTEMS OR OUR ABILITY TO PROVIDE NEW PRODUCTS AND
SERVICES.
 
     There are proposals before the United States Congress and the Federal
Communications Commission to require all cable operators to make a portion of
their cable systems' bandwidth available to other Internet service providers,
such as telephone companies. Certain local franchising authorities are
considering or have already approved such "open access" requirements. Recently,
a number of companies, including telephone companies and Internet service
providers, have requested local authorities and the Federal Communications
Commission to require cable operators to provide access to cable's broadband
infrastructure, which allows cable to deliver a multitude of channels and/or
services, so that these companies may deliver Internet services directly to
customers over cable facilities. For example, Broward County, Florida granted
open access to an Internet service provider as a condition to a cable operator's
transfer of its franchise for cable service. The cable operator has commenced
legal action at the federal district court level. A federal district court in
Portland, Oregon has also upheld the legality of an open access requirement, but
that case has been appealed to the Ninth Circuit.
 
     We believe that allocating a portion of our bandwidth capacity to other
Internet service providers:
 
     - would impair our ability to use our bandwidth in ways that would generate
       maximum revenues;
 
     - would strengthen our Internet service provider competitors; and
 
     - may cause us to decide not to upgrade our systems which would prevent us
       from introducing our planned new products and services.
 
                                       26

<PAGE>   30
 
     In addition, we cannot assure you that if we were required to provide
access in this manner, it would not have a significant adverse impact on our
profitability. This could impact us in many ways, including by:
 
     - increasing competition;
 
     - increasing the expenses we incur to maintain our systems; and/or
 
     - increasing the expense of upgrading and/or expanding our systems.
 
OUR CABLE SYSTEMS ARE OPERATED UNDER FRANCHISES WHICH ARE SUBJECT TO NON-RENEWAL
OR TERMINATION. THE FAILURE TO RENEW A FRANCHISE COULD ADVERSELY AFFECT OUR
BUSINESS IN A KEY MARKET.
 
     Our cable systems generally operate pursuant to franchises, permits or
licenses typically granted by a municipality or other state or local government
controlling the public rights-of-way. Many franchises establish comprehensive
facilities and service requirements, as well as specific customer service
standards and establish monetary penalties for non-compliance. In many cases,
franchises are terminable if the franchisee fails to comply with material
provisions set forth in the franchise agreement governing system operations.
Franchises are generally granted for fixed terms and must be periodically
renewed. Local franchising authorities may resist granting a renewal if either
past performance or the prospective operating proposal is considered inadequate.
Franchise authorities often demand concessions or other commitments as a
condition to renewal, which have been and may continue to be costly to us. In
some instances, franchises have not been renewed at expiration, and we have
operated under either temporary operating agreements or without a license while
negotiating renewal terms with the local franchising authorities.
 
     We cannot assure you that we will be able to comply with all material
provisions of our franchise agreements or that we will be able to renew our
franchises in the future. A termination of and/or a sustained failure to renew a
franchise could adversely affect our business in the affected geographic area.
 
WE OPERATE OUR CABLE SYSTEMS UNDER FRANCHISES WHICH ARE NON-EXCLUSIVE. LOCAL
FRANCHISING AUTHORITIES CAN GRANT ADDITIONAL FRANCHISES AND CREATE COMPETITION
IN MARKET AREAS WHERE NONE EXISTED PREVIOUSLY.
 
     Our cable systems are operated under franchises granted by local
franchising authorities. These franchises are non-exclusive. Consequently, such
local franchising authorities can grant additional franchises to competitors in
the same geographic area. As a result, competing operators may build systems in
areas in which we hold franchises. In some cases municipal utilities may legally
compete with us without obtaining a franchise from the local franchising
authority. The existence of more than one cable system operating in the same
territory is referred to as an overbuild. These overbuilds could adversely
affect our growth, financial condition and results of operations by increasing
competition or creating competition where none existed previously. As of
September 30, 1999, we are aware of overbuild situations impacting 56,000 of our
customers and potential overbuild situations in areas servicing another 54,000
basic customers, together representing a total of 110,000 customers. Additional
overbuild situations may occur in other systems.
 
LOCAL FRANCHISE AUTHORITIES HAVE THE ABILITY TO IMPOSE ADDITIONAL REGULATORY
CONSTRAINTS ON OUR BUSINESS. THIS CAN FURTHER INCREASE OUR EXPENSES.
 
     In addition to the franchise document, cable authorities have also adopted
in some jurisdictions cable regulatory ordinances that further regulate the
operation of cable systems. This additional
 
                                       27

<PAGE>   31
 
regulation increases our expenses in operating our business. We cannot assure
you that the local franchising authorities will not impose new and more
restrictive requirements.
 
     Local franchising authorities also have the power to reduce rates and order
refunds of basic service tier rates paid in the previous twelve-month period
determined to be in excess of the maximum permitted rates. Basic service tier
rates are the prices charged for basic programming services. As of December 31,
1999, we have refunded a total of approximately $835,000 since our inception. We
may be required to refund additional amounts in the future.
 
DESPITE RECENT DEREGULATION OF EXPANDED BASIC CABLE PROGRAMMING PACKAGES, WE ARE
CONCERNED THAT CABLE RATE INCREASES COULD GIVE RISE TO FURTHER REGULATION. THIS
COULD CAUSE US TO DELAY OR CANCEL SERVICE OR PROGRAMMING ENHANCEMENTS OR IMPAIR
OUR ABILITY TO RAISE RATES TO COVER OUR INCREASING COSTS.
 
     On March 31, 1999, the pricing guidelines of expanded basic cable
programming packages were deregulated, permitting cable operators to set their
own rates. This deregulation was not applicable to basic services. However, the
Federal Communications Commission and the United States Congress continue to be
concerned that cable rate increases are exceeding inflation. It is possible that
either the Federal Communications Commission or the United States Congress will
again restrict the ability of cable television operators to implement rate
increases. Should this occur, it would impede our ability to raise our rates. If
we are unable to raise our rates in response to increasing costs, our financial
condition and results of operations could be materially adversely affected.
 
IF WE OFFER TELECOMMUNICATIONS SERVICES, WE MAY BE SUBJECT TO ADDITIONAL
REGULATORY BURDENS CAUSING US TO INCUR ADDITIONAL COSTS.
 
     If we enter the business of offering telecommunications services, we may be
required to obtain federal, state and local licenses or other authorizations to
offer these services. We may not be able to obtain such authorizations in a
timely manner, or at all, and conditions could be imposed upon such licenses or
authorizations that may not be favorable to us. Furthermore, telecommunications
companies, including Internet protocol telephony companies, generally are
subject to significant regulation as well as higher fees for pole attachments.
Internet protocol telephony companies are companies that have the ability to
offer telephone services over the Internet. Pole attachments are cable wires
that are attached to poles.
 
     In particular, cable operators who provide telecommunications services and
cannot reach agreement with local utilities over pole attachment rates in states
that do not regulate pole attachment rates will be subject to a methodology
prescribed by the Federal Communications Commission for determining the rates.
These rates may be higher than those paid by cable operators who do not provide
telecommunications services. The rate increases are to be phased in over a five-
year period beginning on February 8, 2001. If we become subject to
telecommunications regulation or higher pole attachment rates, we may incur
additional costs which may be material to our business.
 
                               THE EXCHANGE OFFER
 
THERE IS NO MARKET FOR THE NOTES. WE CANNOT ASSURE YOU THAT AN ACTIVE TRADING
MARKET WILL DEVELOP FOR THE NOTES WHICH WOULD CAUSE DIFFICULTIES FOR YOU IF YOU
TRY TO RESELL THE NOTES.
 
     Prior to the offering, there was no market for the original notes. We have
been informed by the Initial Purchasers that they intend to make a market in the
original notes after the offering is completed and in the new notes after the
exchange is completed. However, the Initial Purchasers may cease their
market-making at any time without notice. The original notes are not registered
 
                                       28

<PAGE>   32
 
under the Securities Act and were offered and sold only to qualified
institutional buyers and to persons outside the United States. Consequently, the
original notes are subject to restrictions on transfer which are described under
the "Notice to Investors" section of this prospectus. The original notes have
been designated as eligible for trading in the PORTAL market. However, we do not
intend to apply for listing of the original notes or, if issued, the new notes,
on any securities exchange or for quotation through the National Association of
Securities Dealers Automated Quotation System. The liquidity of the trading
market in the new notes, and the market price quoted for the new notes, may be
adversely affected by changes in the overall market for high yield securities
generally or the interest of securities dealers in making a market in the Notes
and by changes in our financial performance or prospects or in the prospects for
companies in our industry generally. As a result, we cannot assure you that an
active trading market will develop for the original Notes or, if issued, the new
notes.
 
IF YOU FAIL TO EXCHANGE YOUR ORIGINAL NOTES FOR NEW NOTES, SUCH ORIGINAL NOTES
WILL REMAIN SUBJECT TO RESTRICTIONS ON TRANSFER. ACCORDINGLY, THE LIQUIDITY OF
THE MARKET FOR THE ORIGINAL NOTES COULD BE ADVERSELY AFFECTED.
 
     Holders of original notes who do not exchange their original notes for new
notes pursuant to the exchange offer will continue to be subject to the
restrictions on transfer of the original notes set forth in the legend on the
original notes. This is a consequence of the issuance of the original notes
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act. In general, original notes may
not be offered or sold, unless registered under the Securities Act, except
pursuant to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. If we complete the exchange
offer, we will not be required to register the original notes, and we do not
anticipate that we will register the original notes, under the Securities Act.
Additionally, to the extent that original notes are tendered and accepted in the
exchange offer, the aggregate principal amount of original notes outstanding
will decrease, with a resulting decrease in the liquidity of the market for the
original notes.
 
WE MAY NOT HAVE THE ABILITY TO RAISE THE FUNDS NECESSARY TO FULFILL OUR
OBLIGATIONS UNDER THE NOTES FOLLOWING A CHANGE OF CONTROL. THIS WOULD PLACE US
IN DEFAULT UNDER THE INDENTURES GOVERNING THE NOTES.
 
     Under the indentures governing the notes, upon the occurrence of specified
change of control events, we will be required to offer to repurchase all
outstanding Notes. However, we may not have sufficient funds at the time of the
change of control event to make the required repurchase of the notes. In
addition, a change of control would require the repayment of borrowings under
our other publicly held debt and our credit facilities. Because our credit
facilities and other publicly held debt, other than the existing senior notes
and senior discount notes of Charter Holdings, are obligations of subsidiaries
of Charter Holdings, the credit facilities and such debt would have to be repaid
by our subsidiaries before their assets could be available to Charter Holdings
to repurchase the notes. Our failure to make or complete an offer to repurchase
the notes would place us in default under the indentures governing the notes.
You should also be aware that a number of important corporate events, such as
leveraged recapitalizations that would increase the level of our indebtedness,
would not constitute a change of control under the indentures governing the
notes.
 
IF WE DO NOT FULFILL OUR OBLIGATIONS TO YOU UNDER THE NOTES, YOU WILL NOT HAVE
ANY RECOURSE AGAINST CHARTER COMMUNICATIONS, INC., CHARTER COMMUNICATIONS
HOLDING COMPANY, MR. ALLEN OR THEIR EQUITY HOLDERS OR THEIR AFFILIATES.
 
     The notes will be issued solely by Charter Holdings and Charter Capital.
None of our equity holders, directors, officers, employees or affiliates,
including Charter Communications, Inc., Charter
 
                                       29

<PAGE>   33
 
Communications Holding Company and Mr. Allen, will be an obligor or guarantor
under the notes. Furthermore, the indentures governing the notes expressly
provide that these parties will not have any liability for our obligations under
the notes or the indentures governing the notes. By accepting the notes, you
waive and release all such liability as consideration for issuance of the notes.
Consequently, if the issuers of the notes do not fulfill their obligations to
you under the notes, you will have no recourse against any of these parties.
 
     Additionally, our equity holders, including Charter Communications, Inc.,
Charter Communications Holding Company and Mr. Allen, will be free to manage
other entities, including other cable companies. If we do not fulfill our
obligations to you under the notes, you will have no recourse against those
other entities or their assets.
 
THE 11.75% DISCOUNT NOTES WILL BE ISSUED WITH ORIGINAL ISSUE DISCOUNT.
CONSEQUENTLY, HOLDERS OF THE 11.75% DISCOUNT NOTES WILL GENERALLY BE REQUIRED TO
INCLUDE AMOUNTS IN GROSS INCOME FOR FEDERAL INCOME TAX PURPOSES IN ADVANCE OF
RECEIVING CASH.
 
     The 11.75% discount notes will be issued at a substantial discount from
their stated principal amount. As a result, purchasers of the 11.75% discount
notes generally will be required to include the accrued portion of this discount
in gross income, as interest, for United States federal income tax purposes in
advance of the receipt of cash payments of this interest.
 
IF A BANKRUPTCY PETITION WERE FILED BY OR AGAINST US, YOU MAY RECEIVE A LESSER
AMOUNT FOR YOUR CLAIM THAN YOU WOULD BE ENTITLED TO RECEIVE UNDER THE INDENTURE
GOVERNING THE 11.75% DISCOUNT NOTES, AND YOU MAY REALIZE TAXABLE GAIN OR LOSS
UPON PAYMENT OF YOUR CLAIM.
 
     If a bankruptcy petition were filed by or against us under the U.S.
Bankruptcy Code after the issuance of the 11.75% discount notes, the claim by a
holder of the 11.75% discount notes for the principal amount of the 11.75%
discount notes may be limited to an amount equal to the sum of:
 
          (1) the initial offering price for the 11.75% discount notes; and
 
          (2) that portion of the original issue discount that does not
     constitute "unmatured interest" for purposes of the U.S. Bankruptcy Code.
 
     Any original issue discount that was not amortized as of the date of the
bankruptcy filing would constitute unmatured interest. Accordingly, holders of
11.75% discount notes under these circumstances may receive a lesser amount than
they would be entitled to receive under the terms of the indenture governing the
11.75% discount notes, even if sufficient funds are available. In addition, to
the extent that the U.S. Bankruptcy Code differs from the Internal Revenue Code
in determining the method of amortization of original issue discount, a holder
of 11.75% discount notes may realize taxable gain or loss upon payment of that
holder's claim in bankruptcy.
 
                                       30

<PAGE>   34
 
                           FORWARD-LOOKING STATEMENTS
 
     This prospectus includes forward-looking statements regarding, among other
things, our plans, strategies and prospects, both business and financial.
Although we believe that our plans, intentions and expectations reflected in or
suggested by these forward-looking statements are reasonable, we cannot assure
you that we will achieve or realize these plans, intentions or expectations.
Forward-looking statements are inherently subject to risks, uncertainties and
assumptions. Important factors that could cause actual results to differ
materially from the forward-looking statements we make in this prospectus are
set forth under the caption "Risk Factors" and elsewhere in this prospectus and
include, but are not limited to:
 
        - our plans to achieve growth by offering new products and services and
          through acquisitions and swaps;
 
        - our anticipated capital expenditures for our planned upgrades and the
          ability to fund these expenditures;
 
        - Charter Communications Holding Company's failure to obtain financing
          sufficient to complete the Bresnan acquisition;
 
        - our beliefs regarding the effects of governmental regulation on our
          business;
 
        - our ability to effectively compete in a highly competitive
          environment; and
 
        - our expectations to be ready for any year 2000 problem.
 
     All forward-looking statements attributable to us or persons acting on our
behalf are expressly qualified in their entirety by those cautionary statements.
 
                                       31

<PAGE>   35
 
                                USE OF PROCEEDS
 
     This exchange offer is intended to satisfy certain of our obligations under
the exchange and registration rights agreements entered into in connection with
the offering of the original notes. We will not receive any proceeds from the
exchange offer. In consideration for issuing the new notes, we will receive
original notes with the same original principal amount at maturity. The form and
terms of the original notes are the same as the form and terms of the new notes,
except as otherwise described in this prospectus. The original notes surrendered
in exchange for new notes will be retired and canceled and cannot be reissued.
Accordingly, the issuance of the new notes will not result in any increase in
our outstanding debt.
 
     We received proceeds totaling approximately $1.3 billion from the private
placement of the original notes. These proceeds will be used to finance the
Avalon and Falcon change of control offers, to finance the Bresnan change of
control offers after the Bresnan acquisition is closed and to repay other debt.
Pending our use of the net proceeds from the sale of the original notes, we may
invest the funds in appropriate short-term investments as determined by us or
repay amounts outstanding under the revolving credit facilities of our
subsidiaries.
 
     The break-down of the uses of proceeds is as follows (in millions):
 

<TABLE>
<S>                                                           <C>
Change of control offers:
  Falcon
     8.375% senior debentures due 2010......................  $  378.8
     9.285% senior discount debentures due 2010.............     322.5
  Avalon
     9.375% senior subordinated notes due 2008..............     151.5
     11.875% senior discount notes due 2008.................     127.4
  Bresnan
     8.0% senior notes due 2005.............................     167.0
     9.25% senior discount notes due 2009...................     105.8
Discounts and commissions...................................      26.8
Expenses....................................................      20.5
                                                              --------
Total.......................................................  $1,300.3
                                                              ========
</TABLE>

 
                                       32

<PAGE>   36
 
                                 CAPITALIZATION
 
     The following table sets forth as of September 30, 1999 on a consolidated
basis:
 
     - the actual capitalization of Charter Holdings;
 
     - the pro forma capitalization of Charter Holdings, assuming that as of
       September 30, 1999:
 
        (1) all acquisitions closed since September 30, 1999 had been completed
            (including the transfer of an Indiana cable system we agreed to swap
            in the InterMedia acquisition);
 
        (2) the recent transfer to Charter Holdings of the Fanch, Falcon and
            Avalon cable systems had occurred and the Pending Transactions had
            been completed;
 
        (3) all of the Helicon notes and substantially all of the Rifkin notes
            had been called or repurchased through tender offers;
 
        (4) the Avalon 11.875% senior discount notes had not been put to us as
            permitted under the change of control provisions in the indenture
            for these notes. The Avalon 11.875% senior discount notes have been
            classified as short-term debt since these notes are puttable to us;
            and
 
        (5) $165.0 million of the Avalon purchase price, $870.0 million of the
            Fanch purchase price and $635.0 million of the Bresnan purchase
            price had been funded with new credit facilities at these entities.
            The borrowings under credit facilities at Bresnan have not yet been
            arranged. Accordingly, this debt is classified as short-term.
 
     - the pro forma as adjusted capitalization of Charter Holdings to reflect:
 
        (1) the issuance and sale of the original notes; and
 
        (2) the repurchase of the Avalon 9.375% senior subordinated notes, the
            Falcon debentures and the Bresnan notes pursuant to the Avalon,
            Falcon and Bresnan change of control offers at prices equal to 101%
            of their aggregate principal amounts, plus accrued and unpaid
            interest, or their accreted value, as applicable, with net proceeds
            from the issuance and sale of the original notes.
 
                                       33

<PAGE>   37
 
     This table should be read in conjunction with the "Unaudited Pro Forma
Financial Statements" and the accompanying notes included elsewhere in this
prospectus.
 

<TABLE>
<CAPTION>
                                                         AS OF SEPTEMBER 30, 1999
                                                 -----------------------------------------
                                                                                PRO FORMA
                                                   ACTUAL        PRO FORMA     AS ADJUSTED
                                                 -----------    -----------    -----------
                                                          (DOLLARS IN THOUSANDS)
<S>                                              <C>            <C>            <C>
Short-term debt(a):
  9.375% senior subordinated notes -- Avalon...  $        --    $   151,500    $        --
  11.875% senior discount notes -- Avalon......           --        127,400        127,400
  8.375% senior debentures -- Falcon...........           --        378,750             --
  9.285% senior discount
     debentures -- Falcon......................           --        322,522             --
  8.0% senior notes -- Bresnan.................           --        167,025             --
  9.25% senior discount notes -- Bresnan.......           --        194,335             --
  Credit facilities -- Bresnan(b)..............           --        635,000        635,000
                                                 -----------    -----------    -----------
     Total short-term debt.....................           --      1,976,532        762,400
                                                 -----------    -----------    -----------
Long-term debt:
  Credit facilities:
     Charter Operating(c)......................    2,850,000      3,543,565      3,504,622
     CC V -- Avalon............................           --        165,000        165,000
     CC VI -- Fanch............................           --        870,000        870,000
     CC VII -- Falcon..........................           --      1,012,750      1,012,750
  8.250% senior notes due 2007.................      598,448        598,448        598,448
  8.625% senior notes due 2009.................    1,495,539      1,495,539      1,495,539
  9.920% senior discount notes due 2011........      954,395        954,395        954,395
  10.00% senior notes due 2009.................           --             --        675,000
  10.25% senior notes due 2010.................           --             --        325,000
  11.75% senior discount notes due 2010........           --             --        300,303
  Other notes(d)...............................      346,250         83,800         83,800
                                                 -----------    -----------    -----------
     Total long-term debt......................    6,244,632      8,723,497      9,984,857
                                                 -----------    -----------    -----------
  Member's equity(e)...........................    4,514,306     10,356,176     10,356,176
                                                 -----------    -----------    -----------
     Total capitalization......................  $10,758,938    $21,056,205    $21,103,433
                                                 ===========    ===========    ===========
</TABLE>

 
-------------------------
(a) Avalon, Falcon and Bresnan notes and debentures are shown at their estimated
    fair values under principles of purchase accounting as of September 30,
    1999.
 
(b) We expect to assume and amend the existing Bresnan credit facilities and
    increase the borrowing availability thereunder. The $635.0 million
    represents $512.0 million in outstanding borrowings under the Bresnan credit
    facilities and $123.0 million in additional borrowings under these credit
    facilities that we anticipate using to fund a portion of the Bresnan
    acquisition purchase price. See "Management's Discussion and Analysis of
    Financial Condition and Results of Operations -- Liquidity and Capital
    Resources."
 
(c) Pro Forma and Pro Forma As Adjusted reflect additional borrowings to fund a
    portion of the InterMedia acquisition purchase price, the repurchase of
    Helicon and Rifkin notes and a portion of the Bresnan acquisition purchase
    price. If the contemplated Swap Transaction is completed, we expect to
    borrow an additional $108.0 million in connection with the closing of this
    transaction. In addition, if we do not obtain timely regulatory approvals
    for our transfer to InterMedia of an Indiana cable system and we are unable
    to transfer replacement systems, we expect to borrow an additional $88.2
    million to pay to InterMedia. Neither of these amounts is reflected in the
    table.
 
                                       34

<PAGE>   38
 
(d) Represents outstanding notes of our Renaissance, Rifkin and Helicon
    subsidiaries. See "Management's Discussion and Analysis of Financial
    Condition and Results of Operations -- Liquidity and Capital
    Resources -- Financing Activities."
 
(e) The increase in member's equity is a result of the transfer to Charter
    Holdings of the Fanch, Falcon, Avalon and Bresnan cable systems.
 
                                       35

<PAGE>   39
 
                    UNAUDITED PRO FORMA FINANCIAL STATEMENTS
 
     The following Unaudited Pro Forma Financial Statements are based on the
financial statements of Charter Holdings. Since January 1, 1999, Charter
Holdings has closed numerous acquisitions. In addition, Charter Holdings merged
with Marcus Holdings in April 1999. Our financial statements, on a consolidated
basis, are adjusted on a pro forma basis to illustrate the estimated effects of
acquisitions closed since September 30, 1999, the recent transfer to Charter
Holdings of the Fanch, Falcon and Avalon cable systems and the Pending
Transactions as if such transactions had occurred on September 30, 1999 for the
Unaudited Pro Forma Balance Sheet and to illustrate the estimated effects of the
following transactions as if they had occurred on January 1, 1998 for the
Unaudited Pro Forma Statements of Operations:
 
     (1) the acquisition of Charter Holdings on December 23, 1998 by Mr. Allen;
 
     (2) the acquisition of certain cable systems from Sonic Communications Inc.
         on May 20, 1998 by Charter Holdings for an aggregate purchase price net
         of cash acquired, of $228.4 million, comprised of $167.5 million in
         cash and $60.9 million in a note payable to the seller;
 
     (3) the acquisition of Marcus Cable by Mr. Allen and Marcus Holdings'
         merger with and into Charter Holdings effective March 31, 1999;
 
     (4) the acquisitions and dispositions during 1998 by Marcus Cable;
 
     (5) the acquisitions by Charter Communications Holding Company, Charter
         Holdings and their subsidiaries completed since January 1, 1999 and the
         Bresnan acquisition;
 
     (6) the refinancing of all the debt of our subsidiaries through the
         issuance of the existing Charter Holdings senior notes and senior
         discount notes and funding under our credit facilities;
 
     (7) the completion of the Fanch, Falcon, Avalon and Bresnan transfers; and
 
     (8) the receipt by specified sellers in the Bresnan acquisition of $1.0
         billion of their consideration in Charter Communications Holding
         Company membership units rather than in cash.
 
     The Unaudited Pro Forma Financial Statements reflect the application of the
principles of purchase accounting to the transactions listed in items (1)
through (5) above. The allocation of certain purchase prices is based, in part,
on preliminary information, which is subject to adjustment upon obtaining
complete valuation information of intangible assets and post-closing purchase
price adjustments. We believe that finalization of the purchase prices will not
have a material impact on our results of operations or financial position.
 
     The unaudited pro forma adjustments are based upon available information
and certain assumptions that we believe are reasonable. In particular, the pro
forma adjustments assume the following:
 
     - We will transfer to InterMedia the Indiana cable system that was retained
       at the time of the InterMedia closing pending receipt of necessary
       regulatory approvals.
 
     - The holders of Avalon 11.875% senior discount notes will not require us
       to repurchase these notes as required by change of control provisions in
       the indentures for these notes.
 
     - We will repurchase the Falcon debentures, the Avalon 9.375% senior
       subordinated notes and the Bresnan notes at prices equal to 101% of their
       aggregate principal amounts, plus accrued and unpaid interest, or
       accreted value, as applicable.
 
                                       36

<PAGE>   40
 
     We expect that the Bresnan purchase price will be paid with a portion of
the net proceeds of Charter Communications, Inc.'s initial public offering, $1.0
billion of equity of Charter Communications Holding Company issued to specified
sellers in the acquisition, assumed debt (comprised of the existing Bresnan
credit facilities and publicly held notes) and borrowings under credit
facilities. We cannot assure you that the Bresnan acquisition will be completed.
 
     We expect to assume and amend the existing Bresnan credit facilities and
increase the borrowing availability thereunder. We expect to borrow
approximately $635.0 million under these credit facilities in connection with
the closing of the Bresnan acquisition. The $635.0 million represents $512.0
million in outstanding borrowings under the Bresnan credit facilities and $123.0
million in additional borrowings under these credit facilities that we
anticipate using to fund a portion of the Bresnan purchase price. In addition,
we expect that we will have to repurchase outstanding Bresnan notes at prices
equal to 101% of their principal amount, plus accrued and unpaid interest, or
their accreted value, as applicable, in connection with required change of
control offers for these notes. As of the anticipated closing date of the
Bresnan acquisition, the total amount of principal and accreted value of the
Bresnan notes will be $362.3 million. We intend to fund a portion of the
repurchase of the Bresnan notes with a portion of the net proceeds of sale of
the original notes.
 
     We cannot assure you that we will be able to raise the financing necessary
to consummate the Bresnan acquisition. If we are unable to raise the financing
necessary to satisfy this obligation, we may be unable to close the Bresnan
acquisition. In any such case, the relevant sellers or creditors could initiate
legal proceedings against us, including under bankruptcy and reorganization
laws, for any damages they suffer as a result of our non-performance. Any such
action could trigger defaults under our other obligations, including the notes,
our credit facilities and our other debt instruments.
 
     The Unaudited Pro Forma Financial Statements of Charter Holdings do not
purport to be indicative of what our financial position or results of operations
would actually have been had the transactions described above been completed on
the dates indicated or to project our results of operations for any future date.
 
                                       37

<PAGE>   41
 

<TABLE>
<CAPTION>
                                                                   UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
                                                                      NINE MONTHS ENDED SEPTEMBER 30, 1999
                                                ---------------------------------------------------------------------------------
                                                 CHARTER         1999                       BRESNAN      OFFERING
                                                 HOLDINGS    ACQUISITIONS                 ACQUISITION   ADJUSTMENTS
                                                 (NOTE A)      (NOTE B)      SUBTOTAL      (NOTE B)      (NOTE C)        TOTAL
                                                ----------   ------------   -----------   -----------   -----------   -----------
                                                                             (DOLLARS IN THOUSANDS)
<S>                                             <C>          <C>            <C>           <C>           <C>           <C>
Revenues......................................  $  970,362    $  974,776    $ 1,945,138   $  217,370     $     --     $ 2,162,508
                                                ----------    ----------    -----------   ----------     --------     -----------
Operating expenses:
  Operating, general and administrative.......     505,041       481,917        986,958      121,089           --       1,108,047
  Depreciation and amortization...............     505,058       587,184      1,092,242      164,936           --       1,257,178
  Stock option compensation expense...........      59,288            --         59,288           --           --          59,288
  Corporate expense charges (Note D)..........      18,309        46,156         64,465       10,850           --          75,315
  Management fees.............................          --        11,677         11,677          221           --          11,898
                                                ----------    ----------    -----------   ----------     --------     -----------
    Total operating expenses..................   1,087,696     1,126,934      2,214,630      297,096           --       2,511,726
                                                ----------    ----------    -----------   ----------     --------     -----------
Loss from operations..........................    (117,334)     (152,158)      (269,492)     (79,726)          --        (349,218)
Interest expense..............................    (310,650)     (295,280)      (605,930)     (67,619)     (22,804)       (696,353)
Interest income...............................       2,284         1,308          3,592           26           --           3,618
Other income (expense)........................        (335)         (455)          (790)          --           --            (790)
                                                ----------    ----------    -----------   ----------     --------     -----------
Loss before extraordinary item................  $ (426,035)   $ (446,585)   $  (872,620)  $ (147,319)    $(22,804)    $(1,042,743)
                                                ==========    ==========    ===========   ==========     ========     ===========
OTHER FINANCIAL DATA:
EBITDA (Note E)...............................  $  387,389    $  434,571    $   821,960   $   85,210                  $   907,170
EBITDA margin (Note F)........................        39.9%         44.6%          42.3%        39.2%                        41.9%
Adjusted EBITDA (Note G)......................  $  465,321    $  492,859    $   958,180   $   96,281                  $ 1,054,461
Cash flows from operating activities..........     292,557       289,830        582,387       97,534                      679,921
Cash flows used in investing activities.......    (504,922)     (500,680)    (1,005,602)     (69,303)                  (1,074,905)
Cash flows from (used in) financing
  activities..................................     645,632       299,797        945,429       15,410                      960,839
Cash interest expense.........................                                                                            564,959
Capital expenditures..........................     442,358       348,403        790,761       59,645                      850,406
Total debt to annualized EBITDA...............                                                                               8.89x
Total debt to annualized adjusted EBITDA......                                                                               7.64
EBITDA to cash interest expense...............                                                                               1.61
EBITDA to interest expense....................                                                                               1.30
Deficiency of earnings to cover fixed charges
  (Note H)....................................                                                                        $ 1,042,743
 
OPERATING DATA (AT END OF PERIOD, EXCEPT FOR
  AVERAGES):
Homes passed (Note I).........................   5,541,000     3,183,000      8,724,000    1,022,000                    9,746,000
Basic customers (Note J)......................   3,426,000     2,074,000      5,500,000      687,000                    6,187,000
Basic penetration (Note K)....................        61.8%         65.2%          63.0%        67.2%                        63.5%
Premium units (Note L)........................   2,039,000       785,000      2,824,000      302,000                    3,126,000
Premium penetration (Note M)..................        59.5%         37.8%          51.3%        44.0%                        50.5%
Average monthly revenue per basic customer
  (Note N)....................................                                                                        $     38.84
</TABLE>

 
                                       38

<PAGE>   42
 
              NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
 
     NOTE A:  Pro forma operating results for Charter Holdings consist of the
following (dollars in thousands):
 

<TABLE>
<CAPTION>
                                                                     HISTORICAL
                                                              ------------------------
                                                               1/1/99        1/1/99
                                                               THROUGH       THROUGH
                                                               9/30/99       3/31/99
                                                               CHARTER       MARCUS        PRO FORMA
                                                              HOLDINGS     HOLDINGS(A)    ADJUSTMENTS      TOTAL
                                                              ---------    -----------    -----------    ---------
<S>                                                           <C>          <C>            <C>            <C>
Revenues....................................................  $ 845,182     $125,180       $     --      $ 970,362
                                                              ---------     --------       --------      ---------
Operating expenses:
  Operating, general and administrative.....................    436,057       68,984             --        505,041
  Depreciation and amortization.............................    441,391       51,688         11,979(b)     505,058
  Stock option compensation expense.........................     59,288           --             --         59,288
  Corporate expense charges.................................     18,309           --             --         18,309
  Management fees...........................................         --        4,381         (4,381)(c)         --
                                                              ---------     --------       --------      ---------
    Total operating expenses................................    955,045      125,053          7,598      1,087,696
                                                              ---------     --------       --------      ---------
Income (loss) from operations...............................   (109,863)         127         (7,598)      (117,334)
Interest expense............................................   (288,750)     (27,067)         5,167(d)    (310,650)
Interest income.............................................     18,326          104        (16,146)(e)      2,284
Other income (expense)......................................       (177)        (158)            --           (335)
                                                              ---------     --------       --------      ---------
Loss before extraordinary item..............................  $(380,464)    $(26,994)      $(18,577)     $(426,035)
                                                              =========     ========       ========      =========
</TABLE>

 
---------------
(a) Marcus Holdings represents the results of operations of Marcus Holdings
    through March 31, 1999, the date of its merger with Charter Holdings.
 
(b) As a result of Mr. Allen acquiring a controlling interest in Marcus Cable, a
    large portion of the purchase price was recorded as franchises ($2.5
    billion) that are amortized over 15 years. This resulted in additional
    amortization for the period from January 1, 1999 through March 31, 1999. The
    adjustment to depreciation and amortization expense consists of the
    following (dollars in millions):
 

<TABLE>
<CAPTION>
                                                                            WEIGHTED AVERAGE
                                                                              USEFUL LIFE       DEPRECIATION/
                                                              FAIR VALUE       (IN YEARS)       AMORTIZATION
                                                              ----------    ----------------    -------------
<S>                                                           <C>           <C>                 <C>
Franchises..................................................   $2,500.0            15              $ 40.8
Cable distribution systems..................................      720.0             8                21.2
Land, buildings and improvements............................       28.3            10                 0.7
Vehicles and equipment......................................       13.6             3                 1.0
                                                                                                   ------
  Total depreciation and amortization.......................                                         63.7
  Less -- historical depreciation and amortization of Marcus
    Cable...................................................                                        (51.7)
                                                                                                   ------
    Adjustment..............................................                                       $ 12.0
                                                                                                   ======
</TABLE>

 
(c) Reflects the elimination of management fees.
 
(d) As a result of the acquisition of Marcus Cable by Mr. Allen, the carrying
    value of outstanding debt was recorded at estimated fair value, resulting in
    a debt premium that is to be amortized as an offset to interest expense over
    the term of the debt. This resulted in a reduction of interest expense.
    Interest expense was further reduced by the effects of the extinguishment of
    substantially all of our long-term debt in March 1999, excluding borrowings
    of our previous credit facilities, and the refinancing of all previous
    credit facilities.
 
(e) Reflects the elimination of interest income on excess cash since we assumed
    substantially all such cash was used to acquire InterMedia.
 
                                       39

<PAGE>   43
 
     NOTE B:  Pro forma operating results for our 1999 acquisitions and the
Bresnan acquisition consist of the following (dollars in thousands):

<TABLE>
<CAPTION>
                                                              NINE MONTHS ENDED SEPTEMBER 30, 1999
                                                                1999 ACQUISITIONS -- HISTORICAL
                                    ----------------------------------------------------------------------------------------
                                                                 GREATER
                                                     AMERICAN     MEDIA                               INTERMEDIA
                                    RENAISSANCE(A)   CABLE(A)   SYSTEMS(A)   HELICON(A)   RIFKIN(A)    SYSTEMS      FALCON
                                    --------------   --------   ----------   ----------   ---------   ----------   ---------
<S>                                 <C>              <C>        <C>          <C>          <C>         <C>          <C>
Revenues...........................    $20,396       $12,311     $42,348      $ 49,565    $152,364     $152,789    $ 320,228
                                       -------       -------     -------      --------    --------     --------    ---------
Operating expenses:
 Operating, general and
   administrative..................      9,382         6,465      26,067        31,693      95,077       84,174      167,824
 Depreciation and amortization.....      8,912         5,537       5,195        16,617      77,985       79,325      168,546
 Equity-based deferred
   compensation....................         --            --          --            --          --           --       44,600
 Management fees...................         --           369          --         2,511       2,513        2,356           --
                                       -------       -------     -------      --------    --------     --------    ---------
   Total operating expenses........     18,294        12,371      31,262        50,821     175,575      165,855      380,970
                                       -------       -------     -------      --------    --------     --------    ---------
Income (loss) from operations......      2,102           (60)     11,086        (1,256)    (23,211)     (13,066)     (60,742)
Interest expense...................     (6,321)       (3,218)       (565)      (20,682)    (34,926)     (17,636)     (98,931)
Interest income....................        122            32          --           124          --          187           --
Other income (expense).............         --             2        (398)           --     (12,742)      (2,719)       8,085
                                       -------       -------     -------      --------    --------     --------    ---------
Income (loss) before income tax
 expense (benefit).................     (4,097)       (3,244)     10,123       (21,814)    (70,879)     (33,234)    (151,588)
Income tax expense (benefit).......        (65)            5       4,535            --      (1,975)      (2,681)      (3,022)
                                       -------       -------     -------      --------    --------     --------    ---------
Income (loss) before extraordinary
 item..............................    $(4,032)      $(3,249)    $ 5,588      $(21,814)   $(68,904)    $(30,553)   $(148,566)
                                       =======       =======     =======      ========    ========     ========    =========
 
<CAPTION>
                                        NINE MONTHS ENDED SEPTEMBER 30, 1999
                                          1999 ACQUISITIONS -- HISTORICAL
                                     ------------------------------------------
 
                                     FANCH(B)    AVALON     OTHER      TOTAL
                                     --------   --------   -------   ----------
<S>                                  <C>        <C>        <C>       <C>
Revenues...........................  $155,626   $ 80,198   $11,303   $  997,128
                                     --------   --------   -------   ----------
Operating expenses:
 Operating, general and
   administrative..................   69,895      45,119     6,213      541,909
 Depreciation and amortization.....   49,172      33,574     3,746      448,609
 Equity-based deferred
   compensation....................       --          --        --       44,600
 Management fees...................    4,253          --       447       12,449
                                     --------   --------   -------   ----------
   Total operating expenses........  123,320      78,693    10,406    1,047,567
                                     --------   --------   -------   ----------
Income (loss) from operations......   32,306       1,505       897      (50,439)
Interest expense...................     (950)    (34,340)   (1,944)    (219,513)
Interest income....................        9         743        --        1,217
Other income (expense).............     (842)         --       (30)      (8,644)
                                     --------   --------   -------   ----------
Income (loss) before income tax
 expense (benefit).................   30,523     (32,092)   (1,077)    (277,379)
Income tax expense (benefit).......      177      (1,362)       --       (4,388)
                                     --------   --------   -------   ----------
Income (loss) before extraordinary
 item..............................  $30,346    $(30,730)  $(1,077)  $ (272,991)
                                     ========   ========   =======   ==========
</TABLE>

 

<TABLE>
<CAPTION>
                                                                  NINE MONTHS ENDED
                                                              SEPTEMBER 30, 1999 BRESNAN
                                                              ACQUISITION -- HISTORICAL
                                                              --------------------------
<S>                                                           <C>
Revenues....................................................           $209,749
                                                                       --------
Operating expenses:
  Operating, general and administrative.....................            127,799
  Depreciation and amortization.............................             42,653
                                                                       --------
    Total operating expenses................................            170,452
                                                                       --------
Income from operations......................................             39,297
Interest expense............................................            (49,186)
Other income (expense)......................................               (268)
                                                                       --------
Loss before extraordinary item..............................           $(10,157)
                                                                       ========
</TABLE>

 
                                       40

<PAGE>   44

<TABLE>
<CAPTION>
                                                                 NINE MONTHS ENDED SEPTEMBER 30, 1999
                                           --------------------------------------------------------------------------------
                                                                          1999 ACQUISITIONS
                                           --------------------------------------------------------------------------------
                                                                                     PRO FORMA
                                                        -------------------------------------------------------------------
                                           HISTORICAL   ACQUISITIONS(C)   DISPOSITIONS(D)   ADJUSTMENTS             TOTAL
                                           ----------   ---------------   ---------------   -----------           ---------
<S>                                        <C>          <C>               <C>               <C>                   <C>
Revenues.................................  $ 997,128        $30,869          $(49,893)       $  (3,328)(f)        $ 974,776
                                           ---------        -------          --------        ---------            ---------
Operating expenses:
 Operating, general and administrative...    541,909         16,557           (23,806)         (52,743)(f)(g)       481,917
 Depreciation and amortization...........    448,609          6,504           (21,040)         153,111(h)           587,184
 Equity-based deferred compensation......     44,600             --                --          (44,600)(i)               --
 Corporate expense charges...............         --             --                --           46,156(g)            46,156
 Management fees.........................     12,449            941            (1,713)              --               11,677
                                           ---------        -------          --------        ---------            ---------
 Total operating expenses................  1,047,567         24,002           (46,559)         101,924            1,126,934
                                           ---------        -------          --------        ---------            ---------
Income (loss) from operations............    (50,439)         6,867            (3,334)        (105,252)            (152,158)
Interest expense.........................   (219,513)        (1,870)               13          (73,910)(j)         (295,280)
Interest income..........................      1,217             91                --               --                1,308
Other income (expense)...................     (8,644)            (5)           (2,576)        10,770(k)                (455)
                                           ---------        -------          --------        ---------            ---------
Income (loss) before income tax expense
 (benefit)...............................   (277,379)         5,083            (5,897)        (168,392)            (446,585)
Income tax expense (benefit).............     (4,388)           (12)               --            4,400(l)                --
                                           ---------        -------          --------        ---------            ---------
Income (loss) before extraordinary
 item....................................  $(272,991)       $ 5,095          $ (5,897)       $(172,792)           $(446,585)
                                           =========        =======          ========        =========            =========
 
<CAPTION>
                                                             NINE MONTHS ENDED SEPTEMBER 30, 1999
                                           -------------------------------------------------------------------------
                                                                      BRESNAN ACQUISITION
                                           -------------------------------------------------------------------------
                                                                                 PRO FORMA
                                                        ------------------------------------------------------------
                                           HISTORICAL   ACQUISITIONS(C)   DISPOSITIONS(E)   ADJUSTMENTS      TOTAL
                                           ----------   ---------------   ---------------   -----------    ---------
<S>                                        <C>          <C>               <C>               <C>            <C>
Revenues.................................  $ 209,749        $ 7,734            $(113)        $      --     $ 217,370
                                           ---------        -------            -----         ---------     ---------
Operating expenses:
 Operating, general and administrative...    127,799          5,562              (69)          (12,203)(g)   121,089
 Depreciation and amortization...........     42,653          2,641              (23)          119,665(h)    164,936
 Equity-based deferred compensation......         --             --               --                --            --
 Corporate expense charges...............         --             --               --            10,850(g)     10,850
 Management fees.........................         --            221               --                --           221
                                           ---------        -------            -----         ---------     ---------
 Total operating expenses................    170,452          8,424              (92)          118,312       297,096
                                           ---------        -------            -----         ---------     ---------
Income (loss) from operations............     39,297           (690)             (21)         (118,312)      (79,726)
Interest expense.........................    (49,186)          (323)              24           (18,134)(j)   (67,619)
Interest income..........................         --             26               --                --            26
Other income (expense)...................       (268)        49,031               --           (48,763)(k)        --
                                           ---------        -------            -----         ---------     ---------
Income (loss) before income tax expense
 (benefit)...............................    (10,157)        48,044                3          (185,209)     (147,319)
Income tax expense (benefit).............         --            (35)              --                35(l)         --
                                           ---------        -------            -----         ---------     ---------
Income (loss) before extraordinary
 item....................................  $ (10,157)       $48,079            $   3         $(185,244)    $(147,319)
                                           =========        =======            =====         =========     =========
</TABLE>

 
---------------
(a) Renaissance represents the results of operations of Renaissance through
    April 30, 1999, the date of acquisition by Charter Holdings. American Cable
    represents the results of operations of American Cable through May 7, 1999,
    the date of acquisition by Charter Holdings. Greater Media Systems
    represents the results of operations of Greater Media Systems through June
    30, 1999, the date of acquisition by Charter Holdings. Helicon represents
    the results of operations of Helicon through July 30, 1999, the date of
    acquisition by the Charter Holdings. Rifkin includes the results of
    operations of Rifkin Acquisition Partners, L.L.L.P., Rifkin Cable Income
    Partners L.P., Indiana Cable Associates, Ltd. and R/N South Florida Cable
    Management Limited Partnership, all under common ownership through September
    13, 1999, the date of acquisition by Charter Holdings as follows (dollars in
    thousands):
 

<TABLE>
<CAPTION>
                                         RIFKIN         RIFKIN      INDIANA    SOUTH
                                       ACQUISITION   CABLE INCOME    CABLE    FLORIDA      OTHER      TOTAL
                                       -----------   ------------   -------   --------   ---------   --------
<S>                                    <C>           <C>            <C>       <C>        <C>         <C>
Revenues.............................   $ 68,829        $3,807      $ 6,034   $ 17,516   $  56,178   $152,364
Income (loss) from operations........     (6,954)          146       (3,714)   (14,844)      2,155    (23,211)
Loss before extraordinary item.......    (21,571)         (391)      (4,336)   (15,605)    (27,001)   (68,904)
</TABLE>

 
(b) Fanch includes the results of operations for the nine months ended September
    30, 1999, of Fanch cable systems as follows (dollars in thousands):
 

<TABLE>
<CAPTION>
                                                              FANCH CABLE
                                                                SYSTEMS       OTHER      TOTAL
                                                              -----------    -------    --------
<S>                                                           <C>            <C>        <C>
Revenues....................................................   $142,607      $13,019    $155,626
Income from operations......................................     29,995        2,311      32,306
Income before extraordinary item............................     29,557          789      30,346
</TABLE>

 
(c) Represents the historical results of operations for the period from January
    1, 1999 through the date of purchase for acquisitions completed by Rifkin,
    Fanch and Bresnan.
 
                                       41

<PAGE>   45
 
     These acquisitions were accounted for using the purchase method of
accounting. The purchase price in millions and closing dates for significant
acquisitions are as follows:
 

<TABLE>
<CAPTION>
                                                      RIFKIN            FANCH          BRESNAN
                                                   ACQUISITIONS     ACQUISITIONS     ACQUISITIONS
                                                   -------------    -------------    ------------
<S>                                                <C>              <C>              <C>
Purchase price.................................    $165.0           $42.2            $40.0
Closing date...................................    February 1999    February 1999    January 1999
 
Purchase price.................................    $53.8            $248.0           $27.0
Closing date...................................    July 1999        February 1999    March 1999
 
Purchase price.................................                     $70.5
Closing date...................................                     March 1999
 
Purchase price.................................                     $50.0
Closing date...................................                     June 1999
</TABLE>

 
(d) Represents the elimination of the operating results related to the cable
    systems transferred to InterMedia as part of a swap of cable systems in
    October 1999. The agreed value of our systems transferred to InterMedia was
    $420.0 million. This number includes 30,000 customers served by an Indiana
    cable system that we did not transfer at the time of the InterMedia closing
    because some of the necessary regulatory approvals were still pending. We
    are obligated to transfer this system to InterMedia upon receipt of such
    regulatory approvals. We will have to pay $88.2 million to InterMedia if we
    do not obtain timely regulatory approvals for our transfer to InterMedia of
    the Indiana cable system and we are unable to transfer replacement systems.
    No material gain or loss is anticipated on the disposition as these systems
    were recently acquired and recorded at fair value at that time.
 
(e) Represents the elimination of the operating results related to the sale of a
    Bresnan cable system sold in January 1999.
 
(f)  Reflects the elimination of historical revenues and expenses associated
     with an entity not included in the purchase by Charter.
 
(g) Reflects a reclassification of expenses representing corporate expenses that
    would have occurred at Charter Investment, Inc. totalling $57.0 million and
    the elimination of stock compensation expense and the write-off of debt
    issuance costs that were included in operating, general and administrative
    expense.
 
(h) Represents additional depreciation and amortization as a result of our
    recent and pending acquisitions. A large portion of the purchase price was
    allocated to franchises ($12.4 billion) that are amortized over 15 years.
    The adjustment to depreciation and amortization expense consists of the
    following (dollars in millions):
 

<TABLE>
<CAPTION>
                                                                         WEIGHTED AVERAGE   DEPRECIATION/
                                                           FAIR VALUE      USEFUL LIFE      AMORTIZATION
                                                           ----------    ----------------   -------------
<S>                                                        <C>           <C>                <C>
Franchises...............................................  $12,356.5            15             $ 574.1
Cable distribution systems...............................    1,729.1             8               155.7
Land, buildings and improvements.........................       53.9            10                 3.6
Vehicles and equipment...................................       89.1             3                18.7
                                                                                               -------
     Total depreciation and amortization.................................................        752.1
     Less-historical depreciation and amortization.......................................       (479.3)
                                                                                               -------
          Adjustment.....................................................................      $ 272.8
                                                                                               =======
</TABLE>

 
(i)  Reflects the elimination of an estimated $44.6 million of change in control
     payments under the terms of Falcon's equity-based compensation plans that
     were triggered by the acquisition of Falcon. These plans will be terminated
     and the employees will participate in the option plan of Charter
     Communications Holding Company. As such, these costs will not recur.
 
                                       42

<PAGE>   46
 
(j)  Reflects additional interest expense on borrowings, which have been or will
     be used to finance the acquisitions as follows (dollars in millions):
 

<TABLE>
<S>                                                           <C>
$165.0 million of credit facilities at a composite current
rate of 8.7% -- Avalon......................................  $  10.8
$150.0 million 9.375% senior subordinated notes -- Avalon...     10.5
$196.0 million 11.875% senior discount notes -- Avalon......     10.8
$870.0 million of credit facilities at a composite current
  rate of 8.4% -- Fanch.....................................     54.9
$1.0 billion of credit facilities at a composite current
  rate of 7.9% -- Falcon....................................     59.1
$375.0 million 8.375% senior debentures -- Falcon...........     23.6
$435.3 million 9.285% senior discount
  debentures -- Falcon......................................     26.4
$696.3 anticipated and committed financing -- Bresnan.......     44.5
$170.0 million 8.0% senior notes -- Bresnan.................     10.2
$275.0 million 9.25% senior discount notes -- Bresnan.......     12.9
Interest expense for recent acquisitions prior to closing
  at composite current rate of 8.2%.........................     99.2
                                                              -------
     Total pro forma interest expenses......................    362.9
     Less-historical interest expense from acquired
      companies.............................................   (270.9)
                                                              -------
       Adjustment...........................................  $  92.0
                                                              =======
</TABLE>

 
     An increase in the interest rate of 0.125% on all variable rate debt would
     result in an increase in interest expense of $5.9 million.
 
(k) Represents the elimination of gain (loss) on sale of cable television
    systems whose results of operations have been eliminated in (d) and (e)
    above.
 
(l)  Reflects the elimination of income tax expense (benefit) as a result of
     being acquired by a limited liability company.
 
     NOTE C:  The offering adjustments of approximately $22.8 million in higher
interest expense consist of the following (dollars in millions):
 

<TABLE>
<CAPTION>
                                                              INTEREST
                        DESCRIPTION                           EXPENSE
                        -----------                           --------
<S>                                                           <C>
$675 million of 10.00% senior notes.........................   $ 50.6
$325 million of 10.25% senior notes.........................     25.0
$532 million of 11.75% senior discount notes................     27.2
Amortization of debt issuance costs.........................      3.6
                                                               ------
  Total pro forma interest expense..........................    106.4
  Less-historical interest expense..........................    (83.6)
                                                               ------
     Adjustment.............................................   $ 22.8
                                                               ======
</TABLE>

 
     NOTE D:  Charter Investment, Inc. has provided corporate management and
consulting services to Charter Operating. In connection with the initial public
offering of common stock by Charter Communications, Inc., the existing
management agreement was assigned to Charter Communications, Inc. and Charter
Communications, Inc. entered into a new management agreement with Charter
Communications Holding Company. See "Certain Relationships and Related
Transactions."
 
     NOTE E:   EBITDA represents earnings (loss) before extraordinary item
before interest, income taxes, depreciation and amortization. EBITDA is
presented because it is a widely accepted financial indicator of a cable
company's ability to service indebtedness. However, EBITDA should not be
considered as an alternative to income from operations or to cash flows from
operating, investing or financing activities, as determined in accordance with
generally accepted accounting principles. EBITDA should also not be construed as
an indication of a company's
 
                                       43

<PAGE>   47
 
operating performance or as a measure of liquidity. In addition, because EBITDA
is not calculated identically by all companies, the presentation here may not be
comparable to other similarly titled measures of other companies. Management's
discretionary use of funds depicted by EBITDA may be limited by working capital,
debt service and capital expenditure requirements and by restrictions related to
legal requirements, commitments and uncertainties.
 
     NOTE F:   EBITDA margin represents EBITDA as a percentage of revenues.
 
     NOTE G:   Adjusted EBITDA means EBITDA before stock option compensation
expense, corporate expense charges, management fees and other income (expense).
Adjusted EBITDA is presented because it is a widely accepted financial indicator
of a cable company's ability to service indebtedness. However, adjusted EBITDA
should not be considered as an alternative to income from operations or to cash
flows from operating, investing or financing activities, as determined in
accordance with generally accepted accounting principles. Adjusted EBITDA should
also not be construed as an indication of a company's operating performance or
as a measure of liquidity. In addition, because adjusted EBITDA is not
calculated identically by all companies, the presentation here may not be
comparable to other similarly titled measures of other companies. Management's
discretionary use of funds depicted by adjusted EBITDA may be limited by working
capital, debt service and capital expenditure requirements and by restrictions
related to legal requirements, commitments and uncertainties.
 
     NOTE H:   Earnings include net income (loss) plus fixed charges. Fixed
charges consist of interest expense and an estimated interest component of rent
expense.
 
     NOTE I:    Homes passed are the number of living units, such as single
residence homes, apartments and condominium units, passed by the cable
television distribution network in a given cable system service area.
 
     NOTE J:   Basic customers are customers who receive basic cable service.
 
     NOTE K:   Basic penetration represents basic customers as a percentage of
homes passed.
 
     NOTE L:   Premium units represent the total number of subscriptions to
premium channels.
 
     NOTE M:  Premium penetration represents premium units as a percentage of
basic customers.
 
     NOTE N:   Average monthly revenue per basic customer represents revenues
divided by the number of months in the period divided by the number of basic
customers at September 30, 1999.
 
                                       44

<PAGE>   48
 

<TABLE>
<CAPTION>
                                                           UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
                                                                  YEAR ENDED DECEMBER 31, 1998
                                -------------------------------------------------------------------------------------------------
                                  CHARTER                       1999                       BRESNAN       OFFERING
                                 HOLDINGS       MARCUS      ACQUISITIONS                 ACQUISITION    ADJUSTMENTS
                                 (NOTE A)      (NOTE B)       (NOTE C)      SUBTOTAL       (NOTE C)      (NOTE D)        TOTAL
                                -----------   -----------   ------------   -----------   ------------   -----------   -----------
                                                                     (DOLLARS IN THOUSANDS)
<S>                             <C>           <C>           <C>            <C>           <C>            <C>           <C>
Revenues......................  $   601,953   $   457,929   $ 1,352,370    $ 2,412,252   $   279,252     $     --     $ 2,691,504
                                -----------   -----------   -----------    -----------   -----------     --------     -----------
Operating expenses:
 Operating, general and
   administrative.............      304,555       236,595       663,870      1,205,020       154,695           --       1,359,715
 Depreciation and
   amortization...............      370,406       258,348       854,661      1,483,415       224,983           --       1,708,398
 Stock option compensation
   expense....................          845            --            --            845            --           --             845
 Corporate expense charges
   (Note E)...................       16,493        17,042        42,313         75,848         5,768           --          81,616
 Management fees..............           --            --        20,803         20,803            --           --          20,803
                                -----------   -----------   -----------    -----------   -----------     --------     -----------
    Total operating
      expenses................      692,299       511,985     1,581,647      2,785,931       385,446           --       3,171,377
                                -----------   -----------   -----------    -----------   -----------     --------     -----------
Loss from operations..........      (90,346)      (54,056)     (229,277)      (373,679)     (106,194)          --        (479,873)
Interest expense..............     (200,794)     (137,627)     (489,077)      (827,498)      (90,764)     (32,521)       (950,783)
Other income (expense)........          518            --       (11,462)       (10,944)           --           --         (10,944)
                                -----------   -----------   -----------    -----------   -----------     --------     -----------
Loss before extraordinary
  item........................  $  (290,622)  $  (191,683)  $  (729,816)   $(1,212,121)  $  (196,958)    $(32,521)    $(1,441,600)
                                ===========   ===========   ===========    ===========   ===========     ========     ===========
OTHER FINANCIAL DATA:
EBITDA (Note F)...............  $   280,578   $   204,292   $   613,922    $ 1,098,792   $   118,789                  $ 1,217,581
EBITDA margin (Note G)........         46.6%         44.6%         45.4%          45.6%         42.5%                        45.2%
Adjusted EBITDA (Note H)......  $   297,398   $   221,334   $   688,500    $ 1,207,232   $   124,557                  $ 1,331,789
Cash flows from operating
  activities..................      141,602       135,466       345,766        622,834       102,361                      725,195
Cash flows used in investing
  activities..................     (206,607)     (217,729)     (430,290)      (854,626)      (77,276)                    (931,902)
Cash flows from (used in)
  financing activities........      210,265       109,924       164,457        484,646       (25,406)                     459,240
Cash interest expense.........                                                                                            776,147
Capital expenditures..........      213,353       224,723       256,469        694,545        58,601                      753,146
Total debt to EBITDA..........                                                                                               8.51x
Total debt to adjusted
  EBITDA......................                                                                                               7.78
EBITDA to cash interest
  expense.....................                                                                                               1.57
EBITDA to interest expense....                                                                                               1.28
Deficiency of earnings to
  cover fixed charges (Note
  I)..........................                                                                                        $ 1,441,600
 
OPERATING DATA (AT END OF
  PERIOD, EXCEPT FOR
  AVERAGES):
Homes passed (Note J).........    2,149,000     1,743,000     4,701,000      8,593,000     1,009,000                    9,602,000
Basic customers (Note K)......    1,255,000     1,061,000     3,098,000      5,414,000       681,000                    6,095,000
Basic penetration (Note L)....         58.4%         60.9%         65.9%          63.0%         67.5%                        63.5%
Premium units (Note M)........      845,000       411,000     1,372,000      2,628,000       267,000                    2,895,000
Premium penetration (Note
  N)..........................         67.3%         38.7%         44.3%          48.5%         39.2%                        47.5%
Average monthly revenue per
  basic customer (Note O).....                                                                                        $     36.80
</TABLE>

 
                                       45

<PAGE>   49
 
            NOTES TO THE UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
 
     NOTE A:  Pro forma operating results for Charter Holdings, including the
acquisition of us on December 23, 1998 by Mr. Allen and the acquisition of Sonic
Communications, Inc., consist of the following (dollars in thousands):

<TABLE>
<CAPTION>
                                                                                    12/24/98   1/1/98
                                                    1/1/98 THROUGH 12/23/98         THROUGH    THROUGH
                                               ----------------------------------   12/31/98   5/20/98
                                                  CCA      CHARTERCOMM              --------   -------
                                                 GROUP      HOLDINGS      CHARTER HOLDINGS      SONIC    ELIMINATIONS     SUBTOTAL
                                               ---------   -----------   -------------------   -------   ------------     ---------
<S>                                            <C>         <C>           <C>        <C>        <C>       <C>              <C>
Revenues.....................................  $ 324,432    $196,801     $ 49,731   $13,713    $17,276     $    --        $ 601,953
                                               ---------    --------     --------   -------    -------     -------        ---------
Operating expenses:
 Operating, general and
   administrative............................    164,145      98,331       25,952     7,134      8,993          --          304,555
 Depreciation and amortization...............    136,689      86,741       16,864     8,318      2,279          --          250,891
 Stock option compensation expense...........         --          --           --       845         --          --              845
 Management fees/corporate expense charges...     17,392      14,780        6,176       473         --          --           38,821
                                               ---------    --------     --------   -------    -------     -------        ---------
   Total operating expenses..................    318,226     199,852       48,992    16,770     11,272          --          595,112
                                               ---------    --------     --------   -------    -------     -------        ---------
Income (loss) from operations................      6,206      (3,051)         739    (3,057)     6,004          --            6,841
Interest expense.............................   (113,824)    (66,121)     (17,277)   (2,353)    (2,624)      1,900(c)      (200,299)
Other income (expense).......................      4,668      (1,684)        (684)      133        (15)     (1,900)(c)          518
                                               ---------    --------     --------   -------    -------     -------        ---------
Income (loss) before income taxes............   (102,950)    (70,856)     (17,222)   (5,277)     3,365          --         (192,940)
Income tax expense...........................         --          --           --        --      1,346          --            1,346
                                               ---------    --------     --------   -------    -------     -------        ---------
Income (loss) before extraordinary item......  $(102,950)   $(70,856)    $(17,222)  $(5,277)   $ 2,019     $    --        $(194,286)
                                               =========    ========     ========   =======    =======     =======        =========
 
<CAPTION>
 
                                                       PRO FORMA
                                               --------------------------
 
                                               ADJUSTMENTS        TOTAL
                                               -----------      ---------
<S>                                            <C>              <C>
Revenues.....................................   $      --       $ 601,953
                                                ---------       ---------
Operating expenses:
 Operating, general and
   administrative............................          --         304,555
 Depreciation and amortization...............     119,515(a)      370,406
 Stock option compensation expense...........          --             845
 Management fees/corporate expense charges...     (22,328)(b)      16,493
                                                ---------       ---------
   Total operating expenses..................      97,187         692,299
                                                ---------       ---------
Income (loss) from operations................     (97,187)        (90,346)
Interest expense.............................       (495)(d)     (200,794)
Other income (expense).......................          --             518
                                                ---------       ---------
Income (loss) before income taxes............     (97,682)       (290,622)
Income tax expense...........................      (1,346)(e)          --
                                                ---------       ---------
Income (loss) before extraordinary item......   $ (96,336)      $(290,622)
                                                =========       =========
</TABLE>

 
---------------
(a)  Represents additional depreciation and amortization as a result of the
     acquisition of us by Mr. Allen. A large portion of the purchase price was
     allocated to franchises ($3.6 billion) that are amortized over 15 years.
     The adjustment to depreciation and amortization expense consists of the
     following (dollars in millions):
 

<TABLE>
<CAPTION>
                                                                          WEIGHTED AVERAGE       DEPRECIATION/
                                                         FAIR VALUE    USEFUL LIFE (IN YEARS)    AMORTIZATION
                                                         ----------    ----------------------    -------------
    <S>                                                  <C>           <C>                       <C>
    Franchises.........................................   $3,600.0               15                 $240.0
    Cable distribution systems.........................    1,439.2               12                  115.3
    Land, buildings and improvements...................       41.3               11                    3.5
    Vehicles and equipment.............................       61.2                5                   11.6
                                                                                                    ------
      Total depreciation and amortization..............                                              370.4
      Less-historical depreciation and amortization....                                             (250.9)
                                                                                                    ------
         Adjustment....................................                                             $119.5
                                                                                                    ======
</TABLE>

 
(b) Reflects the reduction in corporate expense charges of approximately $7.9
    million to reflect the actual costs incurred. Management fees charged to CCA
    Group and CharterComm Holdings, companies not controlled by Charter
    Investment, Inc. at that time, exceeded the allocated costs incurred by
    Charter Investment, Inc. on behalf of those companies by $7.9 million. Also
    reflects the elimination of approximately $14.4 million of change of control
    payments under the terms of the then-existing equity appreciation rights
    plans. Such payments were triggered by the acquisition of us by Mr. Allen.
    Such payments were made by Charter Investment, Inc. and were not subject to
    reimbursement by us, but were allocated to us for financial reporting
    purposes. The equity appreciation rights plans were terminated in connection
    with the acquisition of us by Mr. Allen, and these costs will not recur.
 
(c)  Represents the elimination of intercompany interest on a note payable from
     Charter Holdings to CCA Group.
 
                                       46

<PAGE>   50
 
(d) Reflects additional interest expense on $228.4 million of borrowings under
    our previous credit facilities used to finance the Sonic acquisition offset
    by a reduction of interest expense related to the extinguishment of
    substantially all of our long-term debt in March 1999, excluding borrowings
    of our previous credit facilities, and the refinancing of all previous
    credit facilities.
 
 (e) Reflects the elimination of income tax expense (benefit) as a result of
     being acquired by a limited liability company.
 
     NOTE B:  Pro forma operating results for Marcus Holdings consist of the
following (dollars in thousands):
 

<TABLE>
<CAPTION>
                                                      YEAR ENDED                              PRO FORMA
                                                     DECEMBER 31,   -------------------------------------------------------------
                                                         1998       ACQUISITIONS(A)   DISPOSITIONS(B)    ADJUSTMENTS      TOTAL
                                                     ------------   ---------------   ---------------    -----------    ---------
<S>                                                  <C>            <C>               <C>                <C>            <C>
Revenues...........................................   $ 499,820         $2,620           $ (44,511)       $      --     $ 457,929
                                                      ---------         ------           ---------        ---------     ---------
Operating expenses:
  Operating, general and administrative............     271,638          1,225             (20,971)         (15,297)(c)   236,595
  Depreciation and amortization....................     215,789             --                  --           42,559(d)    258,348
  Corporate expense charges........................          --             --                  --           17,042(c)     17,042
  Management fees..................................       3,341             --                  --           (3,341)(c)        --
  Transaction and severance costs..................     135,379             --                  --         (135,379)(e)        --
                                                      ---------         ------           ---------        ---------     ---------
    Total operating expenses.......................     626,147          1,225             (20,971)         (94,416)      511,985
                                                      ---------         ------           ---------        ---------     ---------
Income (loss) from operations......................    (126,327)         1,395             (23,540)          94,416       (54,056)
Interest expense...................................    (159,985)            --                  --           22,358(d)   (137,627)
Other income (expense).............................     201,278             --            (201,278)              --            --
                                                      ---------         ------           ---------        ---------     ---------
Income (loss) before extraordinary item............   $ (85,034)        $1,395           $(224,818)       $ 116,774     $(191,683)
                                                      =========         ======           =========        =========     =========
</TABLE>

 
---------------
(a) Represents the results of operations of acquired cable systems prior to
    their acquisition in 1998 by Marcus Holdings.
 
(b) Represents the elimination of the operating results and corresponding gain
    on sale of cable systems sold by Marcus Holdings during 1998.
 
(c) Represents a reclassification of expenses totaling $15.3 million from
    operating, general and administrative to corporate expense charges. Also
    reflects the elimination of management fees and the addition of corporate
    expense charges of $1.7 million for actual costs incurred by Charter
    Investment, Inc. on behalf of Marcus Holdings. Management fees charged to
    Marcus Holdings exceeded the costs incurred by Charter Investment, Inc. by
    $1.3 million.
 
(d) As a result of the acquisition of Marcus Holdings by Mr. Allen, a large
    portion of the purchase price was recorded as franchises ($2.5 billion) that
    are amortized over 15 years. This resulted in additional amortization for
    year ended December 31, 1998. The adjustment to depreciation and
    amortization expense consists of the following (dollars in millions):
 

<TABLE>
<CAPTION>
                                                              WEIGHTED AVERAGE
                                                                USEFUL LIFE       DEPRECIATION/
                                                FAIR VALUE       (IN YEARS)       AMORTIZATION
                                                ----------    ----------------    -------------
<S>                                             <C>           <C>                 <C>
Franchises....................................   $2,500.0            15              $ 167.2
Cable distribution systems....................      720.0             8                 84.5
Land, buildings and improvements..............       28.3            10                  2.7
Vehicles and equipment........................       13.6             3                  4.0
                                                                                     -------
     Total depreciation and amortization......                                         258.4
     Less-historical depreciation and
       amortization...........................                                        (215.8)
                                                                                     -------
       Adjustment.............................                                       $  42.6
                                                                                     =======
</TABLE>

 
     Additionally, the carrying value of outstanding debt was recorded at
     estimated fair value, resulting in a debt premium that is to be amortized
     as an offset to interest expense over the term of the debt. This resulted
     in a reduction in interest expense for the year ended December 31, 1998.
 
                                       47

<PAGE>   51
 
(e) As a result of the acquisition of Marcus Holdings by Mr. Allen, Marcus
    Holdings recorded transaction costs of approximately $135.4 million. These
    costs were primarily comprised of approximately $90.2 million in
    compensation paid to employees of Marcus Holdings in settlement of specially
    designated Class B membership units, approximately $24.0 million of
    transaction fees paid to certain equity partners for investment banking
    services and $5.2 million of transaction fees paid primarily for
    professional fees. In addition, Marcus Holdings recorded costs related to
    employee and officer stay-bonus and severance arrangements of approximately
    $16.0 million.
 
     NOTE C:  Pro forma operating results for our recently completed and pending
acquisitions consist of the following (dollars in thousands):

<TABLE>
<CAPTION>
                                                                    YEAR ENDED DECEMBER 31, 1998
                                     -------------------------------------------------------------------------------------------
                                                                   1999 ACQUISITIONS -- HISTORICAL
                                     -------------------------------------------------------------------------------------------
                                                              GREATER
                                                   AMERICAN    MEDIA                           INTERMEDIA
                                     RENAISSANCE    CABLE     SYSTEMS   HELICON    RIFKIN(A)    SYSTEMS      AVALON     FALCON
                                     -----------   --------   -------   --------   ---------   ----------   --------   ---------
<S>                                  <C>           <C>        <C>       <C>        <C>         <C>          <C>        <C>
Revenues...........................   $ 41,524     $15,685    $78,635   $ 75,577   $124,382     $176,062    $ 18,187   $ 307,558
                                      --------     -------    -------   --------   --------     --------    --------   ---------
Operating expenses:
 Operating, general and
   administrative..................     21,037       7,441     48,852     40,179     63,815       86,753      10,067     161,233
 Depreciation and amortization.....     19,107       6,784      8,612     24,290     47,657       85,982       8,183     152,585
 Corporate expense charges.........         --          --         --         --         --           --         655          --
 Management fees...................         --         471         --      3,496      4,106        3,147          --          --
                                      --------     -------    -------   --------   --------     --------    --------   ---------

   Total operating expenses........     40,144      14,696     57,464     67,965    115,578      175,882      18,905     313,818

                                      --------     -------    -------   --------   --------     --------    --------   ---------
                                                                                                                                   
Income (loss) from operations......      1,380         989     21,171      7,612      8,804          180        (718)     (6,260)

Interest expense...................    (14,358)     (4,501)      (535)   (27,634)   (30,482)     (25,449)     (8,223)   (102,591)

Interest income....................        158         122         --         93         --          341         173          --

Other income (expense).............         --          --       (493)        --     36,279       23,030        (463)     (3,093)

                                      --------     -------    -------   --------   --------     --------    --------   ---------
Income (loss) before income tax
 expense...........................    (12,820)     (3,390)    20,143    (19,929)    14,601       (1,898)     (9,231)   (111,944)

Income tax expense (benefit).......        135          --      7,956         --     (4,178)       1,623         186       1,897

                                      --------     -------    -------   --------   --------     --------    --------   ---------
Income (loss) before extraordinary
 item..............................   $(12,955)    $(3,390)   $12,187   $(19,929)  $ 18,779     $ (3,521)   $ (9,417)  $(113,841)

                                      ========     =======    =======   ========   ========     ========    ========   =========
 
<CAPTION>
                                       YEAR ENDED DECEMBER 31, 1998
                                     --------------------------------
                                     1999 ACQUISITIONS -- HISTORICAL
                                     --------------------------------
 
                                     FANCH(B)     OTHER      TOTAL
                                     ---------   -------   ----------
<S>                                  <C>         <C>       <C>
Revenues...........................  $ 141,104   $15,812   $  994,526
                                     ---------   -------   ----------
Operating expenses:
 Operating, general and
   administrative..................     62,977     7,821      510,175
 Depreciation and amortization.....     45,886     4,732      403,818
 Corporate expense charges.........        105        --          760
 Management fees...................      3,998        --       15,218
                                                       
                                     ---------   -------   ----------

   Total operating expenses........    112,966    12,553      929,971
                                              
                                     ---------   -------   ----------
                                        28,138     3,259       64,555
Income (loss) from operations......
                                        (1,873)   (4,023)    (219,669)
Interest expense...................
                                            17        --          904
Interest income....................
                                        (6,628)        5       48,637
Other income (expense).............
                                     ---------   -------   ----------

Income (loss) before income tax         19,654      (759)    (105,573)
 expense...........................
                                           286                  7,905
Income tax expense (benefit).......
                                     ---------   -------   ----------

Income (loss) before extraordinary   $  19,368   $  (759)  $ (113,478)
 item..............................
                                     =========   =======   ==========
                                                                      
</TABLE>

 

<TABLE>
<CAPTION>
                                                                    YEAR ENDED
                                                                 DECEMBER 31, 1998
                                                              -----------------------
                                                              BRESNAN ACQUISITION --
                                                                    HISTORICAL
                                                              -----------------------
<S>                                                           <C>
Revenues....................................................      $       261,964
                                                                  ---------------
Operating expenses:
  Operating, general and administrative.....................              150,750
  Depreciation and amortization.............................               54,308
                                                                  ---------------
        Total operating expenses............................              205,058
                                                                  ---------------
Income from operations......................................               56,906
Interest expense............................................              (18,296)
Other income (expense)......................................               26,754
                                                                  ---------------
Income before extraordinary item............................      $        65,364
                                                                  ===============
</TABLE>

 
                                       48

<PAGE>   52

<TABLE>
<CAPTION>
                                                          YEAR ENDED DECEMBER 31, 1998
                                   ---------------------------------------------------------------------------
                                                                1999 ACQUISITIONS
                                   ---------------------------------------------------------------------------
                                                                          PRO FORMA
                                                --------------------------------------------------------------
                                   HISTORICAL   ACQUISITIONS(C)   DISPOSITIONS(D)   ADJUSTMENTS       TOTAL
                                   ----------   ---------------   ---------------   -----------    -----------
<S>                                <C>          <C>               <C>               <C>            <C>
Revenues.........................  $ 994,526       $417,569          $(59,725)       $      --     $ 1,352,370
                                   ---------       --------          --------        ---------     -----------
Operating expenses:
 Operating, general and
   administrative................    510,175        210,824           (30,538)         (26,591)(f)     663,870
 Depreciation and amortization...    403,818        115,727           (35,981)         371,097(g)      854,661
 Corporate expense charges.......        760         14,962                --           26,591(f)       42,313
 Management fees.................     15,218          6,217              (632)              --          20,803
                                   ---------       --------          --------        ---------     -----------
   Total operating expenses......    929,971        347,730           (67,151)         371,097       1,581,647
                                   ---------       --------          --------        ---------     -----------
Income (loss) from operations....     64,555         69,839             7,426         (371,097)       (229,277)
Interest expense.................   (219,669)       (52,683)           16,927         (233,652)(h)    (489,077)
Interest income..................        904          1,124                --               --           2,028
Other income (expense)...........     48,637          2,311               235          (64,673)(i)     (13,490)
                                   ---------       --------          --------        ---------     -----------
Income (loss) before income tax
 expense (benefit)...............   (105,573)        20,591            24,588         (669,422)       (729,816)
Income tax expense (benefit).....      7,905            669                10           (8,584)(j)          --
                                   ---------       --------          --------        ---------     -----------
Income (loss) before
 extraordinary item..............  $(113,478)      $ 19,922          $ 24,578        $(660,838)    $  (729,816)
                                   =========       ========          ========        =========     ===========
 
<CAPTION>
                                                          YEAR ENDED DECEMBER 31, 1998
                                   --------------------------------------------------------------------------
                                                              BRESNAN ACQUISITION
                                   --------------------------------------------------------------------------
                                                                          PRO FORMA
                                                -------------------------------------------------------------
                                   HISTORICAL   ACQUISITIONS(C)   DISPOSITIONS(E)   ADJUSTMENTS      TOTAL
                                   ----------   ---------------   ---------------   -----------    ----------
<S>                                <C>          <C>               <C>               <C>            <C>
Revenues.........................  $  261,964      $ 28,932          $ (11,644)      $      --     $  279,252
                                   ----------      --------          ---------       ---------     ----------
Operating expenses:
 Operating, general and
   administrative................     150,750        16,255             (6,542)         (5,768)(f)    154,695
 Depreciation and amortization...      54,308         3,971             (2,191)        168,895(g)     224,983
 Corporate expense charges.......          --            --                 --           5,768(f)       5,768
 Management fees.................          --            --                 --              --             --
                                   ----------      --------          ---------       ---------     ----------
   Total operating expenses......     205,058        20,226             (8,733)        168,895        385,446
                                   ----------      --------          ---------       ---------     ----------
Income (loss) from operations....      56,906         8,706             (2,911)       (168,895)      (106,194)
Interest expense.................     (18,296)       (1,338)               738         (71,868)(h)    (90,764)
Interest income..................          --            --                 --              --             --
Other income (expense)...........      26,754         1,957             (1,080)        (27,631)(i)         --
                                   ----------      --------          ---------       ---------     ----------
Income (loss) before income tax
 expense (benefit)...............      65,364         9,325             (3,253)       (268,394)      (196,958)
Income tax expense (benefit).....          --            --                 --              --             --
                                   ----------      --------          ---------       ---------     ----------
Income (loss) before
 extraordinary item..............  $   65,364      $  9,325          $  (3,253)      $(268,394)    $ (196,958)
                                   ==========      ========          =========       =========     ==========
</TABLE>

 
---------------
(a) Rifkin includes the results of operations of Rifkin Acquisition Partners,
    L.L.L.P., as follows (dollars in thousands):
 

<TABLE>
<CAPTION>
                                                          RIFKIN
                                                        ACQUISITION     OTHER      TOTAL
                                                        -----------    -------    --------
<S>                                                     <C>            <C>        <C>
Revenues..............................................    $89,921      $34,461    $124,382
Income from operations................................      1,040        7,764       8,804
Income (loss) before extraordinary item...............     24,419       (5,640)     18,779
</TABLE>

 
(b) Fanch includes the results of operations of Fanch cable systems as follows
    (dollars in thousands):
 

<TABLE>
<CAPTION>
                                                       FANCH CABLE
                                                         SYSTEMS      OTHERS      TOTAL
                                                       -----------    -------    --------
<S>                                                    <C>            <C>        <C>
Revenues.............................................   $124,555      $16,549    $141,104
Income from operations...............................     25,241        2,897      28,138
Income before extraordinary item.....................     18,814          554      19,368
</TABLE>

 
(c) Represents the historical results of operations for the period from January
    1, 1998 through the date of purchase for acquisitions completed by
    Renaissance, the InterMedia systems, Helicon, Rifkin, Fanch, Avalon, Falcon
    and Bresnan in 1998, and for the period from January 1, 1998 through
    December 31, 1998 for acquisitions completed in 1999.
 
                                       49

<PAGE>   53
 
     These acquisitions were accounted for using the purchase method of
     accounting. Purchase prices and the closing dates or anticipated closing
     dates for significant acquisitions are as follows (dollars in millions):

<TABLE>
<CAPTION>
                                             RENAISSANCE     INTERMEDIA        HELICON         RIFKIN          AVALON
                                            -------------   -------------   -------------   -------------   -------------
   <S>                                      <C>             <C>             <C>             <C>             <C>
   Purchase price.........................  $309.5          $29.1           $26.1           $165.0          $30.5
   Closing date...........................  April 1998      December 1998   December 1998   February 1999   July 1998
   Purchase price.........................                                                  $53.8           $431.6
   Closing date...........................                                                  July 1999       November 1998
   Purchase price.........................
   Closing date...........................
   Purchase price.........................
   Closing date...........................
 
<CAPTION>
                                                FALCON           FANCH           BRESNAN
                                            --------------   --------------   -------------
   <S>                                      <C>              <C>              <C>
   Purchase price.........................  $86.2            $42.2            $17.0
   Closing date...........................  July 1998        February 1999    February 1998
   Purchase price.........................  $158.6           $248.0           $11.8
   Closing date...........................  September 1998   February 1999    October 1998
   Purchase price.........................  $513.3           $70.5            $40.0
   Closing date...........................  September 1998   March 1999       January 1999
   Purchase price.........................                   $50.0            $27.0
   Closing date...........................                   June 1999        March 1999
</TABLE>

 
    The InterMedia acquisition above was part of a "swap."
 
(d) Represents the elimination of the operating results primarily related to the
    cable systems transferred to InterMedia as part of a swap of cable systems
    in October 1999. The fair value of the systems transferred to InterMedia was
    $420.0 million. This number includes 30,000 customers served by an Indiana
    cable system that we did not transfer at the time of the InterMedia closing
    because some of the necessary regulatory approvals were still pending. We
    are obligated to transfer this system to InterMedia upon receipt of such
    regulatory approvals. We will have to pay $88.2 million to InterMedia if we
    do not obtain timely regulatory approvals for our transfer to InterMedia of
    the Indiana cable system and we are unable to transfer replacement systems.
    No material gain or loss is anticipated on the disposition as these systems
    were recently acquired and recorded at fair value at that time.
 
(e) Represents the elimination of the operating results related to the sale of a
    Bresnan cable system sold in January 1999.
 
(f) Reflects a reclassification of expenses representing corporate expenses that
    would have occurred at Charter Investment, Inc.
 
(g) Represents additional depreciation and amortization as a result of our
    recently completed and pending acquisitions. A large portion of the purchase
    price was allocated to franchises ($12.4 billion) that are amortized over 15
    years. The adjustments to depreciation and amortization expense consists of
    the following (dollars in millions):
 

<TABLE>
<CAPTION>
                                                    FAIR      WEIGHTED AVERAGE   DEPRECIATION/
                                                    VALUE       USEFUL LIFE      AMORTIZATION
                                                  ---------   ----------------   -------------
<S>                                               <C>         <C>                <C>
Franchises......................................  $12,356.5          15            $  823.8
Cable distribution systems......................    1,729.1           8               223.8
Land, building and improvements.................       53.9          10                 5.2
Vehicles and equipment..........................       89.1           3                26.9
                                                                                   --------
  Total depreciation and amortization...........                                    1,079.7
  Less-historical depreciation and
     amortization...............................                                     (539.7)
                                                                                   --------
     Adjustment.................................                                   $  540.0
                                                                                   ========
</TABLE>

 
                                       50

<PAGE>   54
 
(h) Reflects additional interest expense on borrowings which have been or will
    be used to finance the acquisitions as follows (dollars in millions):
 

<TABLE>
<S>                                                           <C>
$2.7 billion of credit facilities at composite current rate
  of 8.2%...................................................  $ 217.9
$114.4 million 10% senior discount notes -- Renaissance.....     10.7
$165.0 million of credit facilities at a composite current
  rate of 8.7% -- Avalon....................................     14.4
$150.0 million 9.375% senior subordinated notes -- Avalon...     14.1
$196.0 million 11.875% senior discount notes -- Avalon......     14.7
$870.0 million of credit facilities at composite current
  rate of 8.4% -- Fanch.....................................     73.2
$1.0 billion of credit facilities at composite current rate
  of 7.9% -- Falcon.........................................     80.1
$375.0 million 8.375% senior debentures -- Falcon...........     31.4
$435.3 million 9.285% senior discount
  debentures -- Falcon......................................     32.5
$696.3 anticipated and committed financing -- Bresnan.......     59.4
$170.0 million 8% senior notes -- Bresnan...................     13.6
$275.0 million 9.25% senior discount notes -- Bresnan.......     17.8
                                                              -------
  Total pro forma interest expenses.........................    579.8
  Less-historical interest expense from acquired
     companies..............................................   (274.3)
                                                              -------
     Adjustment.............................................  $ 305.5
                                                              =======
</TABLE>

 
     An increase in the interest rate on all variable rate debt of 0.125% would
     result in an increase in interest expense of $7.8 million.
 
(i) Represents the elimination of gain (loss) on the sale of cable television
    systems whose results of operations have been eliminated in (d) and (e)
    above.
 
(j) Reflects the elimination of income tax expense (benefit) as a result of
    being acquired by a limited liability company.
 
     NOTE D:  The offering adjustments of approximately $32.5 million in higher
interest expense consist of the following (dollars in millions):
 

<TABLE>
<CAPTION>
                                                              INTEREST
DESCRIPTION                                                   EXPENSE
-----------                                                   --------
<S>                                                           <C>
$675 million of 10.00% senior notes.........................   $ 67.5
$325 million of 10.25% senior notes.........................     33.3
$532 million of 11.75% senior discount notes................     36.3
Amortization of debt issuance costs.........................      4.8
                                                               ------
  Total pro forma interest expense..........................    141.9
  Less-historical interest expense..........................   (109.4)
                                                               ------
     Adjustment.............................................   $ 32.5
                                                               ======
</TABLE>

 
     NOTE E:  For all of 1998 and through the date of the initial public
offering of Charter Communications, Inc. in November 1999, Charter Investment,
Inc. provided corporate management and consulting services to Charter Operating
and to Marcus Holdings beginning in October 1998. From and after the initial
public offering of Charter Communications, Inc., such management services were
provided by Charter Communications Inc. See "Certain Relationships and Related
Transactions."
 
     NOTE F:  EBITDA represents earnings (loss) before extraordinary item before
interest, income taxes, depreciation and amortization. EBITDA is presented
because it is a widely accepted financial indicator of a cable company's ability
to service indebtedness. However, EBITDA should not be considered as an
alternative
 
                                       51

<PAGE>   55
 
to income from operations or to cash flows from operating, investing or
financing activities, as determined in accordance with generally accepted
accounting principles. EBITDA should also not be construed as an indication of a
company's operating performance or as a measure of liquidity. In addition,
because EBITDA is not calculated identically by all companies, the presentation
here may not be comparable to other similarly titled measures of other
companies. Management's discretionary use of funds depicted by EBITDA may be
limited by working capital, debt service and capital expenditure requirements
and by restrictions related to legal requirements, commitments and
uncertainties.
 
     NOTE G:  EBITDA margin represents EBITDA as a percentage of revenues.
 
     NOTE H:  Adjusted EBITDA means EBITDA before stock option compensation
expense, corporate expense charges, management fees and other income (expense).
Adjusted EBITDA is presented because it is a widely accepted financial indicator
of a cable company's ability to service indebtedness. However, adjusted EBITDA
should not be considered as an alternative to income from operations or to cash
flows from operating, investing or financing activities, as determined in
accordance with generally accepted accounting principles. Adjusted EBITDA should
also not be construed as an indication of a company's operating performance or
as a measure of liquidity. In addition, because adjusted EBITDA is not
calculated identically by all companies, the presentation here may not be
comparable to other similarly titled measures of other companies. Management's
discretionary use of funds depicted by adjusted EBITDA may be limited by working
capital, debt service and capital expenditure requirements and by restrictions
related to legal requirements, commitments and uncertainties.
 
     NOTE I:  Earnings include net income (loss) plus fixed charges. Fixed
charges consist of interest expense and an estimated component of rent expense.
 
     NOTE J:  Homes passed are the number of living units, such as single
residence homes, apartments and condominium units, passed by the cable
television distribution network in a given cable system service area.
 
     NOTE K:  Basic customers are customers who receive basic cable service.
 
     NOTE L:  Basic penetration represents basic customers as a percentage of
homes passed.
 
     NOTE M: Premium units represent the total number of subscriptions to
premium channels.
 
     NOTE N:  Premium penetration represents premium units as a percentage of
basic customers.
 
     NOTE O:  Average monthly revenue per basic customer represents revenues
divided by the number of months in the period divided by the number of basic
customers at December 31, 1998.
 
                                       52

<PAGE>   56
 

<TABLE>
<CAPTION>
                                                            UNAUDITED PRO FORMA BALANCE SHEET
                                                                AS OF SEPTEMBER 30, 1999
                                   -----------------------------------------------------------------------------------
                                                     1999                       BRESNAN       OFFERING
                                     CHARTER     ACQUISITIONS                 ACQUISITION    ADJUSTMENTS
                                    HOLDINGS       (NOTE A)      SUBTOTAL       (NOTE A)      (NOTE B)        TOTAL
                                   -----------   ------------   -----------   ------------   -----------   -----------
                                                                 (DOLLARS IN THOUSANDS)
<S>                                <C>           <C>            <C>           <C>            <C>           <C>
ASSETS
Cash and cash equivalents........  $   434,183    $ (409,597)   $    24,586    $  (23,849)   $        --   $       737
Accounts receivable, net.........       48,470        41,650         90,120         9,774             --        99,894
Receivable from related party....       51,458       (51,458)            --            --             --            --
Prepaid expenses and other.......       27,374        33,881         61,255           225             --        61,480
                                   -----------    ----------    -----------    ----------    -----------   -----------
     Total current assets........      561,485      (385,524)       175,961       (13,850)            --       162,111
Property, plant and equipment....    2,279,489     1,075,397      3,354,886       360,921             --     3,715,807
Franchises.......................    8,268,021     6,716,916     14,984,937     2,759,248             --    17,744,185
Other assets.....................      126,196        12,882        139,078        10,000         47,228       196,306
                                   -----------    ----------    -----------    ----------    -----------   -----------
     Total assets................  $11,235,191    $7,419,671    $18,654,862    $3,116,319    $    47,228   $21,818,409
                                   ===========    ==========    ===========    ==========    ===========   ===========
 
LIABILITIES AND MEMBER'S EQUITY
Short-term debt..................  $        --    $  980,172    $   980,172    $  996,360    $(1,214,132)  $   762,400
Accounts payable and accrued
  expenses.......................      382,565       206,125        588,690        32,598             --       621,288
Payables to manager of cable
  systems........................        8,036            --          8,036            --             --         8,036
                                   -----------    ----------    -----------    ----------    -----------   -----------
     Total current liabilities...      390,601     1,186,297      1,576,898     1,028,958     (1,214,132)    1,391,724
Long-term debt...................    6,244,632     2,440,225      8,684,857        38,640      1,261,360     9,984,857
Deferred management fees.........       17,004            --         17,004            --             --        17,004
Other long-term liabilities......       68,648            --         68,648            --             --        68,648
Member's equity..................    4,514,306     3,793,149      8,307,455     2,048,721             --    10,356,176
                                   -----------    ----------    -----------    ----------    -----------   -----------
     Total liabilities and
       member's equity...........  $11,235,191    $7,419,671    $18,654,862    $3,116,319    $    47,228   $21,818,409
                                   ===========    ==========    ===========    ==========    ===========   ===========
</TABLE>

 
                                       53

<PAGE>   57
 
                 NOTES TO THE UNAUDITED PRO FORMA BALANCE SHEET
 
     NOTE A:  Pro forma balance sheets for our 1999 acquisitions and the Bresnan
acquisition consist of the following (dollars in thousands):
 

<TABLE>
<CAPTION>
                                                                               AS OF SEPTEMBER 30, 1999
                                                              ----------------------------------------------------------
                                                                           1999 ACQUISITIONS -- HISTORICAL
                                                              ----------------------------------------------------------
                                                              INTERMEDIA                                        TOTAL
                                                               SYSTEMS       FALCON     FANCH(A)    AVALON      RECENT
                                                              ----------   ----------   --------   --------   ----------
<S>                                                           <C>          <C>          <C>        <C>        <C>
Cash and cash equivalents...................................   $     --    $    4,196   $    933   $  2,995   $    8,124
Accounts receivable, net....................................     14,971        16,236      4,910      7,059       43,176
Receivable from related party...............................      7,966         2,414         --         --       10,380
Prepaid expenses and other..................................      1,286        30,422      1,600        879       34,187
                                                               --------    ----------   --------   --------   ----------
  Total current assets......................................     24,223        53,268      7,443     10,933       95,867
Property, plant and equipment...............................    228,676       549,476    254,802    121,973    1,154,927
Franchises..................................................    214,182       372,322      4,489    468,855    1,059,848
Deferred income taxes.......................................     15,279            --         --         --       15,279
Other assets................................................        544       434,163    595,637         46    1,030,390
                                                               --------    ----------   --------   --------   ----------
  Total assets..............................................   $482,904    $1,409,229   $862,371   $601,807   $3,356,311
                                                               ========    ==========   ========   ========   ==========
Current maturities of long-term debt........................         --            --     20,534         25       20,559
Accounts payable and accrued expenses.......................   $ 15,504    $  147,949   $ 24,281     22,242   $  209,976
Current deferred revenue....................................     11,151            --         --      3,272       14,423
Note payable to related party...............................      2,265            --         --         --        2,265
Other current liabilities...................................         --            --         --      2,968        2,968
                                                               --------    ----------   --------   --------   ----------
  Total current liabilities.................................     28,920       147,949     44,815     28,507      250,191
Deferred revenues                                                 3,583            --         --         --        3,583
Deferred income taxes.......................................         --            --         --         --           --
Long-term debt..............................................         --     1,681,454      7,931    451,827    2,141,212
Note payable to related party, including accrued interest...    406,975            --      1,457                 408,432
Other long-term liabilities, including redeemable preferred
  shares....................................................     14,934       424,280        203        951      440,368
Equity (deficit)............................................     28,492      (844,454)   807,965    120,522      112,525
                                                               --------    ----------   --------   --------   ----------
  Total liabilities and equity (deficit)....................   $482,904    $1,409,229   $862,371   $601,807   $3,356,311
                                                               ========    ==========   ========   ========   ==========
</TABLE>

 

<TABLE>
<CAPTION>
                                                                  AS OF SEPTEMBER 30, 1999
                                                              ---------------------------------
                                                              BRESNAN ACQUISITION -- HISTORICAL
                                                              ---------------------------------
<S>                                                           <C>
Cash and cash equivalents...................................              $  1,215
Accounts receivable, net....................................                 9,653
                                                                          --------
  Total current assets......................................                10,868
Property, plant and equipment...............................               353,864
Franchises..................................................               320,650
Other assets................................................                20,198
                                                                          --------
  Total assets..............................................              $705,580
                                                                          ========
Accounts payable and accrued expenses.......................              $ 31,693
Other current liabilities...................................                12,969
                                                                          --------
  Total current liabilities.................................                44,662
Long-term debt..............................................               869,211
Other long-term liabilities.................................                 7,329
Deficit.....................................................              (215,622)
                                                                          --------
  Total liabilities and deficit.............................              $705,580
                                                                          ========
</TABLE>

 
                                       54

<PAGE>   58

<TABLE>
<CAPTION>
                                                              AS OF SEPTEMBER 30, 1999
                                     --------------------------------------------------------------------------
                                                                 1999 ACQUISITIONS
                                     --------------------------------------------------------------------------
                                                                            PRO FORMA
                                                  -------------------------------------------------------------
                                     HISTORICAL   ACQUISITIONS(B)   DISPOSITIONS(C)   ADJUSTMENTS      TOTAL
                                     ----------   ---------------   ---------------   -----------   -----------
<S>                                  <C>          <C>               <C>               <C>           <C>
Cash and cash equivalents..........  $    8,124       $  418           $  (4,819)     $  (413,320)(d) $  (409,597)
Accounts receivable, net...........      43,176           64              (1,590)              --          41,650
Receivable from related party......      10,380          125                  --          (61,963)(f)     (51,458)
Prepaid expenses and other.........      34,187           60                (366)              --          33,881
                                     ----------       ------           ---------      -----------     -----------
 Total current assets..............      95,867          667              (6,775)        (475,283)       (385,524)
Property, plant and equipment......   1,154,927        3,197             (82,727)              --       1,075,397
Franchises.........................   1,059,848          722            (334,137)       5,990,483(g)    6,716,916
Deferred income taxes..............      15,279           --                  --          (15,279)(h)          --
Other assets.......................   1,030,390          141                (424)      (1,017,225)(i)      12,882
                                     ----------       ------           ---------      -----------     -----------
 Total assets......................  $3,356,311       $4,727           $(424,063)     $ 4,482,696     $ 7,419,671
                                     ==========       ======           =========      ===========     ===========
Current maturities of long-term
 debt..............................  $   20,559       $   --           $      --      $   (20,559)(k) $        --
Short-term debt....................          --           --                  --          980,172(k)      980,172
Accounts payable and accrued
 expenses..........................     209,976          212              (4,063)                         206,125
Current deferred revenue...........      14,423           --                  --          (14,423)(e)          --
Note payable to related party......       2,265           --                  --           (2,265)(j)          --
Other current liabilities..........       2,968           --                  --           (2,968)(j)          --
                                     ----------       ------           ---------      -----------     -----------
 Total current liabilities.........     250,191          212              (4,063)         939,957       1,186,297
Deferred revenue...................       3,583           --                  --           (3,583)(e)          --
Long-term debt.....................   2,141,212        2,751            (420,000)         716,262(k)    2,440,225
Note payable to related party,
 including accrued interest........     408,432           --                  --         (408,432)(j)          --
Other long-term liabilities,
 including redeemable preferred
 shares............................     440,368           --                  --         (440,368)(l)          --
Equity (deficit)...................     112,525        1,764                  --        3,678,860(m)    3,793,149
                                     ----------       ------           ---------      -----------     -----------
 Total liabilities and equity
   (deficit).......................  $3,356,311       $4,727           $(424,063)     $ 4,482,696     $ 7,419,671
                                     ==========       ======           =========      ===========     ===========
 
<CAPTION>
                                                      AS OF SEPTEMBER 30, 1999
                                     ----------------------------------------------------------
                                                        BRESNAN ACQUISITION
                                     ----------------------------------------------------------
                                                                    PRO FORMA
                                                  ---------------------------------------------
                                     HISTORICAL   ACQUISITIONS(B)   ADJUSTMENTS        TOTAL
                                     ----------   ---------------   -----------      ----------
<S>                                  <C>          <C>               <C>              <C>
Cash and cash equivalents..........  $    1,215       $  164        $  (25,228)(d)   $  (23,849)
Accounts receivable, net...........       9,653          121                --            9,774
Receivable from related party......          --           --                --               --
Prepaid expenses and other.........          --          225                --              225
                                     ----------       ------        ----------       ----------
 Total current assets..............      10,868          510           (25,228)         (13,850)
Property, plant and equipment......     353,864        7,057                --          360,921
Franchises.........................     320,650           --         2,438,598(g)     2,759,248
Deferred income taxes..............          --           --                --               --
Other assets.......................      20,198           --           (10,198)(i)       10,000
                                     ----------       ------        ----------       ----------
 Total assets......................  $  705,580       $7,567        $2,403,172       $3,116,319
                                     ==========       ======        ==========       ==========
Current maturities of long-term
 debt..............................  $       --       $   52        $      (52)(k)   $       --
Short-term debt....................          --           --           996,360(k)       996,360
Accounts payable and accrued
 expenses..........................      31,693          905                --           32,598
Current deferred revenue...........          --            6                (6)(e)           --
Note payable to related party......          --           --                --               --
Other current liabilities..........      12,969           --           (12,969)(j)           --
                                     ----------       ------        ----------       ----------
 Total current liabilities.........      44,662          963           983,333        1,028,958
Deferred revenue...................          --           --                --               --
Long-term debt.....................     869,211        4,465          (835,036)(k)       38,640
Note payable to related party,
 including accrued interest........          --           --                --               --
Other long-term liabilities,
 including redeemable preferred
 shares............................       7,329           --            (7,329)(l)           --
Equity (deficit)...................    (215,622)       2,139         2,262,204(m)     2,048,721
                                     ----------       ------        ----------       ----------
 Total liabilities and equity
   (deficit).......................  $  705,580       $7,567        $2,403,172       $3,116,319
                                     ==========       ======        ==========       ==========
</TABLE>

 
                                       55

<PAGE>   59
 
---------------
(a) Fanch includes the balance sheet of Fanch cable systems as follows (dollars
    in thousands):
 

<TABLE>
<CAPTION>
                                                             FANCH CABLE
                                                               SYSTEMS      OTHERS      TOTAL
                                                             -----------    -------    --------
    <S>                                                      <C>            <C>        <C>
    Total current assets...................................   $  6,014      $ 1,429    $  7,443
    Total assets...........................................    837,398       24,973     862,371
    Total current liabilities..............................     21,652       23,163      44,815
    Equity.................................................    815,746       (7,781)    807,965
    Total liabilities and equity...........................    837,398       24,973     862,371
</TABLE>

 
(b) Represents the historical balance sheets as of September 30, 1999 for
    acquisitions to be completed subsequent to September 30, 1999.
 
(c) Represents the historical assets and liabilities as of September 30, 1999 of
    cable systems transferred to InterMedia on October 1, 1999 and one Indiana
    cable system we are required to transfer to InterMedia as part of a swap of
    cable systems. The cable system being swapped will be accounted for at fair
    value. No material gain or loss is anticipated in conjunction with the swap.
    See "Business -- Acquisitions -- Recently Completed
    Acquisitions -- InterMedia Systems."
 
(d) Represents Charter Holdings' historical cash used to finance a portion of
    the InterMedia, Avalon and Bresnan acquisitions.
 
(e) Represents the offset of advance billings against deferred revenue to be
    consistent with Charter Holdings accounting policy and the elimination of
    deferred revenue.
 
(f) Reflects assets retained by the seller.
 
(g) Substantial amounts of the purchase price have been allocated to franchises
    based on estimated fair values. This results in an allocation of purchase
    price as follows (dollars in thousands):
 

<TABLE>
<CAPTION>
                                       INTERMEDIA
                                        SYSTEMS       AVALON        FALCON       FANCH       BRESNAN        TOTAL
                                       ----------   -----------   ----------   ----------   ----------   -----------
    <S>                                <C>          <C>           <C>          <C>          <C>          <C>
    Working capital..................   $ (1,959)    $(10,979)    $  (97,095)  $  (16,838)  $  (21,220)  $  (148,091)
    Property, plant and equipment....    145,949      125,170        549,476      254,802      360,921     1,436,318
    Franchises.......................    760,434      712,079      3,084,626    2,159,777    2,759,248     9,476,164
    Other............................       (424)       1,939          3,387        7,980       10,000        22,882
                                        --------     --------     ----------   ----------   ----------   -----------
                                        $904,000     $828,209     $3,540,394   $2,405,721   $3,108,949   $10,787,273
                                        ========     ========     ==========   ==========   ==========   ===========
</TABLE>

 
                                       56

<PAGE>   60
 
     The sources of cash for the 1999 acquisitions and the Bresnan acquisition
are as follows (dollars in millions):
 

<TABLE>
    <S>                                                       <C>         <C>         <C>
    Current liabilities:
      Publicly held debt, at fair market value:
         9.375% senior subordinated notes -- Avalon.........  $  151.5
         11.875% senior discount notes -- Avalon............     127.4
         8.375% senior debentures -- Falcon.................     378.8
         9.285% senior discount debentures -- Falcon........     322.5
         8.0% senior notes -- Bresnan.......................     167.0
         9.25% senior discount notes -- Bresnan.............     194.3
      Expected credit facilities draw down of acquisitions:
         Bresnan............................................     635.0    $1,976.5
                                                              --------
    Long term liabilities:
      Credit facilities drawn down upon close of
         acquisitions:
         CC V -- Avalon.....................................     165.0
         CC VI -- Fanch.....................................     870.0
         CC VII -- Falcon...................................   1,012.8
      Expected credit facilities draw down -- Charter
         Operating..........................................     921.1     2,968.9    $ 4,945.4
                                                              --------    --------
    Funded or expected equity contributions:
         Mr. Allen equity contributions.....................     750.0
         Net proceeds from sale of Class B shares...........       1.0
         Net proceeds from sale of Class A shares...........   3,540.9
         Bresnan sellers' equity............................   1,000.0
         Falcon sellers' equity.............................     550.0                  5,841.9
                                                              --------                ---------
                                                                                      $10,787.3
                                                                                      =========
</TABLE>

 
     We expect to assume and amend the existing Bresnan credit facilities and
increase the borrowing availability thereunder. We expect to borrow
approximately $635.0 million under these credit facilities in connection with
the closing of the Bresnan acquisition. The $635.0 million represents $512.0
million in outstanding borrowings under the Bresnan credit facilities and $123.0
million in additional borrowings under these credit facilities that we
anticipate using to fund a portion of the Bresnan purchase price. In addition,
we expect that we will have to repurchase outstanding Bresnan notes at prices
equal to 101% of their principal amount, plus accrued and unpaid interest, or
their accreted value, as applicable, in connection with required change of
control offers for these notes. As of the anticipated closing date of the
Bresnan acquisition, the total amount of principal and accreted value of the
Bresnan notes will be $362.3 million. We intend to fund a portion of the
repurchase of the Bresnan notes with a portion of the net proceeds of the sale
of the original notes.
 
     We cannot assure you that we will be able to raise the financing necessary
to consummate the Bresnan acquisition. If we are unable to raise the financing
necessary to satisfy this obligation, we may be unable to close the Bresnan
acquisition. In any such case, the relevant sellers or creditors could initiate
legal proceedings against us, including under bankruptcy and reorganization
laws, for any damages they suffer as a result of our non-performance. Any such
action could trigger defaults under our other obligations, including our credit
facilities and debt instruments.
 
(h) Represents the elimination of deferred income tax assets and liabilities.
 
                                       57

<PAGE>   61
 
(i)  Represents the elimination of the unamortized historical cost of various
     assets based on the allocation of purchase price (see (g) above) as follows
     (dollars in thousands):
 

<TABLE>
<S>                                                           <C>
Subscriber lists............................................  $  (444,178)
Noncompete agreements.......................................      (12,489)
Deferred financing costs....................................      (50,176)
Goodwill....................................................     (619,901)
Other assets................................................     (121,161)
                                                              -----------
                                                               (1,247,905)
Less-accumulated amortization...............................      220,482
                                                              -----------
                                                              $(1,027,423)
                                                              ===========
</TABLE>

 
(j)  Represents liabilities retained by the seller.
 
(k)  Represents the following (dollars in millions):
 

<TABLE>
<S>                                                           <C>
Long-term debt not assumed..................................  $(1,654.2)
Helicon notes (called)......................................     (115.0)
Rifkin notes (tendered).....................................     (125.0)
Falcon debentures (to be put)...............................     (701.3)
Avalon 9.375% senior subordinated notes (to be put).........     (151.5)
Bresnan notes (to be put)...................................     (361.3)
                                                              ---------
     Total pro forma debt not assumed.......................   (3,108.3)
Short-term debt:
     9.375% senior subordinated notes -- Avalon.............      151.5
     11.875% senior discount notes -- Avalon................      127.4
     8.375% senior debentures -- Falcon.....................      378.8
     9.285% senior discount debentures -- Falcon............      322.5
     8% senior notes -- Bresnan.............................      167.0
     9.25% senior discount notes -- Bresnan.................      194.3
     Bresnan credit facilities..............................      635.0
                                                              ---------
     Total short-term debt..................................    1,976.5
Long-term debt:
     Credit facilities:
       Charter Operating....................................      921.1
       CC V -- Avalon.......................................      165.0
       CC VI -- Fanch.......................................      870.0
       CC VII -- Falcon.....................................    1,012.8
                                                              ---------
     Total long-term debt...................................    2,968.9
                                                              ---------
                                                              $ 1,837.1
                                                              =========
</TABLE>

 
(l)  Represents the elimination of historical liabilities retained by the seller
     and the elimination of Falcon's historical redeemable preferred shares.
 
(m) Represents the elimination of historical equity of $322.9 million and
    additional contributions of $5.84 billion made or to be made to us related
    to the transfer to Charter Holdings of the Fanch, Falcon, Avalon and Bresnan
    cable systems.
 
      NOTE B:  Offering adjustments represent additional long-term debt of $1.3
billion from the issuance and sale of the original notes, the use of the
proceeds from the original notes to repurchase the Avalon 9.375% senior
subordinated notes, Falcon debentures and Bresnan notes pursuant to the Avalon,
Falcon and Bresnan change of control offers, to pay down the Charter Operating
credit facilities totaling $38.9 million, and the addition to other assets of
the estimated expenses paid in connection with the issuance and sale of the
original notes which were capitalized and will be amortized over the term of the
related debt.
 
                                       58

<PAGE>   62
 
                       SELECTED HISTORICAL FINANCIAL DATA
 
     The selected historical financial data below for the years ended December
31, 1996 and 1997, for the periods from January 1, 1998 through December 23,
1998, from December 24, 1998 through December 31, 1998, and January 1, 1999
through September 30, 1999 are derived from the consolidated financial
statements of Charter Holdings. The consolidated financial statements of Charter
Holdings for the years ended December 31, 1996 and 1997, for the periods from
January 1, 1998 through December 23, 1998 and from December 24, 1998 through
December 31, 1998, have been audited by Arthur Andersen LLP, independent public
accountants, and are included elsewhere in this prospectus. The selected
historical financial data for the period from October 1, 1995 through December
31, 1995, are derived from the Charter Holdings unaudited financial statements
and are not included elsewhere in this prospectus. The selected historical
financial data for the year ended December 31, 1994 and for the period from
January 1, 1995 through September 30, 1995 are derived from the unaudited
financial statements of Charter Holdings predecessor business and are not
included elsewhere in this prospectus. The information presented below should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the historical financial statements of
Charter Holdings and related notes included elsewhere in this prospectus.
 

<TABLE>
<CAPTION>
                                          PREDECESSOR OF
                                         CHARTER HOLDINGS                               CHARTER HOLDINGS
                                      ----------------------   ------------------------------------------------------------------
                                                                             YEAR ENDED
                                       YEAR ENDED    1/1/95    10/1/95      DECEMBER 31,       1/1/98     12/24/98      1/1/99
                                      DECEMBER 31,   THROUGH   THROUGH    -----------------   THROUGH     THROUGH       THROUGH
                                          1994       9/30/95   12/31/95    1996      1997     12/23/98    12/31/98      9/30/99
                                      ------------   -------   --------   -------   -------   --------   ----------   -----------
                                                                 (DOLLARS IN THOUSANDS)
<S>                                   <C>            <C>       <C>        <C>       <C>       <C>        <C>          <C>
STATEMENT OF OPERATIONS:
Revenues............................    $  6,584     $5,324    $ 1,788    $14,881   $18,867   $49,731    $   13,713   $   845,182
                                        --------     -------   -------    -------   -------   --------   ----------   -----------
Operating expenses:
  Operating, general and
    administrative..................       3,247      2,581        931      8,123    11,767    25,952         7,134       436,057
  Depreciation and amortization.....       2,508      2,137        648      4,593     6,103    16,864         8,318       441,391
  Stock option compensation
    expense.........................          --         --         --         --        --        --           845        59,288
  Management fees/corporate expense
    charges.........................         106        224         54        446       566     6,176           473        18,309
                                        --------     -------   -------    -------   -------   --------   ----------   -----------
    Total operating expenses........       5,861      4,942      1,633     13,162    18,436    48,992        16,770       955,045
                                        --------     -------   -------    -------   -------   --------   ----------   -----------
Income (loss) from operations.......         723        382        155      1,719       431       739        (3,057)     (109,863)
Interest expense....................          --         --       (691)    (4,415)   (5,120)  (17,277)       (2,353)     (288,750)
Interest income.....................          26         --          5         20        41        44           133        18,326
Other income (expense)..............          --         38         --        (47)       25      (728)           --          (177)
                                        --------     -------   -------    -------   -------   --------   ----------   -----------
Income (loss) before extraordinary
  item..............................    $    749     $  420    $  (531)   $(2,723)  $(4,623)  $(17,222)  $   (5,277)  $  (380,464)
                                        ========     =======   =======    =======   =======   ========   ==========   ===========
BALANCE SHEET DATA (AT END OF
  PERIOD):
Total assets........................    $ 25,511     $26,342   $31,572    $67,994   $55,811   $281,969   $4,335,527   $11,235,191
Total debt..........................      10,194     10,480     28,847     59,222    41,500   274,698     2,002,206     6,244,632
Member's equity (deficit)...........      14,822     15,311        971      2,648    (1,975)   (8,397)    2,147,379     4,514,306
</TABLE>

 
                                       59

<PAGE>   63
 

                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
     Reference is made to the "-- Certain Trends and Uncertainties" section
below in this Management's Discussion and Analysis for a discussion of important
factors that could cause actual results to differ from expectations and
non-historical information contained herein.
 
INTRODUCTION
 
     We do not believe that our historical financial condition and results of
operations are accurate indicators of future results because of recent and
pending significant events, including:
 
     (1) the acquisition by Mr. Allen of CCA Group, Charter Communications
         Properties Holdings, LLC and CharterComm Holdings LLC, referred to
         together with their subsidiaries as the Charter companies;
 
     (2) the merger of Marcus Holdings with and into Charter Holdings;
 
     (3) the recent and pending acquisitions of Charter Communications Holding
         Company, Charter Holdings and their subsidiaries;
 
     (4) the refinancing of the previous credit facilities of the Charter
         companies;
 
     (5) the purchase of publicly held notes that had been issued by several of
         the direct and indirect subsidiaries of Charter Holdings;
 
     (6) the completion of the transfer to Charter Holdings of the Fanch, Falcon
         and Avalon cable systems; and
 
     (7) the anticipated completion of the Pending Transactions.
 
     Provided below is a discussion of our organizational history consisting of:
 
     (1) the operation and development of the Charter companies prior to the
         acquisition by Mr. Allen, together with the acquisition of the Charter
         companies by Mr. Allen;
 
     (2) the merger of Marcus Holdings with and into Charter Holdings; and
 
     (3) the recent and pending acquisitions of Charter Communications Holding
         Company and its direct and indirect subsidiaries.
 
ORGANIZATIONAL HISTORY
 
     Prior to the acquisition of the Charter companies by Mr. Allen on December
23, 1998, and the merger of Marcus Holdings with and into Charter Holdings on
April 7, 1999, the cable systems of the Charter and Marcus companies were
operated under four groups of companies. Three of these groups were comprised of
companies that were managed by Charter Investment, Inc. prior to the acquisition
of the Charter companies by Mr. Allen and the fourth group was comprised of
companies that were subsidiaries of Marcus Holdings. Charter Investment, Inc.
started managing Marcus Holdings in October 1998.
 
     The following is an explanation of how:
 
     (1) Charter Communications Properties Holdings; the operating companies
         that formerly comprised CCA Group; CharterComm Holdings; and the Marcus
         companies became wholly owned subsidiaries of Charter Operating;
 
     (2) Charter Operating became a wholly owned subsidiary of Charter Holdings;
 
                                       60

<PAGE>   64
 
     (3) Charter Holdings became a wholly owned subsidiary of Charter
         Communications Holding Company; and
 
     (4) Charter Communications Holding Company became a wholly owned subsidiary
         of Charter Investment, Inc.
 
THE CHARTER COMPANIES
 
     Prior to Charter Investment, Inc. acquiring the remaining interests that it
did not previously own in two of the three groups of Charter companies, namely
CCA Group and CharterComm Holdings, as described below, the operating
subsidiaries of the three groups of Charter companies were parties to separate
management agreements with Charter Investment, Inc. pursuant to which Charter
Investment, Inc. provided management and consulting services. Prior to our
acquisition by Mr. Allen, the Charter companies were as follows:
 
     (1) Charter Communications Properties Holdings, LLC
 
          Charter Communications Properties Holdings, LLC was a wholly owned
     subsidiary of Charter Investment, Inc. The primary subsidiary of Charter
     Communications Properties Holdings, which owned the cable systems, was
     Charter Communications Properties. In connection with Mr. Allen's
     acquisition on December 23, 1998, Charter Communications Properties
     Holdings was merged out of existence. Charter Communications Properties
     became a direct, wholly owned subsidiary of Charter Investment, Inc. In May
     1998, Charter Communications Properties acquired certain cable systems from
     Sonic Communications, Inc. for a total purchase price, net of cash
     acquired, of $228.4 million, including $60.9 million of assumed debt.
 
     (2) CCA Group
 
          The controlling interests in CCA Group were held by affiliates of
     Kelso & Co. Charter Investment, Inc. had only a minority interest.
     Effective December 23, 1998, prior to Mr. Allen's acquisition, the
     remaining interests it did not previously own in CCA Group were acquired by
     Charter Investment, Inc. from the Kelso affiliates. Consequently, the
     companies comprising CCA Group became wholly owned subsidiaries of Charter
     Investment, Inc.
 
        CCA Group consisted of the following three sister companies:
 
           (a) CCT Holdings, LLC,
 
           (b) CCA Holdings, LLC, and
 
           (c) Charter Communications Long Beach, LLC.
 
          The cable systems were owned by the various subsidiaries of these
     three sister companies. The financial statements for these three sister
     companies historically were combined and the term "CCA Group" was assigned
     to these combined entities. In connection with Mr. Allen's acquisition on
     December 23, 1998, the three sister companies and some of the non-operating
     subsidiaries were merged out of existence, leaving certain of the operating
     subsidiaries owning all of the cable systems under this former group. These
     operating subsidiaries became indirect, wholly owned subsidiaries of
     Charter Investment, Inc.
 
     (3) CharterComm Holdings, LLC
 
          The controlling interests in CharterComm Holdings were held by
     affiliates of Charterhouse Group International Inc. Charter Investment,
     Inc. had only a minority interest. Effective December 23, 1998, prior to
     Mr. Allen's acquisition, the remaining interests it did not previously own
     in CharterComm Holdings were acquired by Charter Investment, Inc. from the
 
                                       61

<PAGE>   65
 
     Charterhouse affiliates. Consequently, CharterComm Holdings became a wholly
     owned subsidiary of Charter Investment, Inc.
 
     The cable systems were owned by the various subsidiaries of CharterComm
Holdings. In connection with Mr. Allen's acquisition on December 23, 1998, some
of the non-operating subsidiaries were merged out of existence, leaving certain
of the operating subsidiaries owning all of the cable systems under this former
group. CharterComm Holdings was merged out of existence. Charter Communications,
LLC became a direct, wholly owned subsidiary of Charter Investment, Inc.
 
     In February 1999, Charter Holdings was formed as a wholly owned subsidiary
of Charter Investment, Inc., and Charter Operating was formed as a wholly owned
subsidiary of Charter Holdings. All of Charter Investment, Inc.'s direct
interests in the entities described above were transferred to Charter Operating.
All of the prior management agreements were terminated and a new management
agreement was entered into between Charter Investment, Inc. and Charter
Operating.
 
     In May 1999, Charter Communications Holding Company was formed as a wholly
owned subsidiary of Charter Investment, Inc. All of Charter Investment, Inc.'s
interests in Charter Holdings were transferred to Charter Communications Holding
Company.
 
     Our acquisition by Mr. Allen became effective on December 23, 1998, through
a series of transactions in which Mr. Allen acquired approximately 94% of the
equity interests of Charter Investment, Inc. for an aggregate purchase price of
$2.2 billion, excluding $2.0 billion in assumed debt. Charter Communications
Properties Holdings, the operating companies that formerly comprised CCA Group
and CharterComm Holdings were contributed to Charter Operating subsequent to Mr.
Allen's acquisition. Charter Communications Properties Holdings is deemed to be
our predecessor. Consequently, the contribution of Charter Communications
Properties Holdings was accounted for as a reorganization under common control.
Accordingly, the accompanying financial statements for periods prior to December
24, 1998 include the accounts of Charter Communications Properties Holdings. The
contributions of the operating companies that formerly comprised CCA Group and
CharterComm Holdings were accounted for in accordance with purchase accounting.
Accordingly, the financial statements for periods after December 23, 1998
include the accounts of Charter Communications Properties Holdings, CCA Group
and CharterComm Holdings.
 
MARCUS COMPANIES
 
     In April 1998, Mr. Allen acquired approximately 99% of the non-voting
economic interests in Marcus Cable, and agreed to acquire the remaining
interests. The owner of the remaining partnership interests retained voting
control of Marcus Cable. In October 1998, Marcus Cable entered into a management
consulting agreement with Charter Investment, Inc., pursuant to which Charter
Investment, Inc. provided management and consulting services to Marcus Cable and
its subsidiaries which own the cable systems. This agreement placed Marcus
Cable's systems under common management with the cable systems of the Charter
companies acquired by Mr. Allen in December 1998.
 
     In March 1999, all of Mr. Allen's interests in Marcus Cable were
transferred to Marcus Holdings, a then newly formed company. Later in March
1999, Mr. Allen acquired the remaining interests in Marcus Cable, including
voting control, which interests were transferred to Marcus Holdings. In April
1999, Mr. Allen merged Marcus Holdings into Charter Holdings, and the operating
subsidiaries of Marcus Holdings and all of the cable systems they owned came
under the ownership of Charter Holdings and, in turn, Charter Operating. For
financial reporting purposes, the merger of Marcus Holdings with and into
Charter Holdings was accounted for as an acquisition of Marcus Holdings
effective March 31, 1999, and accordingly, the results of operations of Marcus
 
                                       62

<PAGE>   66
 
Holdings have been included in the financial statements of Charter
Communications Holding Company since that date.
 
ACQUISITIONS
 
     In 1999, direct or indirect subsidiaries of Charter Holdings acquired
Renaissance Media Group LLC, American Cable Entertainment, LLC, cable television
systems of Greater Media Cablevision, Inc., Helicon Partners I, L.P. and
affiliates, Vista Broadband Communications, L.L.C., a cable television system of
Cable Satellite of South Miami, Inc., Rifkin Acquisition Partners, L.L.L.P. and
InterLink Communications LLLP (collectively, "Rifkin") and cable television
systems of InterMedia Partners and affiliates for a total purchase price of
approximately $4.2 billion, including assumed debt of $354 million. See
"Business -- Acquisitions" and "Description of Certain Indebtedness." These
acquisitions were funded through excess cash from the issuance by Charter
Holdings of its existing senior notes and senior discount notes, borrowings
under the Charter Operating credit facilities, capital contributions to Charter
Holdings by Mr. Allen through Vulcan Cable III Inc. and the assumption of the
outstanding Renaissance, Helicon and Rifkin notes.
 
     As part of the transaction with InterMedia, we agreed to "swap" some of our
non-strategic cable systems located in Indiana, Montana, Utah and northern
Kentucky, representing 142,000 basic customers. The InterMedia systems serve
approximately 413,000 customers in Georgia, North Carolina, South Carolina and
Tennessee. We have transferred cable systems with 112,000 customers to
InterMedia in connection with this swap. A cable system with customers totaling
30,000 has yet to be transferred pending the necessary regulatory approvals. If
the necessary regulatory approvals cannot be obtained for the transfer of this
system by March 28, 2000 InterMedia could require us to pay it $88.2 million in
lieu of transferring the cable system. If InterMedia has not required us to make
such payment by October 1, 2000 and we are still unable to transfer to
InterMedia satisfactory replacement systems by that date because of failure to
obtain the necessary regulatory approvals, we could elect to pay InterMedia
$88.2 million. In addition, if we transfer cash or property other than the
retained system to InterMedia, in certain circumstances, we must indemnify
InterMedia 50% of all taxes and related costs incurred or arising out of any
claim that InterMedia suffered tax losses to which it would not have been
subject if we had transferred the retained system. The exchange of cable
television systems will be recorded at the agreed value of the systems
exchanged.
 
     In addition to these acquisitions, since the beginning of 1999, Charter
Communications Holding Company acquired the Fanch, Falcon and Avalon cable
systems and entered into a definitive agreement to acquire the Bresnan cable
systems. All of these acquisitions are set forth in the table below. The Fanch,
Falcon and Avalon purchase prices were paid with the net proceeds of the initial
public offering of the common stock of Charter Communications, Inc., an equity
contribution to Charter Communications Holding Company by Mr. Allen through
Vulcan Cable III Inc., borrowings under credit facilities and the assumption of
outstanding notes issued by Falcon and Avalon. The Bresnan acquisition will be
financed with a portion of the net proceeds of Charter Communications, Inc.'s
initial public offering, equity to be issued to specific sellers in the
acquisition, assumed debt (comprised of the Bresnan credit facilities and
publicly held notes) and borrowings under credit facilities. We intend to amend
and assume the existing Bresnan credit facilities and increase the borrowing
availability thereunder. See "-- Liquidity and Capital Resources" and
"Description of Certain Indebtedness."
 
     On January 1, 2000, as a result of transfers from Charter Communications
Holding Company, Charter Holdings became the indirect owner of the Fanch, Falcon
and Avalon cable systems. After completion of the Bresnan acquisition and
transfer to us of the Bresnan cable systems, we will be the indirect owner of
the Bresnan cable systems.
 
                                       63

<PAGE>   67
 
     Under the Falcon purchase agreement, specified Falcon sellers received
$550.0 million of the Falcon purchase price in the form of membership units in
Charter Communications Holding Company. Under the Bresnan purchase agreement,
the Bresnan sellers have agreed to receive $1.0 billion of the Bresnan purchase
price in the form of membership units in Charter Communications Holding Company.
In addition, certain Rifkin sellers received $133.3 million of the purchase
price in the form of preferred equity of Charter Communications Holding Company.
Under the Helicon purchase agreement, $25 million of the purchase price was paid
in the form of preferred limited liability company interests of Charter-Helicon,
LLC, a direct wholly owned subsidiary of Charter Communications, LLC, itself an
indirect subsidiary of Charter Communications Holding Company.
 

<TABLE>
<CAPTION>
                                                                          AS OF AND FOR
                                                                      THE NINE MONTHS ENDED
                                                                        SEPTEMBER 30, 1999
                                 ACTUAL OR                         ----------------------------
                                ANTICIPATED         PURCHASE
                                ACQUISITION           PRICE                         REVENUE
ACQUISITION                         DATE          (IN MILLIONS)    CUSTOMERS     (IN THOUSANDS)
-----------                     -----------       -------------    ---------     --------------
<S>                           <C>                 <C>              <C>           <C>
Renaissance.................        4/99               $   459        132,000      $   46,589
American Cable..............        5/99                   240         69,000          27,540
Greater Media systems.......        6/99                   500        174,000          63,749
Helicon.....................        7/99                   550        172,000          63,784
Vista.......................        7/99                   126         27,000          10,610
Cable Satellite.............        8/89                    22          9,000           3,106
Rifkin......................        9/99                 1,460        464,000         159,465
InterMedia systems..........       10/99                  873+        413,000
                                                  systems swap       (142,000)(a)      152,789
                                                                   ----------
                                                                      271,000
Fanch.......................       11/99                 2,400        538,000         155,626
Falcon......................       11/99                 3,481      1,004,000         320,228
Avalon(b)...................       11/99                   845        261,000          81,559
Bresnan.....................  1st Quarter 2000           3,100        687,000         209,749
                                                  ---------        ----------    -------------
     Total..................                           $14,056      4,079,000      $1,294,794
                                                  ---------        ----------    -------------
                                                  ---------        ----------    -------------
</TABLE>

 
-------------------------
 
(a) Represents the number of customers served by cable systems that we agreed to
    transfer to InterMedia. This number includes 30,000 customers served by an
    Indiana cable system that we did not transfer at the time of the InterMedia
    closing because the necessary regulatory approvals were still pending.
 
(b) Includes approximately 5,400 customers served by cable systems that we will
    acquire from certain former affiliates of Avalon. We expect the acquisition
    of these systems to be completed in January 2000. The $845 million purchase
    price for Avalon includes the purchase price for these systems of
    approximately $13 million.
 
     The systems acquired pursuant to these recent and pending acquisitions
served, in the aggregate, approximately 3.8 million customers as of September
30, 1999. On December 1, 1999, Charter Communications, Inc. and AT&T entered
into a non-binding letter of intent to exchange certain of our cable systems for
systems owned by AT&T. If this transaction is completed, subsidiaries of Charter
Holdings will acquire such systems. In connection with the Swap Transaction, we
will be
 
                                       64

<PAGE>   68
 
required to pay to AT&T approximately $108 million in cash. This payment
represents the difference in the agreed values of the systems to be exchanged.
In addition, we are negotiating with several other potential acquisition and
swapping candidates whose systems would further complement our regional
operating clusters.
 
OVERVIEW
 
     Approximately 87% of our historical revenues for the nine months ended
September 30, 1999 are attributable to monthly subscription fees charged to
customers for our basic, expanded basic and premium cable television programming
services, equipment rental and ancillary services provided by our cable
television systems. In addition, we derive other revenues from installation and
reconnection fees charged to customers to commence or reinstate service,
pay-per-view programming, where users are charged a fee for individual programs
requested, advertising revenues and commissions related to the sale of
merchandise by home shopping services. We have generated increased revenues in
each of the past three fiscal years, primarily through internal customer growth,
basic and expanded tier rate increases and acquisitions as well as innovative
marketing. We are beginning to offer our customers several other services, which
are expected to significantly contribute to our revenues. One of these services
is digital cable, which provides subscribers with additional programming
options. We are also offering high speed Internet access to the World Wide Web
through cable modems. Cable modems can be attached to personal computers so that
users can send and receive data over cable systems. Our television based
Internet access allows us to offer the services provided by WorldGate
Communications, Inc., which provides users with TV-based e-mail and other
Internet access.
 
     Our expenses primarily consist of operating costs, general and
administrative expenses, depreciation and amortization expense and management
fees/corporate expense charges. Operating costs primarily include programming
costs, cable service related expenses, marketing and advertising costs,
franchise fees and expenses related to customer billings. Programming costs
accounted for approximately 44% of our operating, general and administrative
expenses for the nine months ended September 1999. Programming costs have
increased in recent years and are expected to continue to increase due to
additional programming being provided to customers, increased cost to produce or
purchase cable programming, inflation and other factors affecting the cable
television industry. In each year we have operated, our costs to acquire
programming have exceeded customary inflationary increases. Significant factors
with respect to increased programming costs are the rate increases and
surcharges imposed by national and regional sports networks directly tied to
escalating costs to acquire programming for professional sports packages in a
competitive market. We have benefited in the past from our membership in an
industry cooperative that provides members with volume discounts from
programming networks. We believe our membership has kept increases in our
programming costs below what the increases would otherwise have been. We also
believe that we should derive additional discounts from programming networks due
to our increased size. Finally, we were able to negotiate favorable terms with
premium networks in conjunction with the premium packages we offer, which
minimized the impact on margins and provided substantial volume incentives to
grow the premium category. Although we believe that we will be able to pass
future increases in programming costs through to customers, there can be no
assurance that we will be able to do so.
 
     General and administrative expenses primarily include accounting and
administrative personnel and professional fees. Depreciation and amortization
expense relates to the depreciation of our tangible assets and the amortization
of our franchise costs. Management fees/corporate expense charges are fees paid
or charges for management services. Charter Holdings records actual expense
charges incurred by Charter Communications, Inc. on behalf of Charter Holdings.
Prior to the acquisition of us by Mr. Allen, the CCA Group and CharterComm
Holdings recorded management fees payable to Charter Investment, Inc. equal to
3.0% to 5.0% of gross revenues plus certain
 
                                       65

<PAGE>   69
 
expenses. In October 1998, Charter Investment, Inc. began managing the cable
operations of Marcus Holdings under a management agreement, which was terminated
in February 1999 and replaced by a master management fee arrangement. The
Charter Operating credit facilities limit management fees to 3.5% of gross
revenues.
 
     In connection with Charter Communications, Inc.'s initial public offering
of common stock in November 1999, the management agreement between Charter
Investment, Inc. and Charter Operating was assigned to Charter Communications,
Inc. and Charter Communications, Inc. entered into a new management agreement
with Charter Communications Holding Company. These management agreements are
substantially similar to the previous management agreement with Charter
Operating except that Charter Communications, Inc. is only entitled to receive
reimbursement of its expenses as consideration for its providing management
services. In addition, the Falcon, Fanch and Avalon cable systems are managed
and the Bresnan cable systems will be managed pursuant to agreements that
entitle Charter Communications, Inc. to receive reimbursement of its expenses as
consideration for its provision of management services. See "Certain
Relationships and Related Transactions."
 
     We have had a history of net losses and expect to continue to report net
losses for the foreseeable future. The principal reasons for our prior and
anticipated net losses include depreciation and amortization expenses associated
with our acquisitions, capital expenditures related to construction and
upgrading of our systems, and interest costs on borrowed money. We cannot
predict what impact, if any, continued losses will have on our ability to
finance our operations in the future.
 
RESULTS OF OPERATIONS
 
     The following discusses the results of operations for:
 
     (1) Charter Holdings, comprised of Charter Communications Properties
         Holdings, for the nine months ended September 30, 1998, and
 
     (2) Charter Holdings comprised of the following for the nine months ended
         September 30, 1999:
 
        - Charter Communications Properties Holdings, CCA Group and CharterComm
          Holdings for the entire period;
 
        - Marcus Holdings for the period from March 31, 1999, the date Mr. Allen
          acquired voting control, through September 30, 1999;
 
        - Renaissance Media Group LLC for the period from April 30, 1999, the
          acquisition date, through September 30, 1999;
 
        - American Cable Entertainment, LLC for the period from May 7, 1999, the
          acquisition date, through September 30, 1999;
 
        - Cable television systems of Greater Media Cablevision, Inc. for the
          period from June 30, 1999, the acquisition date, through September 30,
          1999;
 
        - Helicon Partners I, L.P. and affiliates for the period from July 30,
          1999, the acquisition date, through September 30, 1999;
 
        - Vista Broadband Communications, L.L.C. for the period from July 30,
          1999, the acquisition date, through September 30, 1999;
 
        - Cable television system of Cable Satellite of South Miami, Inc. for
          the period from August 4, 1999, the acquisition date, through
          September 30, 1999; and
 
                                       66

<PAGE>   70
 
        - Rifkin Acquisition Partners, L.L.L.P. and InterLink Communications
          Partners, LLLP for the period from September 13, 1999, the acquisition
          date, through September 30, 1999;
 
     No operating results are included for the InterMedia systems acquired on
October 1, 1999 or for the Fanch, Falcon or Avalon systems acquired by Charter
Communications Holding Company in November 1999 and transferred to us on January
1, 2000.
 
     The following table sets forth the percentages of revenues that items in
the unaudited statements of operations constitute for the indicated periods.
 

<TABLE>
<CAPTION>
                                                      NINE MONTHS ENDED SEPTEMBER 30,
                                                  ----------------------------------------
                                                        1999                   1998
                                                  -----------------      -----------------
                                                           (DOLLARS IN THOUSANDS)
<S>                                               <C>         <C>        <C>         <C>
STATEMENTS OF OPERATIONS
Revenues........................................  $ 845,182   100.0%     $ 32,532    100.0%
                                                  ---------   -----      --------    -----
Operating expenses:
  Operating, general and administrative.........    436,057    51.6        17,498     53.8
  Depreciation and amortization.................    441,391    52.2        11,236     34.5
  Stock option compensation expense.............     59,288     7.0            --       --
  Management fees/corporate expense charges.....     18,309     2.2         1,499      4.6
                                                  ---------   -----      --------    -----
          Total operating expenses..............    955,045   113.0        30,233     92.9
                                                  ---------   -----      --------    -----
(Loss) income from operations...................   (109,863)  (13.0)        2,299      7.1
Interest income.................................     18,326     2.2            23      0.1
Interest expense................................   (288,750)  (34.2)      (11,831)   (36.4)
Other (expense) income..........................       (177)     --             6       --
                                                  ---------   -----      --------    -----
Loss before extraordinary item..................   (380,464)  (45.0)       (9,503)   (29.2)
Extraordinary item-loss from early
  extinguishment of debt........................      7,794     0.9            --       --
                                                  ---------   -----      --------    -----
          Net loss..............................  $(388,258)  (45.9)%    $ (9,503)   (29.2)%
                                                  =========   =====      ========    =====
</TABLE>

 
PERIOD FROM JANUARY 1, 1999 THROUGH SEPTEMBER 30, 1999
COMPARED TO PERIOD FROM JANUARY 1, 1998 THROUGH SEPTEMBER 30, 1998
 
     REVENUES.  Revenues increased by $812.7 million, from $32.5 million for the
first nine months of 1998 to $845.2 million for the first nine months of 1999.
The increase in revenues primarily resulted from the acquisitions of CCA Group
and CharterComm Holdings, Sonic, Marcus Holdings and other recent acquisitions.
Additional revenues from these entities included for the nine-month period ended
September 30, 1999 were $439.3 million, $26.2 million, $261.2 million and $90.7
million, respectively.
 
     OPERATING, GENERAL AND ADMINISTRATIVE EXPENSES.  Operating, general and
administrative expenses increased by $418.6 million, from $17.5 million for the
period from January 1, 1998 through September 30, 1998 to $436.1 million for the
period from January 1, 1999 through September 30, 1999. This increase was due
primarily to the acquisitions of the CCA Group and CharterComm Holdings, Sonic,
Marcus Holdings and other recent acquisitions. Additional operating, general and
administrative expenses from these entities included for the nine-month period
ended September 30, 1999 were $221.1 million, $13.7 million, $140.4 million and
$46.8 million, respectively.
 
                                       67

<PAGE>   71
 
     DEPRECIATION AND AMORTIZATION.  Depreciation and amortization expense
increased by $430.2 million, from $11.2 million for the period from January 1,
1998 through September 30, 1998 to $441.4 million for the period from January 1,
1999 through September 30, 1999. There was a significant increase in
amortization expense resulting from the acquisitions of the CCA Group and
CharterComm Holdings, Sonic, Marcus Holdings and other recent acquisitions.
Additional depreciation and amortization expense from these entities included
for the nine-month period ended September 30, 1999 were $244.0 million, $5.3
million, $133.9 million and $47.3 million, respectively.
 
     STOCK OPTION COMPENSATION EXPENSE.  Stock option compensation expense for
the period from January 1, 1999 through September 30, 1999 was $59.3 million due
to the granting of options to employees in December 1998, February 1999 and
April 1999. The exercise prices of the options are less than the estimated fair
values of the underlying membership units on the date of grant, resulting in
compensation expense accrued over the vesting period of each grant that varies
from four to five years.
 
     MANAGEMENT FEES/CORPORATE EXPENSE CHARGES.  Management fees/corporate
expense charges increased by $16.8 million, from $1.5 million for the period
from January 1, 1998 through September 30, 1998 to $18.3 million for the period
from January 1, 1999 through September 30, 1999. The increase from the period
from January 1, 1998 through September 30, 1998 compared to the period from
January 1, 1999 through September 30, 1999 was the result of the acquisitions of
CCA Group and CharterComm Holdings, Sonic, Marcus Holdings and other recent
acquisitions.
 
     INTEREST INCOME.  Interest income increased by $18.3 million from $23,000
for the period from January 1, 1998 to September 30, 1998 to $18.3 million for
the period from January 1, 1999 to September 30, 1999. The increase was
primarily due to investing excess cash that resulted from required credit
facilities drawdowns.
 
     INTEREST EXPENSE.  Interest expense increased by $276.9 million, from $11.8
million for the period from January 1, 1998 through September 30, 1998 to $288.8
million for the period from January 1, 1999 through September 30, 1999. This
increase resulted primarily from interest on the notes and credit facilities
used to finance the acquisitions of CCA Group and CharterComm Holdings, Marcus
Holdings and other recent acquisitions.
 
     NET LOSS.  Net loss increased by $378.8 million, from $9.5 million for the
period from January 1, 1998 through September 30, 1998 to $388.3 million for the
period from January 1, 1999 through September 30, 1999. The increase in revenues
that resulted from the acquisitions of CCA Group, CharterComm Holdings, Sonic
and Marcus Holdings was not sufficient to offset the operating expenses
associated with the acquired systems and loss from early extinguishment of debt.
 
RESULTS OF OPERATIONS
 
     The following discusses the results of operations for:
 
     (1) Charter Holdings comprised of Charter Communications Properties
         Holdings, for the period from January 1, 1998 through December 23, 1998
         and for the years ended December 31, 1997 and 1996, and
 
     (2) Charter Holdings comprised of Charter Communications Properties
         Holdings, CCA Group and CharterComm Holdings, for the period from
         December 24, 1998 through December 31, 1998.
 
                                       68

<PAGE>   72
 
     The following table sets forth the percentages of revenues that items in
the statements of operations constitute for the indicated periods.
 

<TABLE>
<CAPTION>
                                                               YEAR ENDED
                                                              DECEMBER 31,                     1/1/98              12/24/98
                                                  ------------------------------------         THROUGH             THROUGH
                                                        1996                1997              12/23/98             12/31/98
                                                  ----------------    ----------------    -----------------    ----------------
                                                                             (DOLLARS IN THOUSANDS)
<S>                                               <C>        <C>      <C>        <C>      <C>         <C>      <C>        <C>
STATEMENTS OF OPERATIONS
Revenues........................................  $14,881    100.0%   $18,867    100.0%   $ 49,731    100.0%   $13,713    100.0%
                                                  -------    -----    -------    -----    --------    -----    -------    -----
Operating expenses:
 Operating costs................................    5,888     39.5%     9,157     48.5%     18,751     37.7%     6,168     45.0%
 General and administrative costs...............    2,235     15.0%     2,610     13.8%      7,201     14.5%       966      7.0%
 Depreciation and amortization..................    4,593     30.9%     6,103     32.4%     16,864     33.9%     8,318     60.7%
 Stock option compensation expense..............       --       --         --       --          --       --        845      6.2%
 Management fees/corporate expense charges......      446      3.0%       566      3.0%      6,176     12.4%       473      3.4%
                                                  -------    -----    -------    -----    --------    -----    -------    -----
 Total operating expenses.......................   13,162     88.4%    18,436     97.7%     48,992     98.5%    16,770    122.3%
                                                  -------    -----    -------    -----    --------    -----    -------    -----
Income (loss) from operations...................    1,719     11.6%       431      2.3%        739      1.5%    (3,057)   (22.3%)
Interest income.................................       20      0.1%        41      0.2%         44      0.1%       133      1.0%
Interest expense................................   (4,415)   (29.7%)   (5,120)   (27.1%)   (17,277)   (34.7%)   (2,353)   (17.2%)
Other income (expense)..........................      (47)    (0.3%)       25      0.1%       (728)    (1.5%)       --       --
                                                  -------    -----    -------    -----    --------    -----    -------    -----
Net loss........................................  $(2,723)   (18.3%)  $(4,623)   (24.5%)  $(17,222)   (34.6%)  $(5,277)   (38.5%)
                                                  =======    =====    =======    =====    ========    =====    =======    =====
</TABLE>

 
PERIOD FROM DECEMBER 24, 1998 THROUGH DECEMBER 31, 1998
 
     This period is not comparable to any other period presented. The financial
statements represent eight days of operations. This period not only contains the
results of operations of Charter Communications Properties, but also the results
of operations of those entities purchased in the acquisition of the Charter
companies by Mr. Allen. As a result, no comparison of the operating results for
this eight-day period is presented.
 
PERIOD FROM JANUARY 1, 1998 THROUGH DECEMBER 23, 1998 COMPARED TO 1997
 
     REVENUES.  Revenues increased by $30.9 million, or 163.6%, from $18.9
million in 1997 to $49.7 million for the period from January 1, 1998 through
December 23, 1998. The increase in revenues primarily resulted from the
acquisition of Sonic, which had revenues for that period of $29.8 million.
 
     OPERATING EXPENSES.  Operating expenses increased by $9.6 million, or
104.8%, from $9.2 million in 1997 to $18.8 million for the period from January
1, 1998 through December 23, 1998. This increase was due primarily to the
acquisition of Sonic, which had operating expenses for that period of $9.4
million, partially offset by the loss of $1.4 million on the sale of a cable
system in 1997.
 
     GENERAL AND ADMINISTRATIVE EXPENSES.  General and administrative expenses
increased by $4.6 million, or 175.9%, from $2.6 million in 1997 to $7.2 million
for the period from January 1, 1998 through December 23, 1998. This increase was
due primarily to the acquisition of Sonic, which had general and administrative
expenses for that period of $6.0 million.
 
     DEPRECIATION AND AMORTIZATION.  Depreciation and amortization expense
increased by $10.8 million, or 176.3%, from $6.1 million in 1997 to $16.9
million for the period from January 1, 1998 through December 23, 1998. There was
a significant increase in amortization resulting from the acquisition of Sonic.
Incremental depreciation and amortization expenses of the acquisition of Sonic
were $9.9 million.
 
                                       69

<PAGE>   73
 
     MANAGEMENT FEES/CORPORATE EXPENSE CHARGES.  Corporate expense charges
increased by $5.6 million, or 991.2% from $0.6 million in 1997 to $6.2 million
for the period from January 1, 1998 through December 23, 1998. The increase from
1997 compared to the period from January 1, 1998 through December 23, 1998 was
the result of additional Charter Investment, Inc. charges related to equity
appreciation rights plans of $3.8 million for the period from January 1, 1998
through December 23, 1998 and an increase of $0.9 million in management services
provided by Charter Investment, Inc. as a result of the acquisition of Sonic.
 
     INTEREST EXPENSE.  Interest expense increased by $12.2 million, or 237.4%,
from $5.1 million in 1997 to $17.3 million for the period from January 1, 1998
through December 23, 1998. This increase resulted primarily from the
indebtedness of $220.6 million, including a note payable for $60.9 million,
incurred in connection with the acquisition of Sonic resulting in additional
interest expense.
 
     NET LOSS.  Net loss increased by $12.6 million, or 272.5%, from $4.6
million in 1997 to $17.2 million for the period from January 1, 1998 through
December 23, 1998. The increase in revenues that resulted from cable television
customer growth was not sufficient to offset the operating expenses related to
the acquisition of Sonic.
 
1997 COMPARED TO 1996
 
     REVENUES.  Revenues increased by $4.0 million, or 26.8%, from $14.9 million
in 1996 to $18.9 million in 1997. The primary reason for this increase is the
acquisition of five cable systems in 1996 that increased customers by 58.9%.
 
     Revenues of Charter Communications Properties, excluding the activity of
any other systems acquired during the periods, increased by $0.7 million, or
8.9%, from $7.9 million in 1996 to $8.6 million in 1997.
 
     OPERATING EXPENSES.  Operating expenses increased by $3.3 million, or
55.5%, from $5.9 million in 1996 to $9.2 million in 1997. This increase was
primarily due to the acquisitions of the cable systems in 1996 and the loss of
$1.4 million on the sale of a cable system in 1997.
 
     GENERAL AND ADMINISTRATIVE EXPENSES.  General and administrative expenses
increased by $0.4 million, or 16.8%, from $2.2 million in 1996 to $2.6 million
in 1997. This increase was primarily due to the acquisitions of the cable
systems in 1996.
 
     DEPRECIATION AND AMORTIZATION.  Depreciation and amortization expense
increased by $1.5 million, or 32.9%, from $4.6 million in 1996 to $6.1 million
in 1997. There was a significant increase in amortization resulting from the
acquisitions of the cable systems in 1996.
 
     MANAGEMENT FEES/CORPORATE EXPENSE CHARGES.  Corporate expense charges
increased by $0.2 million, or 26.9%, from $0.4 million in 1996 to $0.6 million
in 1997. These fees were 3.0% of revenues in both 1996 and 1997.
 
     INTEREST EXPENSE.  Interest expense increased by $0.7 million, or 16.0%,
from $4.4 million in 1996 to $5.1 million in 1997. This increase resulted
primarily from the indebtedness incurred in connection with the acquisitions of
several cable systems in 1996.
 
     NET LOSS.  Net loss increased by $1.9 million, or 69.8%, from $2.7 million
in 1996 to $4.6 million in 1997. The increase in net loss is primarily related
to the $1.4 million loss on the sale of a cable system.
 
                                       70

<PAGE>   74
 
OUTLOOK
 
     Our business strategy emphasizes the increase of our operating cash flow by
increasing our customer base and the amount of cash flow per customer. We
believe that there are significant advantages in increasing the size and scope
of our operations, including:
 
     - improved economies of scale in management, marketing, customer service,
       billing and other administrative functions;
 
     - reduced costs for our cable systems and our infrastructure in general;
 
     - increased leverage for negotiating programming contracts; and
 
     - increased influence on the evolution of important new technologies
       affecting our business.
 
     We seek to "cluster" cable systems in suburban and ex-urban areas
surrounding selected metropolitan markets. We believe that such "clustering"
offers significant opportunities to increase operating efficiencies and to
improve operating margins and cash flow by spreading fixed costs over an
expanding subscriber base. In addition, we believe that by concentrating
"clusters" in markets, we will be able to generate higher growth in revenues and
operating cash flow. Through strategic acquisitions and "swaps" of cable
systems, we seek to enlarge the coverage of our current areas of operations,
and, if feasible, develop "clusters" in new geographic areas within existing
regions. Swapping of cable systems allows us to trade systems that do not
coincide with our operating strategy while gaining systems that meet our
objectives. Several significant swaps have been announced. These swaps have
demonstrated the industry's trend to cluster operations. To date, Charter
Holdings has participated in one swap in connection with the transaction with
InterMedia. In addition, Charter Communications, Inc. has entered into a letter
of intent providing for the Swap Transaction.
 
LIQUIDITY AND CAPITAL RESOURCES
 
     Our business requires significant cash to fund acquisitions, capital
expenditures, debt service costs and ongoing operations. We have historically
funded and expect to fund future liquidity and capital requirements through cash
flows from operations, equity contributions, borrowings under our credit
facilities and debt and equity financings.
 
     Our historical cash flows from operating activities for 1998 were $30.2
million, and for the nine months ended September 30, 1999 were $265.6 million.
Pro forma for our merger with Marcus Holdings, the sale of the original notes,
acquisitions completed since that date, the Fanch, Falcon and Avalon transfers
and the Pending Transactions, our cash flows from operating activities for 1998
were $725.2 million, and for the nine months ended September 30, 1999 were
$672.0 million.
 
CAPITAL EXPENDITURES
 
     We have substantial ongoing capital expenditure requirements. We make
capital expenditures primarily to upgrade, rebuild and expand our cable systems,
as well as for system maintenance, the development of new products and services,
and converters. Converters are set-top devices added in front of a subscriber's
television receiver to change the frequency of the cable television signals to a
suitable channel. The television receiver is then able to tune and to allow
access to premium service.
 
     Upgrading our cable systems will enable us to offer new products and
services, including digital television, additional channels and tiers, expanded
pay-per-view options, high-speed Internet access and interactive services.
 
     Capital expenditures for 1999, pro forma for recent acquisitions, the
recent transfer to Charter Holdings of the Fanch, Falcon and Avalon cable
systems and the Pending Transactions, are estimated to be approximately $1.048
billion. For the nine months ended September 30, 1999, we made capital
expenditures, excluding the acquisitions of cable systems, of $385 million. The
majority of the capital
 
                                       71

<PAGE>   75
 
expenditures related to rebuilding existing cable systems. Those expenditures
were funded from cash flows from operations and borrowings under credit
facilities.
 
     For the period from January 1, 2000 to December 31, 2002, we plan to spend
approximately $5.6 billion for capital expenditures, approximately $3.1 billion
of which will be used to upgrade and rebuild our systems to bandwidth capacity
of 550 megahertz or greater and add two-way capability, so that we may offer
advanced services. The remaining $2.5 billion will be used for extensions of
systems, development of new products and services, converters and system
maintenance. Capital expenditures for 2000, 2001 and 2002 are expected to be
approximately $1.6 billion, $2.0 billion and $2.0 billion, respectively. We
currently expect to finance approximately 80% of the anticipated capital
expenditures with cash generated from operations and approximately 20% with
additional borrowings under credit facilities. We cannot assure you that these
amounts will be sufficient to accomplish our planned system upgrade, expansion
and maintenance. See "Risk Factors -- Our Business -- We may not be able to
obtain capital sufficient to fund our planned upgrades and other capital
expenditures." This could adversely affect our ability to offer new products and
services and compete effectively, and could adversely affect our growth,
financial condition and results of operations.
 
FINANCING ACTIVITIES
 
     As of September 30, 1999, pro forma for our merger with Marcus Holdings,
the sale of the original notes, acquisitions completed since that date, the
recent transfer to Charter Holdings of the Fanch, Falcon and Avalon cable
systems and the Pending Transactions, the total debt of Charter Holdings and its
subsidiaries would have been approximately $10.7 billion, Charter Holdings'
member's equity would have been approximately $10.4 billion and the deficiency
of earnings available to cover fixed charges would have been approximately $1.0
billion. Our significant amount of debt may adversely affect our ability to
obtain financing in the future and react to changes in our business. Our credit
facilities and other debt instruments contain, and the credit facilities that we
expect to enter into and the other debt that we expect to assume in connection
with the Pending Transactions will contain, various financial and operating
covenants that could adversely impact our ability to operate our business,
including restrictions on the ability of our operating subsidiaries to
distribute cash to their parents. See "-- Certain Trends and
Uncertainties -- Restrictive Covenants" and "Description of Certain
Indebtedness", for further information and a more detailed description of our
existing debt and the debt that we will assume or refinance in connection with
the Pending Transactions.
 
     MARCH 1999 CHARTER HOLDINGS NOTES.  On March 17, 1999, Charter Holdings and
Charter Capital issued $3.6 billion principal amount of senior notes, the March
1999 Charter Holdings notes consisted of $600 million in aggregate principal
amount of 8.250% senior notes due 2007, $1.5 billion in aggregate principal
amount of 8.625% senior notes due 2009, and $1.475 billion in aggregate
principal amount at maturity of 9.920% senior discount notes due 2011. The net
proceeds of approximately $2.99 billion, combined with the borrowings under our
credit facilities, were used to consummate tender offers for publicly held debt
of several of our subsidiaries, as described below, to refinance borrowings
under our previous credit facilities, for working capital purposes and to
finance a number of recent acquisitions.
 
     Semi-annual interest payments with respect to the March 1999 8.250% Charter
Holdings notes and the March 1999 8.625% Charter Holdings notes are
approximately $89.4 million, commencing on October 1, 1999. No interest on the
March 1999 9.920% Charter Holdings notes will be payable prior to April 1, 2004.
Thereafter, semi-annual interest payments on the three series of March 1999
Charter Holdings notes will be approximately $162.6 million in the aggregate,
commencing on October 1, 2004. In October 1999, Charter Holdings and Charter
Capital completed an offer to exchange the March 1999 Charter Holdings notes for
notes with substantially similar terms, except that the new notes are registered
and are not subject to restrictions on transfer. With the exception of $120,000
principal amount of the March 1999 8.625% Charter Holdings notes, all of the
March 1999
 
                                       72

<PAGE>   76
 
Charter Holdings notes were exchanged for new notes. As of September 30, 1999,
$2.1 billion was outstanding under the March 1999 8.250% Charter Holding notes
and 8.625% Charter Holdings notes, and the accreted value of the March 1999
9.920% Charter Holdings notes was $954.1 million.
 
     Concurrently with the issuance of the March 1999 Charter Holdings notes, we
refinanced substantially all of our previous credit facilities and Marcus Cable
Operating Company, L.L.C.'s credit facilities with new credit facilities entered
into by Charter Operating. In February and March 1999, we commenced cash tender
offers to purchase the 14% senior discount notes issued by Charter
Communications Southeast Holdings, LLC, the 11.25% senior notes issued by
Charter Communications Southeast, LLC, the 13.50% senior subordinated discount
notes issued by Marcus Cable Operating Company, L.L.C., and the 14.25% senior
discount notes issued by Marcus Cable. All such notes, except for $1.1 million
in principal amount, were paid off for an aggregate amount of $1.0 billion. The
remaining $1.1 million of such notes were repaid in September 1999.
 
     CHARTER OPERATING CREDIT FACILITIES.  Charter Operating's credit facilities
provide for two term facilities, Term A with a principal amount of $1.0 billion
that matures September 2007 and Term B with a principal amount of $1.85 billion
that matures on March 2008. The Charter Operating credit facilities also provide
for a $1.25 billion revolving credit facility with a maturity date of September
2007. As of September 30, 1999, approximately $2.85 billion was outstanding and
$1.25 billion was available for borrowing under the Charter Operating credit
facilities. In addition, an uncommitted incremental term facility of up to $500
million with terms similar to the terms of these credit facilities is permitted
under such credit facilities, but will be conditioned on receipt of additional
new commitments from existing and new lenders. We borrowed $520 million under
the revolving credit facility on October 1, 1999 to complete the acquisition of
the InterMedia systems. In addition, we borrowed approximately $269 million in
the aggregate under the revolving credit facility to retire the Rifkin notes and
the Helicon notes during October 1999 and November 1999, respectively.
 
     In November 1999, Charter Communications Holding Company loaned $856.0
million of the net proceeds of Charter Communications, Inc.'s initial public
offering to Charter Operating. The funds were used by Charter Operating to pay
down amounts outstanding under the Charter Operating credit facilities. As of
December 31, 1999, approximately $2.91 billion was outstanding and approximately
$1.19 billion was available for borrowing under the Charter Operating credit
facilities. In connection with the funding of the Bresnan acquisition, we expect
that Charter Operating will repay this loan to Charter Communications Holding
Company which will use the funds so received to pay a portion of the purchase
price for the Bresnan acquisition. We anticipate that Charter Communications
Holding Company will subsequently transfer the Bresnan cable systems to Charter
Holdings.
 
     Amounts under the Charter Operating credit facilities bear interest at a
base rate or a eurodollar rate, plus a margin up to 2.75%. A quarterly
commitment fee of between 0.25% and 0.375% per annum is payable on the
unborrowed balance of Term A and the revolving credit facility. The weighted
average interest rate for outstanding debt on September 30, 1999 was 7.52%.
Furthermore, Charter Operating has entered into interest rate protection
agreements to reduce the impact of changes in interest rates on the debt
outstanding under its credit facilities. See "-- Interest Rate Risk."
 
     RENAISSANCE NOTES.  We acquired Renaissance in April 1999. The Renaissance
10% senior discount notes due 2008 had $163.2 million principal amount at
maturity outstanding and $100.0 million accreted value upon issuance. The
Renaissance 10% notes do not require the payment of interest until April 15,
2003. From and after April 15, 2003, the Renaissance 10% notes bear interest,
payable semi-annually in cash, on April 15 and October 15, commencing on October
15, 2003. The Renaissance 10% notes are due on April 15, 2008. Due to the change
of control of Renaissance, an offer to purchase the Renaissance 10% notes was
made at 101% of their accreted value, plus accrued and unpaid interest, on June
28, 1999. Of the $163.2 million face amount of Renaissance 10% notes
 
                                       73

<PAGE>   77
 
outstanding, $48.8 million were repurchased. As of September 30, 1999, the
accreted value of the Renaissance 10% notes was approximately $82.4 million.
 
     HELICON NOTES.  We acquired Helicon in July 1999. As of September 30, 1999,
Helicon had outstanding $115.0 million in principal amount of 11% senior secured
notes due 2003. On November 1, 1999, we redeemed all of the Helicon 11% notes at
a purchase price equal to 103% of their principal amount, plus accrued interest,
for $124.8 million.
 
     RIFKIN NOTES.  We acquired Rifkin in September 1999. As of September 30,
1999, Rifkin had outstanding $125.0 million in principal amount of 11.125%
senior subordinated notes due 2006. In September 1999, we commenced an offer to
purchase any and all of the outstanding Rifkin notes, together with a $3.0
million promissory note payable, for cash at a premium over the principal
amounts. Notes with a total outstanding principal amount of $124.1 million were
repurchased for a total of $140.6 million, including a consent fee of $30 per
$1,000 to the holders who delivered timely consents to amend the indenture
governing those notes to eliminate substantially all of the restrictive
covenants. We repurchased the promissory note for $3.4 million.
 
     FALCON DEBENTURES.  Falcon has outstanding publicly held debt comprised of
8.375% senior debentures due 2010 and 9.285% senior discount debentures due
2010. As of September 30, 1999, $375.0 million total principal amount of the
Falcon 8.375% debentures were outstanding and the accreted value of the Falcon
9.285% debentures was approximately $315.7 million. In November 1999, we paid
off all of Falcon's 11.56% subordinated notes due 2001 for a total of $15.0
million. Interest on the Falcon 8.375% debentures is payable semi-annually on
April 15 and October 15 of each year. No interest on the Falcon 9.285%
debentures will be payable prior to April 15, 2003. From and after April 15,
2003, the issuers of the Falcon 9.285% debentures may elect to commence accrual
of cash interest payment on any date, and the interest will be payable semi-
annually in cash on each April 15 and October 15 thereafter.
 
     On December 10, 1999, we commenced change of control offers to repurchase
the Falcon debentures at purchase prices of 101% of principal amount, plus
unpaid and accrued interest, or accreted value, as applicable. Because the
Falcon debentures are trading at or near the change of control repurchase
prices, we expect that the Falcon debentures will be put to us. The Falcon
change of control offers will remain open until February 3, 2000. We intend to
finance the Falcon change of control offers with a portion of the net proceeds
of the sale of the original notes.
 
     FALCON CREDIT FACILITIES.  In connection with the Falcon acquisition, we
amended and restated the existing Falcon credit facilities to provide for
available borrowing capacity of $1.25 billion. In November 1999, Charter
Communications Holding Company loaned $173.0 million of the net proceeds of
Charter Communications, Inc.'s initial public offering to the borrower under the
Falcon credit facilities, Falcon Cable Communications, LLC. The funds were used
by Falcon Cable Communications to pay down a portion of the debt under the
Falcon credit facilities. As of November 30, 1999, $846.8 million was
outstanding and $405.2 million was available for borrowing under the Falcon
credit facilities. In connection with the funding of the Bresnan acquisition, we
expect that Falcon Cable Communications will repay the loan to Charter
Communications Holding Company which will use the funds so received to pay a
portion of the purchase price for the Bresnan acquisition.
 
     AVALON NOTES.  Avalon has 11.875% senior discount notes due 2008 and 9.375%
senior subordinated notes due 2008. As of September 30, 1999, the accreted value
of the Avalon 11.875% notes was $121.6 and $150.0 million in principal of the
Avalon 9.375% notes remained outstanding. Before December 1, 2003, there will be
no payments of cash interest on the Avalon 11.875% notes. After December 1,
2003, cash interest on the Avalon 11.875% notes will be payable semi-annually on
 
                                       74

<PAGE>   78
 
June 1 and December 1 of each year, commencing June 1, 2004. Interest on the
Avalon 9.375% notes is payable semi-annually on June 1 and December 1 of each
year.
 
     On December 3, 1999, we commenced change of control offers to repurchase
the Avalon 9.375% notes and the 11.875% notes at purchase prices of 101% of
principal amount or accreted value, as applicable. Because the Avalon 9.375%
notes are trading at or near the change of control repurchase price, we expect
these notes to be put to us. Because the Avalon 11.875% notes have been trading
above the change of control repurchase price, we do not expect these notes to be
put to us. These change of control repurchase offers will remain open until
January 26, 2000. We intend to finance the Avalon change of control offer with a
portion of the net proceeds of the sale of the original notes.
 
     AVALON CREDIT FACILITIES.  The Avalon credit facilities have maximum
borrowings of $300.0 million, consisting of a revolving facility in the amount
of $175.0 million and a term loan B in the amount of $125.0 million. We borrowed
$165.0 million under the Avalon credit facilities to fund a portion of the
Avalon purchase price.
 
     FANCH CREDIT FACILITIES.  The Fanch credit facilities have maximum
borrowings of $1.2 billion, of which we used $870.0 million to fund a portion of
the Fanch purchase price. In November 1999, Charter Communications Holding
Company loaned $20.0 million of the net proceeds of Charter Communications,
Inc.'s initial public offering to the borrower under the Fanch credit
facilities, CC VI Operating Company, LLC. The funds were used by CC VI Operating
Company to pay down a portion of the debt under the Fanch credit facilities. In
connection with the funding of the Bresnan acquisition, we expect that CC VI
Operating Company will repay the loan to Charter Communications Holding Company
which will use the funds so received to pay a portion of the purchase price for
the Bresnan acquisition.
 
     BRESNAN NOTES.  Bresnan has outstanding 8% senior notes due 2009 and 9.25%
senior discount notes due 2009. As of September 30, 1999, $170.0 million in
principal amount of the Bresnan 8% notes was outstanding and the accreted value
of the Bresnan 9.25% notes was $185.9 million. Interest on the Bresnan 8% notes
is payable semi-annually on February 1 and August 1 of each year. On and after
August 1, 2004, interest on the Bresnan 9.25% notes will be payable
semi-annually in cash on February 1 and August 1 of each year. The Bresnan
acquisition will trigger change of control provisions under the Bresnan notes
that will require us to make an offer to repurchase these notes at a price equal
to 101% of the outstanding principal amounts plus accrued interest or accreted
value, as applicable. We expect that the Bresnan notes will be tendered and we
intend to fund the repurchase of a portion of the Bresnan notes with a portion
of the net proceeds of the sale of the original notes.
 
     BRESNAN CREDIT FACILITIES.  Bresnan has credit facilities providing for
borrowings of up to $650.0 million. As of September 30, 1999, $512.0 million was
outstanding and $138.0 million was available for borrowing under the Bresnan
credit facilities. Because the acquisition of Bresnan will trigger change of
control and other provisions under the Bresnan credit facilities, we intend to
amend and assume these credit facilities, including an increase in borrowing
availability. If we cannot amend and assume these credit facilities, we will be
required to refinance the Bresnan credit facilities and repay all outstanding
borrowings thereunder.
 
ACQUISITIONS
 
     In 1999, we acquired the Renaissance, American Cable, Greater Media,
Helicon, Vista, Cable Satellite, Rifkin and InterMedia cable systems. The total
purchase price for these acquisitions was $4.2 billion, including $354 million
of assumed debt. We financed the cash portion of the purchase prices for these
acquisitions through excess cash from the issuance of the March 1999 Charter
Holdings notes, borrowings under the Charter Operating credit facilities,
capital contributions by Mr. Allen through Vulcan Cable III Inc., and, in the
case of InterMedia, through a swap of cable
 
                                       75

<PAGE>   79
 
systems valued at $331.8 million and a commitment to transfer an additional
cable system valued at $88.2 million. We will have to pay $88.2 million to
InterMedia if we do not obtain timely regulatory approvals for our transfer to
InterMedia of the Indiana cable system and we are unable to transfer replacement
systems.
 
     In addition to these acquisitions, since the beginning of 1999, Charter
Communications Holding Company acquired the Fanch, Falcon and Avalon cable
systems and entered into a definitive agreement to acquire the Bresnan cable
systems. The total purchase price for the Fanch, Falcon and Avalon acquisitions
was $6.7 billion, including $1.9 billion of assumed debt. The cash portion of
the Fanch, Falcon and Avalon purchase prices were paid with the net proceeds of
the initial public offering of the common stock of Charter Communications, Inc.,
an equity contribution to Charter Communications Holding Company by Mr. Allen
through Vulcan Cable III Inc. and borrowings under credit facilities. On January
1, 2000 Charter Communications Holding Company transferred the Fanch, Falcon and
Avalon cable systems to us and we became the indirect owner of these systems.
 
     In August 1999, Vulcan Cable III Inc. contributed to Charter Communications
Holding Company $500 million in cash and, in September 1999, an additional $825
million, of which approximately $644.3 million was in cash and approximately
$180.7 million was in the form of equity interests acquired by Vulcan Cable III
Inc. in connection with this Rifkin acquisition. Charter Communications Holding
Company in turn contributed the cash and equity interests to Charter Holdings.
In November 1999, in connection with Charter Communications, Inc.'s initial
public offering, Vulcan Cable III contributed to Charter Communications Holding
Company $750 million in cash. In connection with the Rifkin and Falcon
acquisitions, Charter Communications Holding Company issued equity interests
totaling approximately $683.3 million and a subsidiary of Charter Holdings
issued preferred equity interests totaling $25 million to the sellers.
 
     We expect that the Bresnan purchase price will be paid with a portion of
the net proceeds of Charter Communications, Inc.'s initial public offering, $1.0
billion of equity of Charter Communications Holding Company issued to specified
sellers in the acquisition, assumed debt, comprised of the existing Bresnan
credit facilities and publicly held notes, and borrowings under credit
facilities. We cannot assure you that the Bresnan acquisition will be completed.
Assuming the Bresnan acquisition and transfer are completed, Charter Holdings
will then be the indirect owner of the Bresnan cable systems.
 
     We expect to assume and amend the existing Bresnan credit facilities and
increase the borrowing availability thereunder. We expect to borrow
approximately $635.0 million under these credit facilities in connection with
the closing of the Bresnan acquisition. The $635.0 million represents $512.0
million in outstanding borrowings under the Bresnan credit facilities and $123.0
million in additional borrowings under these credit facilities that we
anticipate using to fund a portion of the Bresnan purchase price. In addition,
we expect that we will have to repurchase outstanding Bresnan notes at prices
equal to 101% of their principal amount, plus accrued and unpaid interest, or
their accreted value, as applicable, in connection with required change of
control offers for these notes. As of the anticipated closing date of the
Bresnan acquisition, the total amount of principal and accreted value of the
Bresnan notes will be $362.3 million. We intend to fund a portion of the
repurchase of the Bresnan notes with a portion of the net proceeds of the sale
of the original notes.
 
     On December 1, 1999, Charter Communications, Inc. and AT&T entered into a
non-binding letter of intent to exchange certain of our cable systems for
certain cable systems owned by AT&T. As part of this transaction, we will be
required to pay to AT&T approximately $108.0 million in cash.
 
     We cannot assure you that we will be able to raise the financing necessary
to satisfy the obligations described above. If we are unable to raise the
financing necessary to satisfy any or all of these obligations, we could be in
default under one or more other obligations.
 
                                       76

<PAGE>   80
 
     For a description of our recently completed and pending acquisitions, see
"Business -- Acquisitions."
 
CERTAIN TRENDS AND UNCERTAINTIES
 
     The following discussion highlights a number of trends and uncertainties,
in addition to those discussed elsewhere in this prospectus, including in "Risk
Factors" and "Business," that could materially impact our business, results of
operations and financial condition.
 
     SUBSTANTIAL LEVERAGE.  As of September 30, 1999, pro forma for our merger
with Marcus Holdings, the sale of the original notes, acquisitions completed
since that date, the recent transfer to Charter Holdings of the Fanch, Falcon
and Avalon cable systems and the Pending Transactions, the total debt of Charter
Holdings and its subsidiaries was approximately $10.7 billion and Charter
Holdings' member's equity was approximately $10.4 billion. We anticipate
incurring significant additional debt in the future to fund the expansion,
maintenance and the upgrade of our cable systems.
 
     Our ability to make payments on our debt and to fund our planned capital
expenditures for upgrading our cable systems and our ongoing operations will
depend on our ability to generate cash and secure financing in the future. This,
to a certain extent, is subject to general economic, financial, competitive,
legislative, regulatory and other factors beyond our control. We cannot assure
you that our business will generate sufficient cash flow from operations, or
that future borrowings will be available to us under our existing credit
facilities, new facilities or from other sources of financing in an amount
sufficient to enable us to repay our debt, to grow our business or to fund our
other liquidity and capital needs.
 
     VARIABLE INTEREST RATES.  A significant portion of our debt bears interest
at variable rates that are linked to short-term interest rates. In addition, a
significant portion of our existing debt, assumed debt or debt we expect to
arrange in connection with the Pending Transactions will bear interest at
variable rates. If interest rates rise, our costs relative to those obligations
will also rise. See discussion on "-- Interest Rate Risk."
 
     RESTRICTIVE COVENANTS.  Our credit facilities and the indentures governing
our outstanding debt contain a number of significant covenants that, among other
things, restrict our ability and the ability of our subsidiaries to:
 
     - pay dividends or make other distributions;
 
     - make certain investments or acquisitions.
 
     - dispose of assets or merge;
 
     - incur additional debt;
 
     - issue equity;
 
     - repurchase or redeem equity interests and debt;
 
     - create liens; and
 
     - pledge assets.
 
     Furthermore, in accordance with our credit facilities we are required to
maintain specified financial ratios and meet financial tests. The ability to
comply with these provisions may be affected by events beyond our control. The
breach of any of these covenants will result in a default under the applicable
debt agreement or instrument, which could trigger acceleration of the debt. Any
default under our credit facilities or the indentures governing our outstanding
debt may adversely affect our growth, our financial condition and our results of
operations.
 
                                       77

<PAGE>   81
 
     IMPORTANCE OF GROWTH STRATEGY AND RELATED RISKS.  We expect that a
substantial portion of any of our future growth will be achieved through
revenues from additional services and the acquisition of additional cable
systems. We cannot assure you that we will be able to offer new services
successfully to our customers or that those new services will generate revenues.
In addition, the acquisition of additional cable systems may not have a positive
net impact on our operating results. Acquisitions involve a number of special
risks, including diversion of management's attention, failure to retain key
acquired personnel, risks associated with unanticipated events or liabilities
and difficulties in assimilation of the operations of the acquired companies,
some or all of which could have a material adverse effect on our business,
results of operations and financial condition. If we are unable to grow our cash
flow sufficiently, we may be unable to fulfill our obligations or obtain
alternative financing.
 
     MANAGEMENT OF GROWTH.  As a result of the acquisition of the Charter
companies by Paul G. Allen, our merger with Marcus Holdings and our recent
acquisitions, we have experienced and will continue to experience rapid growth
that has placed and is expected to continue to place a significant strain on our
management, operations and other resources. Our future success will depend in
part on our ability to successfully integrate the operations acquired and to be
acquired and to attract and retain qualified personnel. Historically, acquired
entities have had minimal employee benefit related costs and all benefit plans
have been terminated with acquired employees transferring to our 401(k) plan. No
significant severance cost is expected in conjunction with the recent
acquisitions. The failure to retain or obtain needed personnel or to implement
management, operating or financial systems necessary to successfully integrate
acquired operations or otherwise manage growth when and as needed could have a
material adverse effect on our business, results of operations and financial
condition.
 
     In connection with our recent acquisitions, we have formed
multi-disciplinary teams to formulate plans for establishing customer service
centers, identifying property, plant and equipment requirements and possible
reduction of headends. Headends are the control centers of a cable television
system, where incoming signals are amplified, converted, processed and combined
for transmission to customers. These teams also determine market position and
how to attract talented personnel. Our goals include rapid transition in
achieving performance objectives and implementing "best practice" procedures.
 
     REGULATION AND LEGISLATION.  Cable systems are extensively regulated at the
federal, state, and local level. These regulations have increased the
administrative and operational expenses of cable television systems and affected
the development of cable competition. Rate regulation of cable systems has been
in place since passage of the Cable Television Consumer Protection and
Competition Act of 1992, although the scope of this regulation recently was
sharply contracted. Since March 31, 1999, rate regulation exists only with
respect to the lowest level of basic cable service and associated equipment.
Basic cable service is the service that cable customers receive for a threshold
fee. This service usually includes local television stations, some distant
signals and perhaps one or more non-broadcast services. This change affords
cable operators much greater pricing flexibility, although Congress could
revisit this issue if confronted with substantial rate increases.
 
     Cable operators also face significant regulation of their channel capacity.
They currently can be required to devote substantial capacity to the carriage of
programming that they would not carry voluntarily, including certain local
broadcast signals, local public, educational and government access users, and
unaffiliated commercial leased access programmers. This carriage burden could
increase in the future, particularly if the Federal Communications Commission
were to require cable systems to carry both the analog and digital versions of
local broadcast signals or if it were to allow unaffiliated Internet service
providers seeking direct cable access to invoke commercial leased access rights
originally devised for video programmers. The Federal Communications Commission
is currently conducting proceedings in which it is considering both of these
channel usage possibilities.
 
                                       78

<PAGE>   82
 
     There is also uncertainty whether local franchising authorities, the
Federal Communications Commission, or the U.S. Congress will impose obligations
on cable operators to provide unaffiliated Internet service providers with
access to cable plant on non-discriminatory terms. If they were to do so, and
the obligations were found to be lawful, it could complicate our operations in
general, and our Internet operations in particular, from a technical and
marketing standpoint. These access obligations could adversely impact our
profitability and discourage system upgrades and the introduction of new
products and services.
 
     POSSIBLE RESCISSION LIABILITY.  The Rifkin and Falcon sellers who acquired
Charter Communications Holding Company membership units in connection with the
respective Rifkin and Falcon acquisitions, the Bresnan sellers who will acquire
Charter Communications Holding Company membership units in connection with the
Bresnan acquisition and the Helicon sellers who acquired shares of Class A
common stock in Charter Communications, Inc.'s initial public offering may have
rescission rights against Charter Communications, Inc. and Charter
Communications Holding Company, as the case may be, arising out of possible
violations of Section 5 of the Securities Act in connection with the offers and
sales of these equity interests. If all of these equity holders successfully
exercised their possible rescission rights and Charter Communications, Inc. or
Charter Communications Holding Company became obligated to repurchase all such
equity interests, the total repurchase obligations could be up to approximately
$1.7 billion. We cannot assure you that Charter Communications, Inc. and Charter
Communications Holding Company would be able to obtain capital sufficient to
fund any required repurchases. If Charter Communications, Inc. and Charter
Communications Holding Company fail to obtain sufficient capital funds for this
purpose, they may seek funds from Charter Holdings and its subsidiaries. This
could adversely affect our financial condition and results of operations.
 
INTEREST RATE RISK
 
     The use of interest rate risk management instruments, such as interest rate
exchange agreements, interest rate cap agreements and interest rate collar
agreements, is required under the terms of our credit facilities. Our policy is
to manage interest costs using a mix of fixed and variable rate debt. Using
interest rate swap agreements, we agree to exchange, at specified intervals, the
difference between fixed and variable interest amounts calculated by reference
to an agreed-upon notional principal amount. Interest rate cap agreements are
used to lock in a maximum interest rate should variable rates rise, but enable
us to otherwise pay lower market rates. Collars limit our exposure to and
benefits from interest rate fluctuations on variable rate debt to within a
certain range of rates.
 
     The table set forth below summarizes the fair values and contract terms of
financial instruments subject to interest rate risk maintained by us as of
December 31, 1998 (dollars in thousands):
 

<TABLE>
<CAPTION>
                                                  EXPECTED MATURITY DATE                                            FAIR VALUE AT
                                   ----------------------------------------------------                             DECEMBER 31,
                                     1999       2000       2001       2002       2003     THEREAFTER     TOTAL          1998
                                   --------   --------   --------   --------   --------   ----------   ----------   -------------
<S>                                <C>        <C>        <C>        <C>        <C>        <C>          <C>          <C>
DEBT
Fixed Rate.......................        --         --         --         --         --   $  271,799   $  271,799    $  271,799
 Average Interest Rate...........        --         --         --         --         --         13.5%        13.5%
Variable Rate....................  $ 10,450   $ 21,495   $ 42,700   $113,588   $157,250   $1,381,038   $1,726,521    $1,726,521
 Average Interest Rate...........       6.0%       6.1%       6.3%       6.5%       7.2%         7.6%         7.2%
INTEREST RATE INSTRUMENTS
Variable to Fixed Swaps..........  $130,000   $255,000   $180,000   $320,000   $370,000   $  250,000   $1,505,000    $ (28,977)
 Average Pay Rate................       4.9%       6.0%       5.8%       5.5%       5.6%         5.6%         5.6%
 Average Receive Rate............       5.0%       5.0%       5.2%       5.2%       5.4%         5.4%         5.2%
Caps.............................  $ 15,000         --         --         --         --           --   $   15,000            --
 Average Cap Rate................       8.5%        --         --         --         --           --          8.5%
Collar...........................        --   $195,000   $ 85,000   $ 30,000         --           --   $  310,000    $  (4,174)
 Average Cap Rate................        --        7.0%       6.5%       6.5%        --           --          6.8%
 Average Floor Rate..............        --        5.0%       5.1%       5.2%        --           --          5.0%
</TABLE>

 
                                       79

<PAGE>   83
 
     The notional amounts of interest rate instruments, as presented in the
above table, are used to measure interest to be paid or received and do not
represent the amount of exposure to credit loss. The estimated fair value
approximates the proceeds (costs) to settle the outstanding contracts. Interest
rates on variable debt are estimated using the average implied forward London
Interbank Offering Rate (LIBOR) rates for the year of maturity based on the
yield curve in effect at December 31, 1998. While swaps, caps and collars
represent an integral part of our interest rate risk management program, their
incremental effect on interest expense for the years ended December 31, 1998,
1997, and 1996 was not significant.
 
     In March 1999, substantially all existing long-term debt, excluding
borrowings of our previous credit facilities, was extinguished, and all previous
credit facilities were refinanced with the Charter Operating credit facilities.
The following table sets forth the fair values and contract terms of the
long-term debt maintained by us as of September 30, 1999 (dollars in thousands):
 

<TABLE>
<CAPTION>
                                                  EXPECTED MATURITY DATE                                            FAIR VALUE AT
                                    ---------------------------------------------------                             SEPTEMBER 30,
                                      1999       2000       2001      2002       2003     THEREAFTER     TOTAL          1999
                                    --------   --------   --------   -------   --------   ----------   ----------   -------------
<S>                                 <C>        <C>        <C>        <C>       <C>        <C>          <C>          <C>
DEBT
Fixed Rate........................        --         --         --        --   $115,000   $3,817,413   $3,932,413    $3,206,520
 Average Interest Rate............        --         --         --        --         11%         9.0%         9.0%
Variable Rate.....................        --         --         --   $88,875   $156,000   $2,605,125   $2,850,000    $2,850,000
 Average Interest Rate............        --         --         --       6.7%       6.8%         7.0%         7.0%
</TABLE>

 
     Interest rates on variable debt are estimated using the average implied
forward LIBOR rates for the year of maturity based on the yield curve in effect
at September 30, 1999.
 
YEAR 2000 ISSUES
 
     GENERAL.  Many existing computer systems and applications, and other
control devices and embedded computer chips use only two digits, rather than
four, to identify a year in the date field, failing to consider the impact of
the recent change in the century. Computer chips are the physical structure upon
which integrated circuits are fabricated as components of systems, such as
telephone systems, computers and memory systems. As a result, such systems,
applications, devices, and chips could create erroneous results or might fail
altogether unless corrected to properly interpret data related to the year 2000
and beyond. These errors and failures may result, not only from a date
recognition problem in the particular part of a system failing, but may also
result as systems, applications, devices and chips receive erroneous or improper
data from third parties suffering from the year 2000 problem. In addition, two
interacting systems, applications, devices or chips, each of which has
individually been fixed so that it will properly handle the year 2000 problem,
could nonetheless result in a failure because their method of dealing with the
problem is not compatible.
 
     The year 2000 issue impacts our owned or licensed computer systems and
equipment used in connection with internal operations, including:
 
     - information processing and financial reporting systems;
 
     - customer billing systems;
 
     - customer service systems;
 
     - telecommunication transmission and reception systems; and
 
     - facility systems.
 
     We have not experienced significant service disruptions or any other
problems since the beginning of the year 2000. We cannot assure you, however,
that such problems will not arise in connection with customer billing or other
periodic information gathering.
 
                                       80

<PAGE>   84
 
     THIRD PARTIES.  We rely directly and indirectly, in the regular course of
business, on the proper operation and compatibility of third-party systems. The
year 2000 problem could cause these systems to fail, err, or become incompatible
with our systems.
 
     If we have or a significant third party on which we rely has failed to
adequately prepare its systems for the change to 2000, or if the year 2000
problem causes our systems to become internally incompatible or incompatible
with such third party systems, our business could suffer from material
disruptions, including the inability to process transactions, send invoices,
accept customer orders or provide customers with our cable services. We could
also face similar disruptions if the year 2000 problem causes general widespread
problems or an economic crisis. We cannot now estimate the extent of these
potential disruptions.
 
     STATE OF READINESS.  We have conducted a three-stage process addressing the
year 2000 problem and its impact on our internal operations, which consisted of:
 
     (1) conducting an inventory and evaluation of our systems, components, and
         other significant infrastructure to identify those elements that we
         reasonably believe could be expected to be affected by the year 2000
         problem. This stage has been completed;
 
     (2) remediating or replacing equipment that, based upon such inventory and
         evaluation, we believe may fail to operate properly in the year 2000.
         This stage has been completed; and
 
     (3) testing of the remediation and replacement conducted in stage two. This
         stage has been completed.
 
     Much of our assessment efforts in stage one have involved, and depend on,
inquiries to third party service providers, suppliers and vendors of various
parts or components of our systems. We have obtained certifications from third
party service providers, suppliers and vendors as to the readiness of mission
critical elements and we are in the process of obtaining certifications of
readiness as to non-mission critical elements. Certain of these third parties
that have certified the readiness of their products will not certify their
interoperability within our fully integrated systems. We cannot assure you that
these technologies of third parties, on which we rely, will be year 2000 ready
or timely converted into year 2000 compliant systems compatible with our
systems. Moreover, because a full test of our systems, on an integrated basis,
would require a complete shut down of our operations, it is not practicable to
conduct such testing. However, we have utilized a third party, in cooperation
with other cable operators, to test a "mock-up" of our major billing and plant
components, including pay-per-view systems, as an integrated system. We are
utilizing another third party to conduct comprehensive testing on our
advertising related scheduling and billing systems. In addition, we have
evaluated the potential impact of third party failure and integration failure on
our systems in developing our contingency plans.
 
     RISKS AND REASONABLY LIKELY WORST CASE SCENARIOS.  The failure to correct a
material year 2000 problem could result in system failures leading to a
disruption in, or failure of certain normal business activities or operations,
for example, a failure of our major billing systems and plant components such as
our pay-per-view systems. Such failures could materially and adversely affect
our results of operations, liquidity and financial condition. Due to the general
uncertainty inherent in the year 2000 problem, resulting in part from the
uncertainty of the year 2000 readiness of third-party suppliers and customers,
we are unable to determine at this time whether the consequences of year 2000
failures will have a material impact on our results of operations, liquidity or
financial condition. However, our year 2000 taskforce has significantly reduced
our level of uncertainty about the year 2000 problem and, in particular, about
the year 2000 compliance and readiness of our material vendors.
 
     CONTINGENCY AND BUSINESS CONTINUATION PLAN.  Our year 2000 plan calls for
suitable contingency planning for our at-risk business functions. We normally
make contingency plans in order to avoid
 
                                       81

<PAGE>   85
 
interrupted service providing video, voice and data products to our customers.
We have distributed detailed guidelines outlining remedial actions for the
failure of any component of our systems which is critical to the transport of
our signal. This includes a communications plan for informing key personnel
across the country in the event of such a failure to accelerate remediation
actions throughout the company.
 
     COST.  We have redeployed internal resources and have selectively engaged
outside vendors to meet the goals of our year 2000 program. We currently
estimate the total cost of our year 2000 remediation program, to be
approximately $9.8 million, substantially all of which has been expended to
date.
 
OPTIONS
 
     In accordance with an employment agreement between Charter Communications,
Inc. and Jerald L. Kent, the President and Chief Executive Officer of Charter
Communications, Inc. and a related option agreement between Charter
Communications Holding Company and Mr. Kent, an option to purchase 3% of the
equity value of all cable systems managed by Charter Investment, Inc. on the
date of the grant, or 7,044,127 membership units, were issued to Mr. Kent. The
option vests over a four-year period from the date of grant and expires ten
years from the date of grant.
 
     In February 1999, Charter Holdings adopted an option plan, which was
assumed by Charter Communications Holding Company in May 1999, providing for the
grant of options to purchase up to 25,009,798 Charter Communications Holding
Company membership units. The option plan provides for grants of options to
employees, consultants and directors of Charter Communications Holding Company
and its affiliates. Options granted will be fully vested after five years from
the date of grant. Options not exercised accumulate and are exercisable, in
whole or in part, any subsequent period, but not later than ten years from the
date of grant.
 
     Membership units received upon exercise of the options will be
automatically exchanged for shares of Class A common stock of Charter
Communications, Inc. on a one-for-one basis.
 

<TABLE>
<CAPTION>
                                                              OPTIONS OUTSTANDING
                                               --------------------------------------------------     OPTIONS
                                                                                       REMAINING    EXERCISABLE
                                                                                        CONTRACT    -----------
                                               NUMBER OF    EXERCISE       TOTAL          LIFE       NUMBER OF
                                                OPTIONS      PRICE        DOLLARS      (IN YEARS)     OPTIONS
                                               ---------    --------      -------      ----------    ---------
<S>                                            <C>          <C>         <C>            <C>          <C>
Outstanding as of January 1, 1999(1).........  7,044,127     $20.00     $140,882,540      9.2(3)      1,761,032
Granted:
  February 9, 1999(2)........................  9,111,681      20.00      182,233,620                    130,000
  April 5, 1999(2)...........................    473,000      20.73        9,805,290                         --
  November 8, 1999(2)........................  4,741,400      19.00       90,086,600                    200,000
  Cancelled..................................   (485,600)     20.00       (9,712,000)                        --
                                                 (56,400)     20.73       (1,169,172)                        --
                                                 (70,600)     19.00       (1,341,400)                        --
                                               ----------    ------     ------------      ---        ----------
Outstanding as of December 31, 1999..........  20,757,608    $19.79(3)  $410,785,478      9.2(3)      2,091,032
                                               ==========    ======     ============      ===        ==========
</TABLE>

 
-------------------------
 
(1) Granted to Jerald L. Kent pursuant to his employment agreement and related
    option agreement.
 
(2) Granted pursuant to the option plan.
 
(3) Weighted average.
 
     We follow Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" to account for the option plans. We recorded stock option
compensation expense of $845,000 for the year ended December 31, 1998 and $59.3
million for the nine months ended
 
                                       82

<PAGE>   86
 
September 30, 1999 in the financial statements since the exercise prices were
less than the estimated fair value of the underlying membership units on the
date of grant. The estimated fair value was determined using the valuation
inherent in Mr. Allen's acquisition of Charter Holdings and valuations of public
companies in the cable television industry adjusted for factors specific to us.
Compensation expense is accrued over the vesting period of each grant which
varies from four to five years. As of September 30, 1999, deferred compensation
remaining to be recognized in future periods totalled $104 million.
 
ACCOUNTING STANDARD NOT YET IMPLEMENTED
 
     In June 1998, the Financial Accounting Standards Board adopted SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No.
133 establishes accounting and reporting standards requiring that every
derivative instrument, including certain derivative instruments embedded in
other contracts, be recorded in the balance sheet as either an asset or
liability measured at its fair value and that changes in the derivative's fair
value be recognized currently in earnings unless specific hedge accounting
criteria are met. Special accounting for qualifying hedges allows a derivative's
gains and losses to offset related results on the hedged item in the income
statement, and requires that a company must formally document, designate and
assess the effectiveness of transactions that receive hedge accounting. SFAS No.
137 "Accounting for Derivative Instruments and Hedging Activities -- Deferral of
the Effective Date of FASB Statement No. 133 -- An Amendment of FASB No. 133"
has delayed the effective date of SFAS No. 133 to fiscal years beginning after
June 15, 2000. We have not yet quantified the impacts of adopting SFAS No. 133
on our consolidated financial statements nor have we determined the timing or
method of our adoption of SFAS No. 133. However, SFAS No. 133 could increase
volatility in earnings (loss).
 
                                       83

<PAGE>   87
 
                               THE EXCHANGE OFFER
 
TERMS OF THE EXCHANGE OFFER
 
GENERAL
 
     We sold the original notes on January 12, 2000 in a transaction exempt from
the registration requirements of the Securities Act of 1933, as amended. The
initial purchasers of the notes subsequently resold the original notes to
qualified institutional buyers in reliance on Rule 144A and under Regulation S
under the Securities Act.
 
     In connection with the sale of original notes to the initial purchasers
pursuant to the Purchase Agreement, dated January 6, 2000, among us and Goldman,
Sachs & Co., Chase Securities Inc., Credit Suisse First Boston, FleetBoston
Robertson Stephens, Merrill & Co., Morgan Stanley Dean Witter, TD Securities,
First Union Securities, Inc., PNC Capital Markets, Inc. and SunTrust Equitable
Securities, the holders of the original notes became entitled to the benefits of
the exchange and registration rights agreements dated January 12, 2000, among us
and the initial purchasers.
 
     Under the registration rights agreements, the issuers became obligated to
file a registration statement in connection with an exchange offer within 120
days after January 12, 2000 and to use their reasonable best efforts to have the
exchange offer registration statement declared effective within 180 days after
January 12, 2000. The exchange offer being made by this prospectus, if
consummated within the required time periods, will satisfy our obligations under
the registration rights agreements. This prospectus, together with the letter of
transmittal, is being sent to all beneficial holders known to the issuers.
 
     Upon the terms and subject to the conditions set forth in this prospectus
and in the accompanying letter of transmittal, the issuers will accept all
original notes properly tendered and not withdrawn prior to the expiration date.
The issuers will issue $1,000 principal amount of new notes in exchange for each
$1,000 principal amount of outstanding original notes accepted in the exchange
offer. Holders may tender some or all of their original notes pursuant to the
exchange offer.
 
     Based on no-action letters issued by the staff of the Securities and
Exchange Commission to third parties we believe that holders of the new notes
issued in exchange for original notes may offer for resale, resell and otherwise
transfer the new notes, other than any holder that is an affiliate of ours
within the meaning of Rule 405 under the Securities Act, without compliance with
the registration and prospectus delivery provisions of the Securities Act. This
is true as long as the new notes are acquired in the ordinary course of the
holder's business, the holder has no arrangement or understanding with any
person to participate in the distribution of the new notes and neither the
holder nor any other person is engaging in or intends to engage in a
distribution of the new notes. A broker-dealer that acquired original notes
directly from the issuers cannot exchange the original notes in the exchange
offer. Any holder who tenders in the exchange offer for the purpose of
participating in a distribution of the new notes cannot rely on the no-action
letters of the staff of the Securities and Exchange Commission and must comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with any resale transaction.
 
     Each broker-dealer that receives new notes for its own account in exchange
for original notes, where original notes were acquired by such broker-dealer as
a result of market-making or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such new notes. See
"Plan of Distribution" for additional information.
 
     We shall be deemed to have accepted validly tendered original notes when,
as and if we have given oral or written notice of the acceptance of such notes
to the exchange agent. The exchange agent will act as agent for the tendering
holders of original notes for the purposes of receiving the new notes from the
issuers and delivering new notes to such holders.
 
                                       84

<PAGE>   88
 
     If any tendered original notes are not accepted for exchange because of an
invalid tender or the occurrence of the conditions set forth under
"-- Conditions" without waiver by us, certificates for any such unaccepted
original notes will be returned, without expense, to the tendering holder of any
such original notes as promptly as practicable after the expiration date.
 
     Holders of original notes who tender in the exchange offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the letter of transmittal, transfer taxes with respect to the exchange of
original notes, pursuant to the exchange offer. We will pay all charges and
expenses, other than certain applicable taxes in connection with the exchange
offer. See "-- Fees and Expenses."
 
SHELF REGISTRATION STATEMENT
 
     Pursuant to the registration rights agreements, if the exchange offer is
not completed prior to the date on which the earliest of any of the following
events occurs:
 
          (a) applicable interpretations of the staff of the Securities and
     Exchange Commission do not permit us to effect the exchange offer,
 
          (b) any holder of notes notifies us that either:
 
             (1) such holder is not eligible to participate in the exchange
        offer, or
 
             (2) such holder participates in the exchange offer and does not
        receive freely transferable new notes in exchange for tendered original
        notes, or
 
          (c) the exchange offer is not completed within 210 days after January
     12, 2000,
 
we will, at our cost:
 
     - file a shelf registration statement covering resales of the original
       notes,
 
     - use our reasonable best efforts to cause the shelf registration statement
       to be declared effective under the Securities Act at the earliest
       possible time, but no later than 90 days after the time such obligation
       to file arises, and
 
     - use our reasonable best efforts to keep effective the shelf registration
       statement until the earlier of two years after the date as of which the
       Securities and Exchange Commission declares such shelf registration
       statement effective or the shelf registration otherwise becomes
       effective, or the time when all of the applicable original notes are no
       longer outstanding.
 
     If any of the events described occurs, we will refuse to accept any
original notes and will return all tendered original notes.
 
     We will, if and when we file the shelf registration statement, provide to
each holder of the original notes copies of the prospectus which is a part of
the shelf registration statement, notify each holder when the shelf registration
statement has become effective and take other actions as are required to permit
unrestricted resales of the original notes. A holder that sells original notes
pursuant to the shelf registration statement generally must be named as a
selling security-holder in the related prospectus and must deliver a prospectus
to purchasers, a seller will be subject to civil liability provisions under the
Securities Act in connection with these sales. A seller of the original notes
also will be bound by applicable provisions of the registration rights
agreements, including indemnification obligations. In addition, each holder of
original notes must deliver information to be used in connection with the shelf
registration statement and provide comments on the shelf registration statement
in order to have its original notes included in the shelf registration statement
and benefit from the provisions regarding any liquidated damages in the
registration rights agreement.
 
                                       85

<PAGE>   89
 
INCREASE IN INTEREST RATE
 
     If:
 
     (1) the registration statement, of which this prospectus is a part, has not
been declared effective by the Securities and Exchange Commission within 180
days of the issuance of the original notes, and we have not used or are not
continuing to use our reasonable best efforts to cause the registration
statement to become effective, or
 
     (2) the exchange offer has not been completed within 30 business days after
the initial effective date of the exchange offer registration statement, or
 
     (3) the exchange offer registration statement is either withdrawn by us or
subject to an effective stop order without being followed immediately by an
additional registration statement filed and declared effective, or
 
     (4) we are required to file the shelf registration statement and either
 
        (a) the shelf registration statement has not become effective or been
            declared effective on or before the 90th calendar day following the
            date such obligation to file arises, or
 
        (b) the shelf registration statement has been declared effective and
            such shelf registration statement ceases to be effective, except as
            specifically permitted in the registration rights agreements,
            without being succeeded promptly by an additional registration
            statement filed and declared effective,
 
the interest rate borne by the original notes will be increased by 0.25% per
year for the first 90 days of default, 0.50% per year for the second 90 days of
default, 0.75% per year for the third 90 days of default and 1.0% per year for
the remaining period of time in default.
 
     The sole remedy available to the holders of the original notes will be the
immediate increase in the interest rate on the original notes as described
above. Any amounts of additional interest due as described above will be payable
in cash on the same interest payments dates as the original notes.
 
EXPIRATION DATE; EXTENSIONS; AMENDMENT
 
     We will keep the exchange offer open for not less than 30 days, or longer
if required by applicable law, after the date on which notice of the exchange
offer is mailed to the holders of the old notes. The term "expiration date"
means the expiration date set forth on the cover page of this prospectus, unless
we extend the exchange offer, in which case the term "expiration date" means the
latest date to which the exchange offer is extended.
 
     In order to extend the expiration date, we will notify the exchange agent
of any extension by oral or written notice and will issue a public announcement
of the extension, each prior to 5:00 p.m., New York City time, on the next
business day after the previously scheduled expiration date.
 
     We reserve the right
 
          (a) to delay accepting any original notes, to extend the exchange
     offer or to terminate the exchange offer and not accept original notes not
     previously accepted if any of the conditions set forth under
     "-- Conditions" shall have occurred and shall not have been waived by us,
     if permitted to be waived by us, by giving oral or written notice of such
     delay, extension or termination to the exchange agent, or
 
          (b) to amend the terms of the exchange offer in any manner deemed by
     us to be advantageous to the holders of the original notes.
 
                                       86

<PAGE>   90
 
     Any delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by oral or written notice. If the exchange
offer is amended in a manner determined by us to constitute a material change,
we promptly will disclose such amendment in a manner reasonably calculated to
inform the holders of the original notes of such amendment. Depending upon the
significance of the amendment, we may extend the exchange offer if it otherwise
would expire during such extension period.
 
     Without limiting the manner in which we may choose to make a public
announcement of any extension, amendment or termination of the exchange offer,
we will not be obligated to publish, advertise, or otherwise communicate any
such announcement, other than by making a timely release to an appropriate news
agency.
 
PROCEDURES FOR TENDERING
 
     To tender in the exchange offer, a holder must complete, sign and date the
letter of transmittal, or a facsimile of the letter of transmittal, have the
signatures on the letter of transmittal guaranteed if required by instruction 2
of the letter of transmittal, and mail or otherwise deliver such letter of
transmittal or such facsimile or an agent's message in connection with a book
entry transfer, together with the original notes and any other required
documents. To be validly tendered, such documents must reach the exchange agent
before 5:00 p.m., New York City time, on the expiration date. Delivery of the
original notes may be made by book-entry transfer in accordance with the
procedures described below. Confirmation of such book-entry transfer must be
received by the exchange agent prior to the expiration date.
 
     The term "agent's message" means a message, transmitted by a book-entry
transfer facility to, and received by, the exchange agent, forming a part of a
confirmation of a book-entry transfer, which states that such book-entry
transfer facility has received an express acknowledgment from the participant in
such book-entry transfer facility tendering the original notes that such
participant has received and agrees to be bound by the terms of the letter of
transmittal and that we may enforce such agreement against such participant.
 
     The tender by a holder of original notes will constitute an agreement
between such holder and us in accordance with the terms and subject to the
conditions set forth in this prospectus and in the letter of transmittal.
 
     Delivery of all documents must be made to the exchange agent at its address
set forth below. Holders may also request their respective brokers, dealers,
commercial banks, trust companies or nominees to effect such tender for such
holders.
 
     THE METHOD OF DELIVERY OF ORIGINAL NOTES AND THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK
OF THE HOLDERS. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE
AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE TIMELY DELIVERY TO THE EXCHANGE AGENT BEFORE 5:00 P.M., NEW
YORK CITY TIME, ON THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR ORIGINAL
NOTES SHOULD BE SENT TO US.
 
     Only a holder of original notes may tender original notes in the exchange
offer. The term "holder" with respect to the exchange offer means any person in
whose name original notes are registered on our books or any other person who
has obtained a properly completed bond power from the registered holder.
 
     Any beneficial holder whose original notes are registered in the name of
its broker, dealer, commercial bank, trust company or other nominee and who
wishes to tender should contact such registered holder promptly and instruct
such registered holder to tender on its behalf. If such beneficial holder wishes
to tender on its own behalf, such registered holder must, prior to completing
and executing the letter of transmittal and delivering its original notes,
either make appropriate
 
                                       87

<PAGE>   91
 
arrangements to register ownership of the original notes in such holder's name
or obtain a properly completed bond power from the registered holder. The
transfer of record ownership may take considerable time.
 
     Signatures on a letter of transmittal or a notice of withdrawal, must be
guaranteed by a member firm of a registered national securities exchange or of
the National Association of Securities Dealers, Inc. or a commercial bank or
trust company having an office or correspondent in the United States referred to
as an "eligible institution", unless the original notes are tendered
 
     (a) by a registered holder who has not completed the box entitled "Special
         Issuance Instructions" or "Special Delivery Instructions" on the letter
         of transmittal or
 
     (b) for the account of an eligible institution. In the event that
         signatures on a letter of transmittal or a notice of withdrawal, are
         required to be guaranteed, such guarantee must be by an eligible
         institution.
 
     If the letter of transmittal is signed by a person other than the
registered holder of any original notes listed therein, such original notes must
be endorsed or accompanied by appropriate bond powers and a proxy which
authorizes such person to tender the original notes on behalf of the registered
holder, in each case signed as the name of the registered holder or holders
appears on the original notes.
 
     If the letter of transmittal or any original notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and unless waived by us,
evidence satisfactory to us of their authority so to act must be submitted with
the letter of transmittal.
 
     All questions as to the validity, form, eligibility, including time of
receipt, and withdrawal of the tendered original notes will be determined by us
in our sole discretion, which determination will be final and binding. We
reserve the absolute right to reject any and all original notes not properly
tendered or any original notes our acceptance of which, in the opinion of
counsel for us, would be unlawful. We also reserve the right to waive any
irregularities or conditions of tender as to particular original notes. Our
interpretation of the terms and conditions of the exchange offer, including the
instructions in the letter of transmittal, will be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of original notes must be cured within such time as we shall determine. None of
us, the exchange agent or any other person shall be under any duty to give
notification of defects or irregularities with respect to tenders of original
notes, nor shall any of them incur any liability for failure to give such
notification. Tenders of original notes will not be deemed to have been made
until such irregularities have been cured or waived. Any original notes received
by the exchange agent that are not properly tendered and as to which the defects
or irregularities have not been cured or waived will be returned without cost to
such holder by the exchange agent to the tendering holders of original notes,
unless otherwise provided in the letter of transmittal, as soon as practicable
following the expiration date.
 
     In addition, we reserve the right in our sole discretion to
 
     (a) purchase or make offers for any original notes that remain outstanding
         subsequent to the expiration date or, as set forth under
         "-- Conditions," to terminate the exchange offer in accordance with the
         terms of the registration rights agreements and
 
     (b) to the extent permitted by applicable law, purchase original notes in
         the open market, in privately negotiated transactions or otherwise. The
         terms of any such purchases or offers may differ from the terms of the
         exchange offer.
 
                                       88

<PAGE>   92
 
     By tendering, each holder will represent to us that, among other things,
 
     (a) the new notes acquired pursuant to the exchange offer are being
         obtained in the ordinary course of business of such holder or other
         person,
 
     (b) neither such holder nor such other person is engaged in or intends to
         engage in a distribution of the new notes,
 
     (c) neither such holder or other person has any arrangement or
         understanding with any person to participate in the distribution of
         such new notes, and
 
     (d) such holder or other person is not our "affiliate," as defined under
         Rule 405 of the Securities Act, or, if such holder or other person is
         such an affiliate, will comply with the registration and prospectus
         delivery requirements of the Securities Act to the extent applicable.
 
     We understand that the exchange agent will make a request promptly after
the date of this prospectus to establish accounts with respect to the original
notes at the Depository Trust Company for the purpose of facilitating the
exchange offer, and subject to the establishment of such accounts, any financial
institution that is a participant in the Depository Trust Company's system may
make book-entry delivery of original notes by causing the Depository Trust
Company to transfer such original notes into the exchange agent's account with
respect to the original notes in accordance with the Depository Trust Company's
procedures for such transfer. Although delivery of the original notes may be
effected through book-entry transfer into the exchange agent's account at the
Depository Trust Company, an appropriate letter of transmittal properly
completed and duly executed with any required signature guarantee, or an agent's
message in lieu of the letter of transmittal, and all other required documents
must in each case be transmitted to and received or confirmed by the exchange
agent at its address set forth below on or prior to the expiration date, or, if
the guaranteed delivery procedures described below are complied with, within the
time period provided under such procedures. Delivery of documents to Depository
Trust Company does not constitute delivery to the exchange agent.
 
GUARANTEED DELIVERY PROCEDURES
 
     Holders who wish to tender their original notes and
 
          (a) whose original notes are not immediately available or
 
          (b) who cannot deliver their original notes, the letter of transmittal
     or any other required documents to the exchange agent prior to the
     expiration date, may effect a tender if:
 
             (1) the tender is made through an eligible institution;
 
             (2) prior to the expiration date, the exchange agent receives from
        such eligible institution a properly completed and duly executed Notice
        of Guaranteed Delivery, by facsimile transmission, mail or hand
        delivery, setting forth the name and address of the holder of the
        original notes, the certificate number or numbers of such original notes
        and the principal amount of original notes tendered, stating that the
        tender is being made thereby, and guaranteeing that, within three
        business days after the expiration date, the letter of transmittal, or
        facsimile thereof or agent's message in lieu of the letter of
        transmittal, together with the certificate(s) representing the original
        notes to be tendered in proper form for transfer and any other documents
        required by the letter of transmittal will be deposited by the eligible
        institution with the exchange agent; and
 
             (3) such properly completed and executed letter of transmittal (or
        facsimile thereof) together with the certificate(s) representing all
        tendered original notes in proper form for
 
                                       89

<PAGE>   93
 
        transfer and all other documents required by the letter of transmittal
        are received by the exchange agent within three business days after the
        expiration date.
 
WITHDRAWAL OF TENDERS
 
     Except as otherwise provided in this prospectus, tenders of original notes
may be withdrawn at any time prior to 5:00 p.m., New York City time, on the
expiration date. However, where the expiration date has been extended, tenders
of original notes previously accepted for exchange as of the original expiration
date may not be withdrawn.
 
     To withdraw a tender of original notes in the exchange offer, a written or
facsimile transmission notice of withdrawal must be received by the exchange
agent at its address set forth in this prospectus prior to 5:00 p.m., New York
City time, on the expiration date. Any such notice of withdrawal must:
 
          (a) specify the name of the depositor, who is the person having
     deposited the original notes to be withdrawn,
 
          (b) identify the original notes to be withdrawn, including the
     certificate number or numbers and principal amount of such original notes
     or, in the case of original notes transferred by book-entry transfer, the
     name and number of the account at Depository Trust Company to be credited,
 
          (c) be signed by the depositor in the same manner as the original
     signature on the letter of transmittal by which such original notes were
     tendered, including any required signature guarantees, or be accompanied by
     documents of transfer sufficient to have the trustee with respect to the
     original notes register the transfer of such original notes into the name
     of the depositor withdrawing the tender and
 
          (d) specify the name in which any such original notes are to be
     registered, if different from that of the depositor. All questions as to
     the validity, form and eligibility, including time of receipt, of such
     withdrawal notices will be determined by us, and our determination shall be
     final and binding on all parties. Any original notes so withdrawn will be
     deemed not to have been validly tendered for purposes of the exchange offer
     and no new notes will be issued with respect to the original notes
     withdrawn unless the original notes so withdrawn are validly retendered.
     Any original notes which have been tendered but which are not accepted for
     exchange will be returned to its holder without cost to such holder as soon
     as practicable after withdrawal, rejection of tender or termination of the
     exchange offer. Properly withdrawn original notes may be retendered by
     following one of the procedures described above under "-- Procedures for
     Tendering" at any time prior to the expiration date.
 
CONDITIONS
 
     Notwithstanding any other term of the exchange offer, we will not be
required to accept for exchange, or exchange, any new notes for any original
notes, and may terminate or amend the exchange offer before the expiration date,
if the exchange offer violates any applicable law or interpretation by the staff
of the Securities and Exchange Commission.
 
     If we determine in our reasonable discretion that the foregoing condition
exists, we may
 
          (1) refuse to accept any original notes and return all tendered
     original notes to the tendering holders,
 
          (2) extend the exchange offer and retain all original notes tendered
     prior to the expiration of the exchange offer, subject, however, to the
     rights of holders who tendered such original notes to withdraw their
     tendered original notes, or
 
                                       90

<PAGE>   94
 
          (3) waive such condition, if permissible, with respect to the exchange
     offer and accept all properly tendered original notes which have not been
     withdrawn. If such waiver constitutes a material change to the exchange
     offer, we will promptly disclose such waiver by means of a prospectus
     supplement that will be distributed to the holders, and we will extend the
     exchange offer as required by applicable law.
 
EXCHANGE AGENT
 
     Harris Trust and Savings Bank has been appointed as exchange agent for the
exchange offer. Questions and requests for assistance and requests for
additional copies of this prospectus or of the letter of transmittal should be
directed to Harris Trust and Savings Bank addressed as follows:
 
                         For Information by Telephone:
                                 (212) 701-7624
 
                         HARRIS TRUST AND SAVINGS BANK
 

<TABLE>
<S>                                            <C>
       By Registered or Certified Mail                   By Hand or Overnight Mail:
     c/o Harris Trust Company of New York           c/o Harris Trust Company of New York
             Wall Street Station                             Wall Street Plaza
                P.O. Box 1023                                  88 Pine Street
        New York, New York 10268-1023                            19th Floor
                                                          New York, New York 10005
                                                 Attention: Reorganization Trust Department
</TABLE>

 
                           By Facsimile Transmission:
                                 (212) 701-7637
                            (Telephone Confirmation)
                                 (212) 701-7624
 
     Harris Trust and Savings Bank is an affiliate of the trustee under the
indentures governing the notes.
 
FEES AND EXPENSES
 
     We have agreed to bear the expenses of the exchange offer pursuant to the
exchange and registration rights agreements. We have not retained any
dealer-manager in connection with the exchange offer and will not make any
payments to brokers, dealers or others soliciting acceptances of the exchange
offer. We, however, will pay the exchange agent reasonable and customary fees
for its services and will reimburse it for its reasonable out-of-pocket expenses
in connection with providing the services.
 
     The cash expenses to be incurred in connection with the exchange offer will
be paid by us. Such expenses include fees and expenses of Harris Trust and
Savings Bank as exchange agent, accounting and legal fees and printing costs,
among others.
 
ACCOUNTING TREATMENT
 
     The new notes will be recorded at the same carrying value as the original
notes as reflected in our accounting records on the date of exchange.
Accordingly, no gain or loss for accounting purposes will be recognized by us.
The expenses of the exchange offer and the unamortized expenses related to the
issuance of the original notes will be amortized over the term of the notes.
 
                                       91

<PAGE>   95
 
CONSEQUENCES OF FAILURE TO EXCHANGE
 
     Holders of original notes who are eligible to participate in the exchange
offer but who do not tender their original notes will not have any further
registration rights, and their original notes will continue to be subject to
restrictions on transfer. Accordingly, such original notes may be resold only
 
     - to us, upon redemption of these notes or otherwise,
 
     - so long as the original notes are eligible for resale pursuant to Rule
       144A under the Securities Act, to a person inside the United States whom
       the seller reasonably believes is a qualified institutional buyer within
       the meaning of Rule 144A in a transaction meeting the requirements of
       Rule 144A,
 
     - in accordance with Rule 144 under the Securities Act, or under another
       exemption from the registration requirements of the Securities Act, and
       based upon an opinion of counsel reasonably acceptable to us,
 
     - outside the United States to a foreign person in a transaction meeting
       the requirements of Rule 904 under the Securities Act, or
 
     - under an effective registration statement under the Securities Act,
 
in each case in accordance with any applicable securities laws of any state of
the United States.
 
REGULATORY APPROVALS
 
     We do not believe that the receipt of any material federal or state
regulatory approval will be necessary in connection with the exchange offer,
other than the effectiveness of the exchange offer registration statement under
the Securities Act.
 
OTHER
 
     Participation in the exchange offer is voluntary and holders of original
notes should carefully consider whether to accept the terms and condition of
this exchange offer. Holders of the original notes are urged to consult their
financial and tax advisors in making their own decisions on what action to take
with respect to the exchange offer.
 
                                       92

<PAGE>   96
 
 
                                   BUSINESS
 
OVERVIEW
 
     We are the fourth largest operator of cable television systems in the
United States, serving approximately 6.2 million customers, after giving effect
to the Bresnan acquisition and transfer. We currently serve approximately 5.5
million customers.
 
     We offer a full range of traditional cable television services. Our service
offerings include the following programming packages:
 
     - basic programming;
 
     - expanded basic programming;
 
     - premium service; and
 
     - pay-per-view television programming.
 
     As part of our Wired World vision, we are also beginning to offer an array
of new services including:
 
     - digital television;
 
     - interactive video programming; and
 
     - high-speed Internet access.
 
We are also exploring opportunities in telephony.
 
     The new products and services described above will take advantage of the
significant bandwidth of our cable systems. We are accelerating the upgrade of
our cable systems to more quickly provide these products and services.
 
     For the year ended December 31, 1998, pro forma for our merger with Marcus
Holdings, the acquisitions completed during 1998 and 1999, the recent transfer
to Charter Holdings of the Fanch, Falcon and Avalon cable systems and the
Pending Transactions, our revenues would have been approximately $2.7 billion.
For the first nine months of 1999, pro forma for our merger with Marcus
Holdings, acquisitions completed in 1999, the Fanch, Falcon and Avalon transfers
and the Pending Transactions, our revenues would have been $2.2 billion. For the
three months ended September 30, 1999 on the same pro forma basis, our revenues
would have been $0.7 billion.
 
     Mr. Allen, the principal owner of Charter Communications, Inc. and one of
the computer industry's visionaries, has long believed in a Wired World in which
cable technology will facilitate the convergence of television, computers and
telecommunications. We believe cable's ability to deliver voice, video and data
at high speeds will enable it to serve as the primary platform for the delivery
of new services to the home and workplace.
 
                                       93

<PAGE>   97
 
BUSINESS STRATEGY
 
     Our objective is to increase our operating cash flow by increasing our
customer base and the amount of cash flow per customer. To achieve this
objective, we are pursuing the following strategies:
 
     INTEGRATE AND IMPROVE ACQUIRED CABLE SYSTEMS.  We seek to rapidly integrate
acquired cable systems and apply our core operating strategies to raise the
financial and operating performance of these acquired systems. Our integration
process occurs in three stages:
 
          SYSTEM EVALUATION.  We conduct an extensive evaluation of each system
     we acquire. This process begins prior to reaching an agreement to purchase
     the system and focuses on the system's:
 
        - business plan;
 
        - customer service standards;
 
        - management capabilities; and
 
        - technological capacity and compatibility.
 
          We also evaluate opportunities to consolidate headends and billing and
     other administrative functions. Based upon this evaluation, we formulate
     plans for customer service centers, plant upgrades, market positioning, new
     product and service launches and human resource requirements.
 
          IMPLEMENTATION OF OUR CORE OPERATING STRATEGIES.  To achieve our high
     standards for customer satisfaction and financial and operating
     performance, we:
 
        - attract and retain high quality local management;
 
        - empower local managers with a high degree of day-to-day operational
          autonomy;
 
        - set key financial and operating benchmarks for management to meet,
          such as revenue and cash flow per subscriber, subscriber growth,
          customer service and technical standards; and
 
        - provide incentives to all employees through grants of cash bonuses and
          stock options.
 
          ONGOING SUPPORT AND MONITORING.  We provide local managers with
     regional and corporate management guidance, marketing and other support for
     implementation of their business plans. We monitor performance of our
     acquired cable systems on a frequent basis to ensure that performance goals
     can be met.
 
     The turn-around in our Fort Worth system, which our management team began
to manage in October 1998, is an example of our success in integrating newly
acquired cable systems into our operations. We introduced a customer care team
that has worked closely with city governments to improve customer service and
local government relations, and each of our customer service representatives
attended a training program. We also conducted extensive training programs for
our technical and engineering, dispatch, sales and support, and management
personnel. We held a series of sales events and service demonstrations to
increase customer awareness and enhance our community exposure and reputation.
We reduced the new employee hiring process from two to three weeks to three to
five days.
 
     OFFER NEW PRODUCTS AND SERVICES.  We intend to expand the array of products
and services we offer to our customers to implement our Wired World vision.
Using digital technology, we plan to offer additional channels on our existing
service tiers, create new service tiers, introduce multiple packages of premium
services and increase the number of pay-per-view channels. We also plan to add
digital music services and interactive program guides which are comprehensive
guides to television program listings that can be accessed by network, time,
date or genre. In addition, we have begun to
 
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roll out advanced services, including interactive video programming and high
speed Internet access, and we are currently exploring opportunities in
telephony. We have entered into agreements with several providers of high speed
Internet and other interactive services, including EarthLink Network, Inc., High
Speed Access Corp., WorldGate Communications, Inc., Wink Communications, Inc.
and Excite@Home Corporation. We have recently entered into a joint venture with
Vulcan Ventures Inc. and Go2Net, Inc. to form Broadband Partners, LLC. The
purpose of this joint venture is to deliver high speed Internet portal services
to our subscribers.
 
     UPGRADE THE BANDWIDTH CAPACITY OF OUR SYSTEMS.  Over the next three years,
we plan to spend approximately $5.6 billion from 2000 to 2002 to upgrade to 550
megahertz or greater the bandwidth of our cable systems and the systems we
acquire through our pending acquisitions and to add two-way capability.
Upgrading to at least 550 megahertz of bandwidth capacity will allow us to:
 
     - offer advanced services, such as digital television, Internet access and
       other interactive services;
 
     - increase channel capacity up to 82 channels, or even more programming
       channels if some of our bandwidth is used for digital services; and
 
     - permit two-way communication which will give our customers the ability to
       send and receive signals over the cable system so that high speed cable
       services, such as Internet access, will not require a separate telephone
       line.
 
     As of September 30, 1999, approximately 53% of our customers were served by
cable systems with at least 550 megahertz bandwidth capacity, and approximately
31% of our customers had two-way communication capability. By year-end 2003,
including all recent acquisitions, the recent transfer to Charter Holdings of
the Fanch, Falcon and Avalon cable systems and the systems we will operate after
the Bresnan acquisition and transfer, we expect that approximately 98% of our
customers will be served by cable systems with at least 550 megahertz bandwidth
capacity and two-way communication capability.
 
     Our planned upgrades are designed to reduce the number of headends from
1,257 in 1999 to 456 in 2003, including the recent transfers and the systems we
will operate after the Bresnan acquisition and transfer. Reducing the number of
headends will reduce headend equipment and maintenance expenditures and,
together with other upgrades, will provide enhanced picture quality and system
reliability. In addition, by year-end 2003, including the recent Fanch, Falcon
and Avalon transfers and the systems we will operate after the Bresnan
acquisition and transfer, we expect that approximately 90% of our customers will
be served by headends serving at least 10,000 customers.
 
     MAXIMIZE CUSTOMER SATISFACTION.  To maximize customer satisfaction, we
operate our business to provide reliable, high-quality products and services,
superior customer service and attractive programming choices at reasonable
rates. We have implemented stringent internal customer service standards which
we believe meet or exceed those established by the National Cable Television
Association, which is the Washington, D.C.-based trade association for the cable
television industry. We believe that our customer service efforts have
contributed to our superior customer growth, and will strengthen the Charter
brand name and increase acceptance of our new products and services.
 
     EMPLOY INNOVATIVE MARKETING.  We have developed and successfully
implemented a variety of innovative marketing techniques to attract new
customers and increase revenue per customer. Our marketing efforts focus on
tailoring Charter branded entertainment and information services that provide
value, choice, convenience and quality to local customer preference. We use
demographic "cluster codes" to address messages to target audiences through
direct mail and telemarketing. Cluster codes identify customers by marketing
type such as young professionals, retirees or families. In addition, we promote
our services on radio, in local newspapers and by door-to-door selling. In many
of our systems, we offer discounts to customers who purchase multiple premium
services such as Home Box Office or Showtime. We also have a coordinated
strategy for retaining customers that
 
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includes televised retention advertising to reinforce the link between quality
service and the Charter brand name and to encourage customers to purchase higher
service levels. Successful implementation of these marketing techniques has
contributed to internal customer growth rates in excess of the cable industry
average in each year from 1996 through 1998 for the systems we owned in each of
those years. We have begun to implement our marketing programs in all of the
systems we have recently acquired.
 
     EMPHASIZE LOCAL MANAGEMENT AUTONOMY WHILE PROVIDING REGIONAL AND CORPORATE
SUPPORT AND CENTRALIZED FINANCIAL CONTROLS.  Our local cable systems are
organized into seven operating regions. A regional management team oversees
local system operations in each region. We believe that a strong management
presence at the local system level:
 
     - improves our customer service;
 
     - increases our ability to respond to customer needs and programming
       preferences;
 
     - reduces the need for a large centralized corporate staff;
 
     - fosters good relations with local governmental authorities; and
 
     - strengthens community relations.
 
     Our regional management teams work closely with both local managers and
senior management in our corporate office to develop budgets and coordinate
marketing, programming, purchasing and engineering activities. Our centralized
financial management enables us to set financial and operating benchmarks and
monitor performance on an ongoing basis. In order to attract and retain high
quality managers at the local and regional operating levels, we provide a high
degree of operational autonomy and accountability and cash and equity-based
compensation. Charter Communications Holding Company has adopted a plan to
distribute to employees and consultants, including members of corporate
management and key regional and system-level management personnel, options
exercisable for up to 25,009,798 Charter Communications Holding Company
membership units.
 
     CONCENTRATE OUR SYSTEMS IN TIGHTER GEOGRAPHICAL CLUSTERS.  To improve
operating margins and increase operating efficiencies, we regularly seek to
improve the geographic clustering of our cable systems by selectively swapping
our cable systems for systems of other cable operators or acquiring systems in
close proximity to our systems. We believe that by concentrating our systems in
clusters, we will be able to generate higher growth in revenues and operating
cash flow. Clustering enables us to consolidate headends and spread fixed costs
over a larger subscriber base. Charter Communications, Inc. and AT&T Broadband &
Internet Services have entered into a non-binding letter of intent for the Swap
Transaction to exchange certain cable systems. If completed, this will allow us
to improve the clustering of our cable systems in certain key markets. We are
negotiating with several other cable operators whose systems we consider to be
potential acquisition or swapping candidates.
 
CHARTER ORGANIZATIONAL STRUCTURE
 
     Each of the entities in our organizational structure and how it relates to
us is described below. In our discussion of the following entities, we make the
same assumptions as described on page 3 with respect to our organizational
chart.
 
     CHARTER COMMUNICATIONS, INC.  Charter Communications, Inc. is a holding
company whose principal asset is an approximate 38% equity interest and a 100%
voting interest in Charter Communications Holding Company. Charter
Communications, Inc.'s only business is to act as the sole manager of Charter
Communications Holding Company and its subsidiaries. As sole manager, Charter
Communications, Inc. controls the affairs of us and our subsidiaries. Mr. Allen,
through his ownership of Charter Communications, Inc.'s high vote Class B common
stock and his indirect
 
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ownership of Charter Communications Holding Company membership units, controls
approximately 93.6% of the voting power of all of Charter Communications, Inc.'s
capital stock.
 
     VULCAN CABLE III INC.  In August 1999, Mr. Allen, through Vulcan Cable III
Inc., contributed to Charter Communications Holding Company $500 million in cash
and, in September 1999, an additional $825 million, of which approximately
$644.3 million was in cash and approximately $180.7 million was in the form of
equity interests acquired by Vulcan Cable III Inc. in connection with the Rifkin
acquisition, in each case in exchange for membership units at a price per
membership unit of $20.73. In addition, Mr. Allen, through Vulcan Cable III
Inc., made a $750 million equity contribution to Charter Communications Holding
Company. Mr. Allen owns 100% of the equity of Vulcan Cable III Inc. Vulcan Cable
III Inc. has a 18.3% equity interest and no voting rights in Charter
Communications Holding Company.
 
     CHARTER INVESTMENT, INC.  Mr. Allen owns approximately 96.8% of the
outstanding stock of Charter Investment, Inc. The remaining equity is owned by
our founders, Jerald L. Kent, Barry L. Babcock and Howard L. Wood. Charter
Investment, Inc. has a 37.3% equity interest and no voting rights in Charter
Communications Holding Company.
 
     BRESNAN SELLERS.  Under the terms of the pending Bresnan acquisition, some
of the sellers have the right to receive a portion of their purchase price in
Charter Communications Holding Company common membership units rather than in
cash. They will be able to exchange these membership units for shares of Class A
common stock on a one-for-one basis. These equity holders as a group will have a
6.4% equity interest and no voting rights in Charter Communications Holding
Company.
 
     CHARTER COMMUNICATIONS HOLDING COMPANY, LLC.  Charter Communications
Holding Company is our direct 100% parent. We anticipate that Charter
Communications Holding Company will transfer the Bresnan cable systems to us
after the Bresnan acquisition.
 
     CHARTER COMMUNICATIONS HOLDINGS, LLC.  Charter Holdings is a co-issuer of
the notes and the March 1999 Charter Holdings notes. Charter Holdings owns 100%
of Charter Operating and Charter Capital.
 
     CHARTER COMMUNICATIONS HOLDINGS CAPITAL CORPORATION.  Charter Capital is a
wholly owned subsidiary of Charter Holdings and a co-issuer of the notes and the
March 1999 Charter Holdings notes.
 
     CHARTER COMPANIES.  These companies consist of the companies that own or
operate all of the cable systems currently owned by Charter Holdings. These
include all recent acquisitions, other than the Fanch, Falcon and Avalon
acquisitions, the systems obtained through the merger of Marcus Holdings with
Charter Holdings and the cable systems originally managed by Charter Investment,
Inc., namely Charter Communications Properties Holdings, LLC, CCA Group and
CharterComm Holdings. Historical financial information is presented separately
for these companies. Charter Operating, a direct subsidiary of Charter Holdings,
owns all of the operating subsidiaries and is the borrower under the Charter
Operating credit facilities. The Charter Companies also include the issuers of
the outstanding notes of Renaissance and Rifkin.
 
     FALCON COMPANIES.  These companies consist of the companies that own or
operate all of the cable systems acquired in the Falcon acquisition and Falcon
Cable Communications, which is the borrower under the Falcon credit facilities.
 
     FANCH COMPANIES.  These companies consist of the companies that own or
operate all of the cable systems acquired in the Fanch acquisition and CC VI
Operating, LLC, which is the borrower under the Fanch credit facilities.
 
     AVALON COMPANIES.  These companies consist of the companies that own or
operate all of the cable systems acquired in the Avalon acquisition, including
CC Michigan, LLC and CC New
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England, LLC, which are the borrowers under the Avalon credit facilities. CC V
Holdings, LLC (formerly Avalon Cable LLC) and CC V Holdings Finance, Inc.
(formerly Avalon Cable Finance Holdings, Inc.) are co-issuers of the Avalon
11.875% senior discount notes.
 
     BRESNAN COMPANIES.  These companies consist of the companies that own or
operate all of the cable systems to be acquired in the pending Bresnan
acquisition. One of these companies will be the borrower under the anticipated
Bresnan credit facilities to be arranged in connection with the Bresnan
acquisition.
 
ACQUISITIONS
 
     Our primary criterion in considering acquisition and swapping opportunities
is the financial return that we expect to ultimately realize. We consider each
acquisition in the context of our overall existing and planned operations,
focusing particularly on the impact on our size and scope and the ability to
reinforce our clustering strategy, either directly or through future swaps or
acquisitions. Other specific factors we consider in acquiring a cable system
are:
 
     - demographic profile of the market as well as the number of homes passed
       and customers within the system;
 
     - per customer revenues and operating cash flow and opportunities to
       increase these financial benchmarks;
 
     - proximity to our existing cable systems or the potential for developing
       new clusters of systems;
 
     - the technological state of such system; and
 
     - the level of competition within the local market.
 
     We believe that there are significant advantages in increasing the size and
scope of our operations, including:
 
     - improved economies of scale in management, marketing, customer service,
       billing and other administrative functions;
 
     - reduced costs for our cable plants and our infrastructure in general;
 
     - increased leverage for negotiating programming contracts; and
 
     - increased influence on the evolution of important new technologies
       affecting our business.
 
     We believe that as a result of our acquisition strategy and our systems
upgrade we will be well positioned to have cable systems with economies of scale
sufficient to allow us to execute our strategy to expand the array of products
and services that we offer to our customers as we implement our Wired World
vision. We will, however, continue to explore acquisitions and swaps of cable
systems that would further complement our existing cable systems.
 
     MERGER WITH MARCUS HOLDINGS.  On April 23, 1998, Mr. Allen acquired
approximately 99% of the non-voting economic interests in Marcus Cable Company,
L.L.C., and agreed to acquire the remaining interests in Marcus Cable. The
aggregate purchase price was approximately $1.4 billion, excluding $1.8 billion
in assumed debt. On February 22, 1999, Marcus Holdings was formed, and all of
Mr. Allen's interests in Marcus Cable were transferred to Marcus Holdings on
March 15, 1999. On March 31, 1999, Mr. Allen completed the acquisition of all
remaining interests of Marcus Cable. On April 7, 1999, the holding company
parent of the Marcus companies, Marcus Holdings, merged into Charter Holdings,
which was the surviving entity of the merger. The subsidiaries of Marcus
Holdings became subsidiaries of Charter Operating. During the period of
obtaining the requisite regulatory approvals for the transaction, the Marcus
systems came under common management with
 
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our subsidiaries in October 1998 pursuant to the terms of a management agreement
dated as of October 1998.
 
RECENTLY COMPLETED ACQUISITIONS
 
     RENAISSANCE.  In April 1999, one of our subsidiaries purchased Renaissance
Media Group LLC for approximately $459 million, consisting of $348 million in
cash and $111 million of assumed debt, consisting of the Renaissance notes. As a
result of our acquisition of Renaissance, we recently completed a tender offer
for this publicly held debt pursuant to the change of control provisions under
the Renaissance notes. Holders of notes representing 30% of the total
outstanding principal amount of the notes tendered their notes. See "Description
of Certain Indebtedness" for a description of the material restrictive covenants
and other terms under the Renaissance notes. Renaissance owns cable systems
located in Louisiana, Mississippi and Tennessee, has approximately 132,000
customers and is being operated as part of our Southern region. For the nine
months ended September 30, 1999, Renaissance had revenues of approximately $46.6
million. For the year ended December 31, 1998, Renaissance had revenues of
approximately $41.5 million. Approximately 48% of Renaissance's customers are
currently served by systems with at least 550 megahertz bandwidth capacity.
 
     AMERICAN CABLE.  In May 1999, one of our subsidiaries purchased American
Cable Entertainment, LLC for approximately $240 million. American Cable owns
cable systems located in California serving approximately 69,000 customers and
is being operated as part of our Western region. For the nine months ended
September 30, 1999, American Cable had revenues of approximately $27.5 million.
For the year ended December 31, 1998, American Cable had revenues of
approximately $15.7 million. None of the American Cable systems' customers is
currently served by systems with 550 megahertz bandwidth capacity or greater.
 
     GREATER MEDIA SYSTEMS.  In June 1999, one of Charter Holdings' subsidiaries
purchased certain cable systems of Greater Media Cablevision Inc. for
approximately $500 million. The Greater Media systems are located in
Massachusetts, have approximately 174,000 customers and are being operated as
part of our Northeast Region. For the nine months ended September 30, 1999, the
Greater Media systems had revenues of approximately $63.7 million. For the year
ended December 31, 1998, the Greater Media systems had revenues of approximately
$78.6 million. Approximately 49% of the Greater Media systems' customers are
currently served by systems with at least 550 megahertz bandwidth capacity.
 
     HELICON.  In July 1999, we acquired Helicon Partners I, L.P. and affiliates
for approximately $550 million, consisting of $410 million in cash, $115 million
of assumed debt, and $25 million in the form of preferred limited liability
company interest of Charter-Helicon LLC, a direct wholly owned subsidiary of
Charter Communications, LLC. The holders of the preferred interest have the
right to require Mr. Allen to purchase the interest until the fifth anniversary
of the closing of the Helicon acquisition. The preferred interest will be
redeemable at any time following the fifth anniversary of the Helicon
acquisition or upon a change of control, and it must be redeemed on the tenth
anniversary of the Helicon acquisition. Helicon owns cable systems located in
Alabama, Georgia, New Hampshire, North Carolina, West Virginia, South Carolina,
Tennessee, Pennsylvania, Louisiana and Vermont, and has approximately 172,000
customers. For the nine months ended September 30, 1999, Helicon had revenues of
approximately $63.8 million. For the year ended December 31, 1998, Helicon had
revenues of approximately $75.6 million. Approximately 79% of Helicon's
customers are currently served by systems with at least 550 megahertz bandwidth
capacity. The debt we assumed consisted of publicly held Helicon notes. On
November 1, 1999, we redeemed all of the Helicon notes at a price of 103% of the
total principal amount of the notes, plus accrued and unpaid interest to the
date of redemption.
 
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     RIFKIN.  In September 1999, Charter Operating acquired Rifkin Acquisition
Partners L.L.L.P. and InterLink Communications Partners, LLLP for a purchase
price of approximately $1.46 billion, consisting of $1.2 billion in cash, $133.3
million in equity and $125.0 million in assumed debt.
 
     In accordance with the terms of the agreements, certain sellers elected to
receive a total of approximately $133.3 million of the purchase price in the
form of Class A preferred membership units of Charter Communications Holding
Company. The preferred membership units were exchangeable at the time of Charter
Communications, Inc.'s initial public offering for shares of Charter
Communications, Inc.'s Class A common stock. Certain Rifkin sellers exchanged
approximately $130 million of the preferred membership units for shares of Class
A common stock.
 
     The debt assumed in the Rifkin acquisition consisted of the publicly held
Rifkin notes and a promissory note. In September 1999, we commenced an offer to
repurchase the Rifkin notes at a premium over their principal amount, plus
accrued interest. In connection with this offer to repurchase the Rifkin notes,
we obtained consents to amend the related indenture and offered to pay any
holder of notes that consented and tendered on or prior to October 1, 1999 an
additional $30 for each $1,000 principal amount of notes tendered. We
repurchased Rifkin notes with a total outstanding principal amount of $124.1
million for an aggregate purchase price of $140.6 million. In addition, we
repurchased the promissory note for $3.4 million.
 
     Rifkin owns cable systems primarily in Florida, Georgia, Illinois, Indiana,
Tennessee, Virginia and West Virginia, serving approximately 464,000 customers.
For the nine months ended September 30, 1999, Rifkin had revenues of
approximately $159.5 million. For the year ended December 31, 1998, Rifkin had
revenues of approximately $124.4 million. Approximately 30% of the Rifkin
systems' customers are currently served by systems with at least 550 megahertz
bandwidth capacity.
 
     INTERMEDIA SYSTEMS.  In October 1999, Charter Communications, LLC purchased
certain cable systems of InterMedia Capital Partners IV, L.P., InterMedia
Partners and their affiliates in exchange for approximately $873 million in cash
and certain of our cable systems. The InterMedia systems serve approximately
413,000 customers in North Carolina, South Carolina, Georgia and Tennessee. As
part of this transaction, we agreed to "swap" some of our non-strategic cable
systems serving approximately 142,000 customers located in Indiana, Montana,
Utah and northern Kentucky.
 
     At the closing, we retained a cable system located in Indiana serving
approximately 30,000 customers for which we were unable to obtain the necessary
regulatory approval. We agreed to retain ownership and bear the risk of loss
associated with this system until such approvals can be obtained. In the event
that the necessary regulatory approvals are not obtained by March 28, 2000,
InterMedia may elect to receive other properties from us mutually acceptable to
InterMedia and us.
 
     If we are unable to transfer to InterMedia satisfactory replacement
systems, we must pay InterMedia $88.2 million in cash. In addition, if we
transfer cash or property other than the retained Indiana system to InterMedia,
in certain circumstances, we must indemnify InterMedia and its affiliates for
50% of all taxes and associated costs incurred or arising out of any claim that
InterMedia suffered and tax losses to which it would not have been subject if we
had transferred the retained Indiana system in October 1999.
 
     This transaction after giving effect to the transfer of the retained
Indiana system results in a net increase of 271,000 customers concentrated in
our Southeast and Southern regions. Approximately 84% of these customers are
currently served by systems with at least 550 megahertz bandwidth capacity. For
the nine months ended September 30, 1999, the InterMedia systems had revenues of
approximately $152.8 million. For the year ended December 31, 1998, the
InterMedia systems had revenues of approximately $176.1 million.
 
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     FANCH.  In November 1999, Charter Communications Holding Company purchased
the partnership interests of Fanch Cablevision of Indiana, L.P., specified
assets of Cooney Cable Associates of Ohio, Limited Partnership, Fanch-JV2 Master
Limited Partnership, Mark Twain Cablevision Limited Partnership,
Fanch-Narragansett CSI Limited Partnership, North Texas Cablevision, Ltd., Post
Cablevision of Texas, Limited Partnership and Spring Green Communications, L.P.
and the stock of Tioga Cable Company, Inc., Cable Systems, Inc. and, indirectly,
Hornell Television Service, Inc. for a total combined purchase price of
approximately $2.4 billion in cash. These interests and assets have been
transferred to Charter Holdings or its subsidiaries. At the time of the closing
of the acquisition, we closed the Fanch credit facilities providing for
borrowings of up to $1.2 billion. We used $0.9 billion of this availability to
fund a portion of the Fanch purchase price.
 
     Under the Fanch purchase agreement, immediately prior to the closing of the
Fanch acquisition, certain assets of TWFanch-one Co. were distributed to Fanch
Cablevision of Indiana and Hornell Television Service, Inc. in exchange for all
of their partnership interests in TWFanch-one Co. In addition, immediately prior
to the closing of the Fanch acquisition, certain assets of TWFanch-two Co. were
distributed to Fanch-JV2 Master and Cooney Cable in exchange for all of their
partnership interests in TWFanch-two Co.
 
     The cable television systems acquired in this acquisition are located in
Colorado, Indiana, Kansas, Kentucky, Michigan, Mississippi, New Mexico,
Oklahoma, Texas and Wisconsin, and serve approximately 538,000 customers. For
the nine months ended September 30, 1999, these cable systems had revenues of
approximately $155.6 million. For the year ended December 31, 1998, these
systems had revenues of approximately $141.1 million. Approximately 19% of these
systems' customers are currently served by systems with at least 550 megahertz
bandwidth capacity.
 
     FALCON.  In November 1999, Charter Communications Holding Company purchased
partnership interests in Falcon Communications, L.P. from Falcon Holding Group,
L.P. and TCI Falcon Holdings, LLC, interests in a number of Falcon entities held
by Falcon Cable Trust and Falcon Holding Group, Inc., specified interests in
Enstar Communications Corporation and Enstar Finance Company, LLC held by Falcon
Holding Group, L.P., and specified interests in Adlink held by DHN Inc. These
interests were transferred to us on January 1, 2000.
 
     The purchase price for the transaction was approximately $3.5 billion,
consisting of cash, $550 million in membership units in Charter Communications
Holding Company issued to the Falcon sellers and $1.67 billion in assumed debt.
All of the membership units have been exchanged for Class A common stock of
Charter Communications, Inc. or have been put to Mr. Allen. Offers to repurchase
the Falcon debentures have been made. We intend to finance required repayments
of Falcon debentures with a portion of the proceeds of the sale of the original
notes.
 
     The Falcon cable systems are located in California and the Pacific
Northwest, Missouri, North Carolina, Alabama and Georgia and serve approximately
1,004,000 customers. For the nine months ended September 30, 1999, the cable
systems to be acquired had revenues of approximately $320.2 million. For the
year ended December 31, 1998, the cable systems had revenues of approximately
$307.6 million. As of September 30, 1999, $375 million total principal amount of
Falcon senior debentures and $15 million total principal amount of Falcon
subordinated notes were outstanding and the accreted value of the Falcon senior
discount debentures was $315.7 million. The subordinated notes were repurchased
in connection with the Falcon acquisition. In addition, $975.8 million was
outstanding under the Falcon credit facilities. Approximately 7% of the
customers of the systems to be acquired are currently served by systems with at
least 550 megahertz bandwidth capacity.
 
     AVALON.  In November 1999, Charter Communications Holding Company purchased
directly and indirectly all of the equity interests of Avalon Cable LLC from
Avalon Cable Holdings LLC and Avalon Investors, L.L.C. for approximately $576.9
million in cash and $268.1 million in assumed
 
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notes. These interests were transferred to us on January 1, 2000. Avalon Cable
operates primarily in Michigan and New England and serves approximately 261,000
customers. For the nine months ended September 30, 1999, Avalon Cable had
revenues of approximately $81.6 million. For the year ended December 31, 1998,
Avalon Cable had revenues of approximately $18.2 million. As of September 30,
1999, there was $150.0 million principal amount outstanding and $121.6 million
accreted value under the Avalon 9.375% notes and the Avalon 11.875% notes,
respectively. We have made offers to repurchase the Avalon 9.375% notes and the
Avalon 11.875% notes. Because the Avalon 11.875% notes are trading above the
change of control repurchase price, we do not expect these notes to be put to
us. We intend to finance required payments of Avalon 9.375% notes with a portion
of the proceeds of the sale of the original notes. Approximately 15% of the
Avalon systems' customers are currently served by systems with at least 550
megahertz bandwidth capacity.
 
     OTHER ACQUISITIONS.  One of our subsidiaries acquired Vista Broadband
Communications, LLC in July 1999 and acquired a cable system of Cable Satellite
of South Miami, Inc. in August 1999. These cable systems are located in Georgia
and southern Florida and serve a total of approximately 36,000 customers. The
total purchase price for these other acquisitions was approximately $148 million
in cash. For the nine months ended September 30, 1999, the systems acquired in
connection with these other acquisitions had revenues of approximately $13.7
million. For the year ended December 31, 1998, these systems had revenues of
approximately $15.8 million. Approximately 76% of the Vista and South Miami
systems' customers are currently served by 550 megahertz bandwidth capacity.
 
PENDING BRESNAN ACQUISITION
 
     In June 1999, Charter Communications Holding Company entered into an
agreement to purchase Bresnan Communications Company Limited Partnership for a
total purchase price of approximately $3.1 billion. For a discussion of the
funding requirements for the Bresnan acquisition, see "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
 
     The equity portion of the purchase price will be membership units in
Charter Communications Holding Company equal to 6.4% of the total membership
units in Charter Communications Holding Company. This percentage interest is
calculated based on a number of assumptions about Charter Communications Holding
Company and pending acquisitions, including debt levels, the value of pending
acquisition targets and the enterprise value of Charter Communications Holding
Company. Accordingly, this percentage interest will likely change at or prior to
the closing of the Bresnan acquisition.
 
     The Bresnan cable systems to be acquired in this acquisition are located in
Michigan, Minnesota, Wisconsin and Nebraska and serve approximately 687,000
customers. For the nine months ended September 30, 1999, the Bresnan cable
systems we are buying had revenues of approximately $209.7 million. For the year
ended December 31, 1998, these systems had revenues of approximately $262.0
million. Approximately 57% of these systems' customers are currently served by
systems with at least 550 megahertz bandwidth capacity. Following regulatory
approvals, we anticipate that this transaction will close during the first
quarter of 2000. The agreement may be terminated if the acquisition has not been
completed on or prior to May 1, 2000.
 
PENDING SWAP TRANSACTION
 
     On December 1, 1999, Charter Communications, Inc. entered into a
non-binding letter of intent with AT&T Broadband & Internet Services to exchange
certain cable systems. The contemplated Swap Transaction would involve cable
systems owned by AT&T located in municipalities in Alabama, Georgia, Illinois
and Missouri serving approximately 701,000 subscribers and certain of our cable
systems located in municipalities in California, Connecticut, Kentucky,
Massachusetts, Texas
 
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and Tennessee serving approximately 631,000 subscribers. If the Swap Transaction
is completed, subsidiaries of Charter Holdings will acquire the AT&T systems
being exchanged. The Swap Transaction will allow us to improve the clustering of
our cable systems in certain key markets. For example, upon completion of the
Swap Transaction we will serve approximately 800,000 customers in St. Louis and
the surrounding areas of Missouri and Illinois. We believe that improved
clustering will allow us to gain operating efficiencies and economies of scale,
as well as to accelerate the roll-out of enhanced broadband technology and
services to more customers. The agreed value of the AT&T systems is $2.5 billion
and the agreed value of the Charter systems is $2.4 billion. As part of the Swap
Transaction, we will be required to pay AT&T approximately $108 million in cash.
This represents the difference in the agreed values of the systems being
exchanged. The Swap Transaction is subject to the negotiation and execution of a
definitive exchange agreement, regulatory approvals and other conditions typical
in transactions of this type. We cannot assure you that the Swap Transaction
will be completed.
 
PRODUCTS AND SERVICES
 
     We offer our customers a full array of traditional cable television
services and programming and we have begun to offer new and advanced high
bandwidth services such as high-speed Internet access. We plan to continually
enhance and upgrade these services, including adding new programming and other
telecommunications services, and will continue to position cable television as
an essential service.
 
     TRADITIONAL CABLE TELEVISION SERVICES.  As of September 30, 1999,
approximately 87% of our customers subscribe to both "basic" and "expanded
basic" service and generally receive a line-up of between 33 and 85 channels of
television programming, depending on the bandwidth capacity of the system.
Customers who pay additional amounts can also subscribe for additional channels,
either individually or in packages of several channels, as add-ons to the basic
channels. As of September 30, 1999, more than 25% of our customers subscribe for
premium channels, with additional customers subscribing for other special add-on
packages. We tailor both our basic channel line-up and our additional channel
offerings to each system according to demographics, programming preferences,
competition, price sensitivity and local regulation.
 
     Our traditional cable television service offerings include the following:
 
     - BASIC CABLE.  All of our customers receive basic cable services, which
       generally consist of local broadcast television, local community
       programming, including governmental and public access, and limited
       satellite programming. For the nine months ended September 30, 1999, the
       average monthly fee was $12.57 for basic service.
 
     - EXPANDED BASIC CABLE.  This expanded tier includes a group of
       satellite-delivered or non-broadcast channels, such as Entertainment and
       Sports Programming Network (ESPN), Cable News Network (CNN) and Lifetime
       Television, in addition to the basic channel line-up. For the nine months
       ended September 30, 1999, the average monthly fee was $16.08 for expanded
       basic service.
 
     - PREMIUM CHANNELS.  These channels provide unedited, commercial-free
       movies, sports and other special event entertainment programming. Home
       Box Office, Cinemax and Showtime are typical examples. We offer
       subscriptions to these channels either individually or in packages. For
       the nine months ended September 30, 1999, the average monthly fee was
       $6.28 per premium subscription.
 
     - PAY-PER-VIEW.  These channels allow customers to pay to view a single
       showing of a recently released movie, a one-time special sporting event
       or music concerts on an unedited, commercial-free basis. We currently
       charge a fee that ranges from $2.95 to $8.95 for movies.
 
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<PAGE>   107
 
       For special events, such as championship boxing matches, we have charged
       a fee of up to $54.95.
 
     We have employed a variety of targeted marketing techniques to attract new
customers by focusing on delivering value, choice, convenience and quality. We
employ direct mail and telemarketing, using demographic "cluster codes" to
target specific messages to target audiences. In many of our systems, we offer
discounts to customers who purchase premium services on a limited trial basis in
order to encourage a higher level of service subscription. We also have a
coordinated strategy for retaining customers that includes televised retention
advertising to reinforce the decision to subscribe and to encourage customers to
purchase higher service levels.
 
     NEW PRODUCTS AND SERVICES.  A variety of emerging technologies and the
rapid growth of Internet usage have presented us with substantial opportunities
to provide new or expanded products and services to our customers and to expand
our sources of revenue. The desire for such new technologies and the use of the
Internet by businesses in particular have triggered a significant increase in
our commercial market penetration. As a result, we are in the process of
introducing a variety of new or expanded products and services beyond the
traditional offerings of analog television programming for the benefit of both
our residential and commercial customers. These new products and services
include:
 
     - digital television and its related enhancements;
 
     - high-speed Internet access, through television set-top converter boxes,
       cable modems installed in personal computers and traditional telephone
       Internet access;
 
     - interactive services, such as Wink, which adds interactivity and
       electronic commerce opportunities to traditional programming and
       advertising; and
 
     - telephony and data transmission services, which are private network
       services interconnecting locations for a customer.
 
     Cable television's high bandwidth allows cable to be well positioned to
deliver a multitude of channels and/or new and advanced products and services.
We believe that this high bandwidth will be a key factor in the successful
delivery of these products and services.
 
     DIGITAL TELEVISION.  As part of upgrading our systems, we are installing
headend equipment capable of delivering digitally encoded cable transmissions to
a two-way digital-capable set-top converter box in the customer's home. This
digital connection offers significant advantages. For example, we can compress
the digital signal to allow the transmission of up to twelve digital channels in
the bandwidth normally used by one analog channel. This will allow us to
increase both programming and service offerings, including near video-on-demand
for pay-per-view customers. We expect to increase the amount of services
purchased by our customers.
 
     Digital services customers may receive a mix of additional television
programming, an electronic program guide and up to 40 channels of digital music.
The additional programming falls into four categories which are targeted toward
specific markets:
 
     - additional basic channels, which are marketed in systems primarily
       serving rural communities;
 
     - additional premium channels, which are marketed in systems serving both
       rural and urban communities;
 
     - "multiplexes" of premium channels to which a customer previously
       subscribed, such as multiple channels of HBO or Showtime, which are
       varied as to time of broadcast or varied based on programming content
       theme which are marketed in systems serving both rural and urban
       communities; and
 
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<PAGE>   108
 
     - additional pay-per-view programming, such as more pay-per-view options
       and/or frequent showings of the most popular films to provide near
       video-on-demand, which are more heavily marketed in systems primarily
       serving both rural and urban communities.
 
     As part of our current pricing strategy for digital services, we have
established a retail rate of $4.95 to $8.95 per month for the digital set-top
converter and the delivery of "multiplexes" of premium services, additional
pay-per-view channels, digital music and an electronic programming guide. Some
of our systems also offer additional basic and expanded basic tiers of service.
These tiers of services retail for $6.95 per month. As of September 30, 1999,
more than 28,600 of our customers subscribed to the digital service offered by
21 of our cable systems, which served approximately 480,000 basic cable
customers. For the six-month period ended October 30, 1999, revenue per customer
for our digital service was approximately $20.76 and cash flow per customer was
$11.21. As of December 31, 1999, approximately 2.4 million of our customers were
served by cable systems capable of delivering digital services.
 
     INTERNET ACCESS.  We currently provide Internet access to our customers by
two principal means:
 
     - via cable modems attached to personal computers, either directly or
       through an outsourcing contract with an Internet service provider; and
 
     - through television access, via a service such as WorldGate.
 
We also provide Internet access in some markets through traditional dial-up
telephone modems, using a third party service provider.
 
     The principal advantage of cable Internet connections is the high speed of
data transfer over a cable system. We currently offer these services to our
residential customers over coaxial cable at speeds that can range up to
approximately 50 times the speed of a conventional telephone modem. Furthermore,
a two-way communication cable system using a hybrid fiber optic/coaxial
structure can support the entire connection at cable modem speeds without the
need for a separate telephone line. If the cable system only supports one-way
signals from the headend to the customer, the customer must use a separate
telephone line in order to send signals to the provider, although such customer
still receives the benefit of high speed cable access when downloading
information, which is the primary reason for using cable as an Internet
connection. In addition to Internet access over our traditional coaxial system,
we also provide our commercial customers fiber optic cable access at a price
that we believe is less than the price offered by the telephone companies.
 
     In the past, cable Internet connections have provided customers with widely
varying access speeds because each customer accessed the Internet by sending and
receiving data through a node. Users connecting simultaneously through a single
node share the bandwidth of that node, so that users' connection speeds may
diminish as additional users connect through the same node. To induce users to
switch to our Internet services, however, we guarantee our cable modem customers
the minimum access speed selected from several speed options we offer. We also
provide higher guaranteed access speeds for customers willing to pay an
additional cost. In order to meet these guarantees, we are increasing the
bandwidth of our systems and "splitting" nodes easily and cost-effectively to
reduce the number of customers per node.
 
     - CABLE MODEM-BASED INTERNET ACCESS.  We have deployed cable modem-based
Internet access services in 46 markets including: Los Angeles, California; St.
Louis, Missouri; and Fort Worth, Texas.
 
     As of September 30, 1999, we provided Internet access service to
approximately 27,225 homes and 250 commercial customers. The following table
indicates the historical and projected availability, pro forma for our recent
and pending acquisitions, of cable modem Internet access services in our
 
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<PAGE>   109
 
systems, as of the dates indicated. Only a small percentage of the homes passed
currently subscribe to these services.
 

<TABLE>
<CAPTION>
                                                                    HOMES PASSED BY
                                                                 ADVANCED DATA SERVICES
                                                           ----------------------------------
                                                           SEPTEMBER 30,
                                                               1999         DECEMBER 31, 1999
                                                           -------------    -----------------
                                                             (ACTUAL)          (PROJECTED)
<S>                                                        <C>              <C>
HIGH SPEED INTERNET ACCESS VIA CABLE MODEMS:
High Speed Access .......................................      721,300          1,165,000
  EarthLink/Charter Pipeline.............................      572,700            708,700
  Excite@Home............................................      233,400            932,600
  Convergence.com........................................      263,200            263,200
  In-House/Other.........................................       79,700            459,000
                                                             ---------         ----------
     Total cable modems..................................    1,870,300          3,528,500
                                                             =========         ==========
  Internet access via WorldGate..........................      348,600            428,800
                                                             =========         ==========
</TABLE>

 
     We have an agreement with EarthLink Network, Inc., an independent Internet
service provider, to provide as a label service Charter Pipeline(TM), which is a
cable modem-based, high-speed Internet access service we offer. EarthLink and
MindSpring Enterprises, Inc. have announced plans to merge by next spring
creating the second-largest Internet service provider (ISP) in the United
States. We currently charge a monthly usage fee of between $24.95 and $39.95.
Our customers have the option to lease a cable modem for $10 to $15 a month or
to purchase a modem for between $300 and $400. As of September 30, 1999, we
offered EarthLink Internet access to approximately 573,000 of our homes passed
and have approximately 8,500 customers.
 
     We have a relationship with High Speed Access to offer Internet access in
some of our smaller systems. High Speed Access also provides Internet access
services to our customers under the Charter Pipeline brand name. Although the
Internet access service is provided by High Speed Access, the Internet "domain
name" of our customer's e-mail address and web site, if any, is "Charter.net,"
allowing the customer to switch or expand to our other Internet services without
a change of e-mail address. High Speed Access provides three different tiers of
service to us. The base tier is similar to our arrangements with EarthLink and
Excite@Home. The turnkey tier bears all capital, operating and marketing costs
of providing the service, and seeks to build economies of scale in our smaller
systems that we cannot efficiently build ourselves by simultaneously contracting
to provide the same services to other small geographically contiguous systems.
The third tier allows for a la carte selection of services between the base tier
and the turnkey tier. As of September 30, 1999, High Speed Access offered
Internet access to approximately 721,000 of our homes passed, and approximately
8,600 customers have signed up for the service. During the last three months of
1999, we, jointly with High Speed Access, launched service in an additional 13
systems, covering approximately 432,000 additional homes passed. Vulcan
Ventures, Inc., a company controlled by Mr. Allen, has an equity investment in
High Speed Access. See "Certain Relationships and Related Transactions."
 
     We have a revenue sharing agreement with Excite@Home, under which
Excite@Home currently provides Internet service to customers in our systems
serving Fort Worth, University Park and Highland Park, Texas. The Excite@Home
network provides high-speed, cable modem-based Internet access using our cable
infrastructure. As of September 30, 1999, we offered Excite@Home Internet
service to approximately 233,000 of our homes passed and had approximately 4,700
customers.
 
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<PAGE>   110
 
     We also have services agreements with Convergence.com, under which
Convergence.com currently provides Internet service to customers in systems
acquired from Rifkin. The Convergence.com network provides high-speed, cable
modem-based Internet access using our cable infrastructure. As of September 30,
1999, we offered Convergence.com service to approximately 263,000 homes passed
and had approximately 5,400 customers.
 
     We actively market our cable modem service to businesses in each one of our
systems where we have the capability to offer such service. Our marketing
efforts are often door-to-door, and we have established a separate division
whose function is to make businesses aware that this type of Internet access is
available through us. We also provide several virtual local area networks for
municipal and educational facilities in our Los Angeles cluster including Cal
Tech, the City of Pasadena and the City of West Covina.
 
     - TV-BASED INTERNET ACCESS.  We have a non-exclusive agreement with
WorldGate to provide its TV-based e-mail and Internet access to our cable
customers. WorldGate's technology is only available to cable systems with
two-way capability. WorldGate offers easy, low-cost Internet access to customers
at connection speeds ranging up to 128 kilobits per second. For a monthly fee,
we provide our customers with e-mail and Internet access that does not require
the use of a PC, an existing or additional telephone line, or any additional
equipment. Instead, the customer accesses the Internet through the set-top box,
which the customer already has on his television set, and a wireless keyboard,
that is provided with the service and which interfaces with the box. WorldGate
works on advanced analog and digital converters and, therefore, can be installed
utilizing advanced analog converters already deployed. In contrast, other
converter-based, non-PC Internet access products require a digital platform and
a digital converter prior to installation.
 
     Customers who opt for television-based Internet access are generally
first-time users who prefer this more user-friendly interface. Of these users,
39% use WorldGate at least once a day, and 66% use it at least once a week.
Although the WorldGate service bears the WorldGate brand name, the Internet
domain names of the customers who use this service is "Charter.net." This allows
the customers to switch or expand to our other Internet services without a
change of e-mail address.
 
     We first offered WorldGate to customers on the upgraded portion of our
systems in St. Louis in April 1998. We are also currently offering this service
in five other systems. In addition, we plan to introduce it in four additional
systems during 2000. Charter Investment, Inc. and a subsidiary of Charter
Holdings own a minority interest in WorldGate. Charter Investment, Inc. will
transfer its ownership interests to Charter Communications Holding Company. See
"Certain Relationships and Related Transactions." As of September 30, 1999, we
provided WorldGate Internet service to approximately 6,100 customers.
 
     - INTERNET PORTAL SERVICES.  On October 1, 1999, Charter Communications
Holding Company, Vulcan Ventures, an entity controlled by Mr. Allen, and Go2Net,
Inc. entered into a joint venture to form Broadband Partners, LLC. Broadband
will provide access to the Internet through a "portal" to our current and future
subscribers and potentially to other providers of high speed Internet access. A
portal is an Internet web site that serves as a user's initial point of entry to
the World Wide Web. By offering selected content, services and links to other
web sites, a portal guides and directs users through the World Wide Web and
generates revenues from advertising on its own web pages and by sharing revenues
generated by linked or featured web sites.
 
     Revenue splits and other economic terms in this arrangement will be at
least as favorable to us as terms between Broadband and any other parties.
Charter Communications Holding Company has agreed to use Broadband's portal
services exclusively for an initial six-year period that will begin when the
portal services are launched, except that Charter Communications Holding
Company's existing agreements with other Internet high speed portal services and
High Speed Access may run
 
                                       107

<PAGE>   111
 
for their current term to the extent that such agreements do not allow for the
carriage of content provided by Charter Communications Holding Company or Vulcan
Ventures. The joint venture is for an initial 25-year term, subject to
successive five-year renewals by mutual consent. Vulcan Ventures will own 55.2%,
Charter Communications Holding Company will own 24.9% and Go2Net will own 19.9%
of Broadband's membership interests. Vulcan Ventures will have voting control
over the Broadband entity. Broadband's board of directors will consist of three
directors designated by Vulcan Ventures and one by each of Charter
Communications Holding Company and Go2Net.
 
     Each of Broadband's investors will be obligated to provide their pro rata
share of funding for Broadband's operations and capital expenditures, except
that Vulcan Ventures will fund our portion of Broadband's expenses for the first
four years and will fund Go2Net's portion of Broadband's expenses to the extent
Go2Net's portion exceeds budget for the first four years.
 
     We believe that our participation in the Broadband joint venture will
facilitate the delivery of a broad array of Internet products and services to
our customers over the television set's digital set-top box and through the
personal computer.
 
     The Broadband joint venture has not yet established a timetable for
launching its portal services. We do not anticipate that our participation in
the joint venture will have a material adverse impact on our financial condition
or results of operations for the foreseeable future.
 
     WINK-ENHANCED PROGRAMMING.  We have formed a relationship with Wink, which
sells technology to embed interactive features, such as additional information
and statistics about a program or the option to order an advertised product,
into programming and advertisements. A customer with a Wink-enabled set-top box
and a Wink-enabled cable provider sees an icon flash on the screen when
additional Wink features are available to enhance a program or advertisement. By
pressing the select button on a standard remote control, a viewer of a
Wink-enhanced program is able to access additional information regarding such
program, including, for example, information on prior episodes or the program's
characters. A viewer watching an advertisement would be able to access
additional information regarding the advertised product and may also be able to
utilize the two-way transmission features to order a product. We have bundled
Wink's services with our traditional cable services in both our advanced analog
and digital platforms. Wink's services are provided free of charge. A company
controlled by Mr. Allen has made an equity investment in Wink. See "Certain
Relationships and Related Transactions."
 
     Various programming networks, including CNN, NBC, ESPN, HBO, Showtime,
Lifetime, VH1, the Weather Channel, and Nickelodeon, are currently producing
over 1,000 hours of Wink-enhanced programming per week. Under certain
revenue-sharing arrangements, we will modify our headend technology to allow
Wink-enabled programming to be offered on our systems. Each time one of our
customers uses Wink to request certain additional information or order an
advertised product, we receive fees from Wink.
 
     TELEPHONE SERVICES.  We expect to be able to offer cable telephony services
in the near future using our systems' direct, two-way connections to homes and
other buildings. We are exploring technologies using Internet protocol
telephony, as well as traditional switching technologies that are currently
available, to transmit digital voice signals over our systems. AT&T and other
telephone companies have already begun to pursue strategic partnering and other
programs which make it attractive for us to acquire and develop this alternative
Internet protocol technology. For the last two years, we have sold telephony
services as a competitive access provider in the state of Wisconsin through one
of our subsidiaries, and are currently looking to expand our services as a
competitive access provider into other states.
 
     JOINT VENTURE WITH RCN CORPORATION.  On October 1, 1999, Charter
Communications Holding Company and RCN Corporation entered into a binding term
sheet containing the principal terms of a
 
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<PAGE>   112
 
non-exclusive joint venture to provide a broad range of telephony services to
the customers of Charter Communications Holding Company's subsidiaries in its
Los Angeles franchise territory. RCN is engaged in the businesses of bundling
residential voice, video and Internet access operations, cable operations and
certain long distance telephony operations. RCN is developing advanced fiber
optic networks to provide a wide range of telecommunications services, including
long distance telephone, video programming and data services, such as high-speed
Internet access.
 
     Charter Communications Holding Company will provide access to its
subsidiaries' Los Angeles subscriber base and will provide the capital necessary
to develop telephony capability in Los Angeles. In addition, Charter
Communications Holding Company will provide the necessary personnel to oversee
and manage the telephony services. RCN will provide the necessary personnel and
support services to develop and implement telephony services to be provided by
Charter Communications Holding Company. Charter Communications Holding Company
will pay RCN's fees at rates consistent with industry market compensation.
Charter Communications Holding Company will have all rights to the telephony
business and assets and will receive all revenues derived from the telephony
business unless the parties expand RCN's role by mutual agreement. We believe
that our telephony joint venture, together with Mr. Allen's investment in RCN,
may allow us to take advantage of RCN's telephony experience as we deliver
telephone services to our customers, although we cannot assure you that we will
realize anticipated advantages.
 
     The term sheet contains only the principal terms of this joint venture and
provides that the parties will enter into definitive agreements, which will
contain, among other terms, details of the compensation to be received by RCN.
To date, we and RCN have had only preliminary discussions regarding specific
operational matters and have not determined a timetable for the commencement of
services by the joint venture. We do not anticipate that this joint venture will
have a material impact on our financial condition or results of operations in
the foreseeable future.
 
     MISCELLANEOUS SERVICES.  We also offer paging services to our customers in
certain markets. As of September 30, 1999, we had approximately 9,400 paging
customers. We also lease our fiber-optic cable plant and equipment to commercial
and non-commercial users of data and voice telecommunications services.
 
OUR SYSTEMS
 
     As of September 30, 1999, without giving effect to acquisitions since that
date, our cable systems consisted of approximately 93,200 miles of coaxial and
approximately 11,100 sheath miles of fiber optic cable passing approximately 5.5
million households and serving approximately 3.4 million customers. Coaxial
cable is a type of cable used for broadband data and cable systems. This type of
cable has excellent broadband frequency characteristics, noise, immunity and
physical durability. The cable is connected from each node to individual homes
or buildings. A node is a single connection to a cable system's main
high-capacity fiber optic cable that is shared by a number of customers. A
sheath mile is the actual length of cable in miles. Fiber optic cable is a
communication medium that uses hair-thin glass fibers to transmit signals over
long distances with minimum signal loss or distortion. As of September 30, 1999,
without giving effect to acquisitions since that date, approximately 53% of our
customers were served by systems with at least 550 megahertz bandwidth capacity,
approximately 30% had at least 750 megahertz bandwidth capacity and
approximately 31% were served by systems capable of providing two-way
interactive communication capability. Such two-way interactive communication
capability includes two-way Internet connections, services provided by Wink, and
interactive program guides.
 
     CORPORATE MANAGEMENT.  Pursuant to a services agreement between Charter
Communications, Inc. and Charter Investment, Inc., Charter Investment, Inc.
provides the necessary personnel and services to manage Charter Communications
Holding Company, Charter Holdings and their
 
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<PAGE>   113
 
subsidiaries. These personnel and services are provided to Charter
Communications, Inc. on a cost reimbursement basis. Management of Charter
Communications, Inc. and Charter Investment, Inc. consists of approximately 275
people led by Charter Communications chief executive officer Jerald L. Kent.
They are responsible for coordinating and overseeing our operations, including
certain critical functions, such as marketing and engineering, that are
conducted by personnel at the regional and local system level. The corporate
office also performs certain financial control functions such as accounting,
finance and acquisitions, payroll and benefit administration, internal audit,
purchasing and programming contract administration on a centralized basis.
 
     OPERATING REGIONS.  To manage and operate our systems, we have established
two divisions that contain a total of twelve operating regions. Each of the two
divisions is managed by a Senior Vice President who reports directly to Mr. Kent
and is responsible for overall supervision of the operating regions within the
division. Each region is managed by a team consisting of a Senior Vice President
or a Vice President, supported by operational, marketing and engineering
personnel. Within each region, certain groups of cable systems are further
organized into clusters. We believe that much of our success is attributable to
our operating philosophy which emphasizes decentralized management, with
decisions being made as close to the customer as possible.
 
     The Western Division is comprised of the following regions: Central, North
Central, MetroPlex (Dallas/Fort Worth), Southern California, Northwest, Michigan
and National. The Eastern Division is comprised of the following regions:
Southeast, Mid-South, Northeast, Gulf Coast and Mid-Atlantic.
 
     The following table provides an overview of customer data for each of our
operating regions as of September 30, 1999 giving effect to acquisitions closed
since September 30, 1999, the recent transfer to Charter Holdings of the Fanch,
Falcon and Avalon cable systems, the Bresnan acquisition and transfer and the
Swap Transaction, after which our systems will pass approximately 9.7 million
homes serving approximately 6.3 million customers.
 
                                 CUSTOMER DATA
                            AS OF SEPTEMBER 30, 1999
 

<TABLE>
<CAPTION>
                              CHARTER        RECENT                      BRESNAN                      SWAP
                             HOLDINGS    ACQUISITIONS(a)   SUBTOTAL    ACQUISITION   SUBTOTAL    TRANSACTION(b)     TOTAL
                             ---------   ---------------   ---------   -----------   ---------   --------------   ---------
<S>                          <C>         <C>               <C>         <C>           <C>         <C>              <C>
WESTERN DIVISION:
Central....................   435,840           6,280       442,120           --      442,120        390,390        832,510
  North Central............   405,710          14,150       419,860      371,670      791,530             --        791,530
  MetroPlex................   189,340              --       189,340           --      189,340       (189,340)            --
  Southern California......   585,280         166,800       752,080           --      752,080        (49,530)       702,550
  Northwest................        --         388,670       388,670           --      388,670             --        388,670
  Michigan.................        --         302,710       302,710      254,500      557,210             --        557,210
  National.................    74,360         110,370       184,730       61,060      245,790        (14,500)       231,290
                             ---------      ---------      ---------     -------     ---------      --------      ---------
                             1,690,530        988,980      2,679,510     687,230     3,366,740       137,020      3,503,760
EASTERN DIVISION:
  Southeast................   581,740         382,390       964,130           --      964,130        150,630      1,114,760
  Mid-South................   306,370         232,030       538,400           --      538,400        (50,570)       487,830
  Northeast................   285,150          41,420       326,570           --      326,570       (326,570)            --
  Gulf Coast...............   362,000          69,100       431,100           --      431,100        160,470        591,570
  Mid-Atlantic.............   199,860         359,890       559,750           --      559,750             --        559,750
                             ---------      ---------      ---------     -------     ---------      --------      ---------
                             1,735,120      1,084,830      2,819,950          --     2,819,950       (66,040)     2,753,910
                             ---------      ---------      ---------     -------     ---------      --------      ---------
Total......................  3,425,650      2,073,810      5,499,460     687,230     6,186,690        70,980      6,257,670
                             =========      =========      =========     =======     =========      ========      =========
</TABLE>

 
---------------
 
(a) Represents the InterMedia, Avalon, Falcon and Fanch cable systems.
 
(b) The Swap Transaction is the subject of a non-binding letter of intent. We
    cannot assure you that this transaction will be completed.
 
                                       110

<PAGE>   114
 
     The following discussion provides a description of our operating regions as
of September 30, 1999, giving effect to acquisitions closed since that date, the
recent transfer to Charter Holdings of the Fanch, Falcon and Avalon cable
systems and the Bresnan acquisition and transfer.
 
     CENTRAL REGION.  The Central region consists of cable systems serving
approximately 442,000 customers of which approximately 250,000 customers reside
in and around St. Louis County or in adjacent areas in Illinois. The remaining
approximate 192,000 customers reside in small to medium-sized communities in
Missouri, Illinois and Indiana. If the pending Swap Transaction with AT&T is
completed, we would serve more than 800,000 customers in the Central region and
approximately 525,000 customers in the St. Louis area.
 
     NORTH CENTRAL REGION.  The North Central region consists of cable systems
serving approximately 792,000 customers located throughout the states of
Wisconsin and Minnesota. Approximately 539,000 and 253,000 customers reside in
the states of Wisconsin and Minnesota, respectively. Within the state of
Wisconsin, the two largest operating clusters are located in and around Madison,
serving approximately 225,000 customers, and Fond du Lac, serving approximately
107,000 customers. Within the state of Minnesota, the two largest operating
clusters are located in and around Rochester, serving approximately 141,000
customers, and St. Cloud, serving approximately 62,000 customers.
 
     METROPLEX REGION.  The MetroPlex region consists of cable systems serving
approximately 189,000 customers of which approximately 132,000 are served by the
Fort Worth system. If the pending Swap Transaction with AT&T is completed, we
will no longer serve the Metroplex region.
 
     SOUTHERN CALIFORNIA REGION.  The Southern California region consists of
cable systems serving approximately 752,000 customers located entirely in the
state of California, with approximately 510,000 customers located in the Los
Angeles metropolitan area. These customers reside primarily in the communities
of Pasadena, Alhambra, Glendale, Long Beach and Riverside. We also have
approximately 193,000 customers in central California, principally located in
the communities of San Luis Obispo, West Sacramento and Turlock, and
approximately 50,000 customers in northern California that will be "swapped" to
AT&T.
 
     NORTHWEST REGION.  The Northwest region was formed in connection with the
recent Fanch and Falcon acquisitions. After these acquisitions, the Northwest
region consists of cable systems serving approximately 389,000 customers
residing in the states of Oregon, Washington, Idaho, Utah and California. The
two largest operating clusters in the Northwest region are located in and around
Kennewick, Washington, serving approximately 85,000 customers and Medford,
Oregon, serving approximately 72,000 customers.
 
     MICHIGAN REGION.  The Michigan region was formed in connection with the
recent Fanch, Avalon and Falcon acquisitions. After these acquisitions and the
pending Bresnan acquisition, the Michigan region consists of cable systems
serving approximately 557,000 customers. The largest operating cluster in the
Michigan region is located in and around Bay City, Michigan serving
approximately 134,000 customers.
 
     NATIONAL REGION.  The National region consists of cable systems serving
approximately 246,000 customers residing in small to medium-sized communities in
the states of Nebraska, Texas, New Mexico, North Dakota, Kansas, Colorado and
Oklahoma. If the pending Swap Transaction is completed, we will swap
approximately 14,500 customers to AT&T.
 
     SOUTHEAST REGION.  The Southeast region consists of cable systems serving
approximately 964,000 customers residing primarily in small to medium-sized
communities in North Carolina, South Carolina, Georgia and Florida. There are
significant clusters of cable systems in and around the cities and counties of
Greenville/Spartanburg, South Carolina; Hickory and Asheville, North Carolina;
and
 
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<PAGE>   115
 
Atlanta, Georgia. If the pending Swap Transaction with AT&T is completed, we
will acquire approximately 151,000 customers in this region.
 
     MID-SOUTH REGION.  The Mid-South region consists of cable systems serving
approximately 538,000 customers residing in the states of Tennessee and
Kentucky. The Mid-South region has a significant cluster of cable systems in and
around Kingsport, Tennessee serving approximately 123,000 customers. A portion
of the Mid-South cable systems with approximately 51,000 customers will be
"swapped" if the pending Swap Transaction with AT&T is completed.
 
     NORTHEAST REGION.  The Northeast region consists of cable systems serving
approximately 327,000 customers residing in the states of Connecticut and
Massachusetts. These systems serve the communities of Newtown and Willimantic,
Connecticut, and areas in and around Pepperell, Massachusetts. If the pending
Swap Transaction with AT&T is completed, we will no longer serve the Northeast
region.
 
     GULF COAST REGION.  The Gulf Coast region was formed in connection with the
Fanch and Falcon acquisitions. After these recent acquisitions and the Swap
Transaction with AT&T, the Gulf Coast region will consist of cable systems
serving approximately 592,000 customers residing in the states of Louisiana,
Mississippi and Alabama. Within the state of Alabama, the two largest operating
clusters are located in and around Birmingham, serving approximately 175,000
customers, and Montgomery, serving approximately 113,000 customers.
 
     MID-ATLANTIC REGION.  The Mid-Atlantic region consists of cable systems
serving approximately 560,000 customers residing in the states of Virginia, West
Virginia, Vermont, Ohio, Pennsylvania, New York and Maryland. The Mid-Atlantic
region has significant clusters of cable systems in and around the cities of
Charleston, West Virginia, serving approximately 190,000 customers, and
Johnstown, Pennsylvania, serving approximately 77,000 customers.
 
     PLANT AND TECHNOLOGY OVERVIEW.  We have engaged in an aggressive program to
upgrade our existing cable plant over the next three years. For the period from
January 1, 2000 to December 31, 2002, we plan to spend approximately $5.6
billion for capital expenditures, approximately $3.1 billion of which will be
used to upgrade our systems to bandwidth capacity of 550 megahertz or greater,
so that we may offer advanced services. The remaining capital will be spent on
plant extensions, new services, converters and system maintenance.
 
     The following table describes the current technological state of our
systems and the anticipated progress of planned upgrades through 2001, based on
the percentage of our customers who will have access to the bandwidth and other
features shown:
 

<TABLE>
<CAPTION>
                                         LESS THAN                     750 MEGAHERTZ    TWO-WAY
                                       550 MEGAHERTZ   550 MEGAHERTZ    OR GREATER     CAPABILITY
                                       -------------   -------------   -------------   ----------
<S>                                    <C>             <C>             <C>             <C>
September 30, 1999...................      46.7%           23.3%           30.0%          31.2%
December 31, 1999....................      54.7%           15.0%           30.3%          30.3%
December 31, 2000....................      32.8%            9.5%           57.7%          57.7%
December 31, 2001....................      17.7%            7.2%           75.1%          75.1%
December 31, 2002....................       6.0%            5.6%           88.4%          88.4%
</TABLE>

 
     We have adopted HFC architecture as the standard for our ongoing systems
upgrades. HFC architecture combines the use of fiber optic cable, which can
carry hundreds of video, data and voice channels over extended distances, with
coaxial cable, which requires a more extensive signal amplification in order to
obtain the desired transmission levels for delivering channels. In most systems,
we connect fiber optic cable to individual nodes serving an average of 500 homes
or
 
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<PAGE>   116
 
commercial buildings. We believe that this network design provides high capacity
and superior signal quality, and will enable us to provide the newest forms of
telecommunications services to our customers. The primary advantages of HFC
architecture over traditional coaxial cable networks include:
 
     - increased channel capacity of cable systems;
 
     - reduced number of amplifiers, which are devices to compensate for signal
       loss caused by coaxial cable, needed to deliver signals from the headend
       to the home, resulting in improved signal quality and reliability;
 
     - reduced number of homes that need to be connected to an individual node,
       improving the capacity of the network to provide high-speed Internet
       access and reducing the number of households affected by disruptions in
       the network; and
 
     - sufficient dedicated bandwidth for two-way services, which avoids reverse
       signal interference problems that can otherwise occur when you have
       two-way communication capability.
 
     The HFC architecture will enable us to offer new and enhanced services,
including:
 
     - additional channels and tiers;
 
     - expanded pay-per-view options;
 
     - high-speed Internet access;
 
     - wide area networks, which permit a network of computers to be connected
       together beyond an area;
 
     - point-to-point data services, which can switch data links from one point
       to another; and
 
     - digital advertising insertion, which is the insertion of local, regional
       and national programming.
 
     The upgrades will facilitate our new services in two primary ways:
 
     - Greater bandwidth allows us to send more information through our systems.
       This provides us with the capacity to provide new services in addition to
       our current services. As a result, we will be able to roll out digital
       cable programming in addition to existing analog channels offered to
       customers who do not wish to subscribe to a package of digital services.
 
     - Enhanced design configured for two-way communication with the customer
       allows us to provide cable Internet services without telephone support
       and other interactive services, such as an interactive program guide,
       impulse pay-per-view, video-on-demand and Wink, that cannot be offered
       without upgrading the bandwidth capacity of our systems.
 
     This HFC architecture will also position us to offer cable telephony
services in the future, using either Internet protocol technology or
switch-based technology, another method of linking communications.
 
CUSTOMER SERVICE AND COMMUNITY RELATIONS
 
     Providing a high level of service to our customers has been a central
driver of our historical success. Our emphasis on system reliability,
engineering support and superior customer satisfaction is key to our management
philosophy. In support of our commitment to customer satisfaction, we operate a
24-hour customer service hotline in most systems and offer on-time installation
and service guarantees. It is our policy that if an installer is late for a
scheduled appointment the customer receives free installation, and if a service
technician is late for a service call the customer receives a $20 credit.
 
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<PAGE>   117
 
     As of September 30, 1999, we maintained eleven call centers located in our
twelve regions, which are responsible for handling call volume for more than 54%
of our customers. They are staffed with dedicated personnel who provide service
to our customers 24 hours a day, seven days a week. We believe operating
regional call centers allows us to provide "localized" service, which also
reduces overhead costs and improves customer service. We have invested
significantly in both personnel and equipment to ensure that these call centers
are professionally managed and employ state-of-the-art technology. As of
December 31, 1999, pro forma for the transfer to us of the Fanch, Falcon and
Avalon cable systems and the Bresnan acquisition and transfer, we employed
approximately 2,650 customer service representatives throughout the systems. Our
customer service representatives receive extensive training to develop customer
contact skills and product knowledge critical to successful sales and high rates
of customer retention. As of December 31, 1999, pro forma for the transfer to us
of the Fanch, Falcon and Avalon cable systems and the Bresnan acquisition and
transfer, we had approximately 4,800 technical employees who are encouraged to
enroll in courses and attend regularly scheduled on-site seminars conducted by
equipment manufacturers to keep pace with the latest technological developments
in the cable television industry. We utilize surveys, focus groups and other
research tools as part of our efforts to determine and respond to customer
needs. We believe that all of this improves the overall quality of our services
and the reliability of our systems, resulting in fewer service calls from
customers.
 
     We are also committed to fostering strong community relations in the towns
and cities our systems serve. We support many local charities and community
causes in various ways, including marketing promotions to raise money and
supplies for persons in need, and in-kind donations that include production
services and free air-time on major cable networks. Recent charity affiliations
include campaigns for "Toys for Tots," United Way, local theatre, children's
museums, local food banks and volunteer fire and ambulance corps. We also
participate in the "Cable in the Classroom" program, whereby cable television
companies throughout the United States provide schools with free cable
television service. In addition, we install and provide free basic cable service
to public schools, government buildings and non-profit hospitals in many of the
communities in which we operate. We also provide free cable modems and
high-speed Internet access to schools and public libraries in our franchise
areas. We place a special emphasis on education, and regularly award
scholarships to employees who intend to pursue courses of study in the
communications field.
 
SALES AND MARKETING
 
     PERSONNEL RESOURCES.  We have a centralized team responsible for
coordinating the marketing efforts of our individual systems. For most of our
systems with over 30,000 customers we have a dedicated marketing manager, while
smaller systems are handled regionally. We believe our success in marketing
comes in large part from new and innovative ideas and from good interaction
between our corporate office, which handles programs and administration, and our
field offices, which implement the various programs. We are also continually
monitoring the regulatory arena, customer perception, competition, pricing and
product preferences to increase our responsiveness to our customer base. Our
customer service representatives are given the incentive to use their daily
contacts with customers as opportunities to sell our new service offerings.
 
     MARKETING STRATEGY.  Our long-term marketing objective is to increase cash
flow through deeper market penetration and growth in revenue per household. To
achieve this objective and to position our service as an indispensable consumer
service, we are pursuing the following strategies:
 
     - increase the number of rooms per household with cable;
 
     - introduce new cable products and services;
 
     - design product offerings to enable greater opportunity for customer
       choices;
 
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<PAGE>   118
 
     - utilize "tiered" packaging strategies to promote the sale of premium
       services and niche programming;
 
     - offer our customers more value through discounted bundling of products;
 
     - increase the number of residential consumers who use our set-top box,
       which enables them to obtain advanced digital services such as a greater
       number of television stations and interactive services;
 
     - target households based on demographic data;
 
     - develop specialized programs to attract former customers, households that
       have never subscribed and illegal users of the service; and
 
     - employ Charter branding of products to promote customer awareness and
       loyalty.
 
     We have innovative marketing programs which utilize market research on
selected systems, compare the data to national research and tailor marketing
programs for individual markets. We gather detailed customer information through
our regional marketing representatives and use the Claritas geodemographic data
program and consulting services to create unique packages of services and
marketing programs. These marketing efforts and the follow-up analysis provide
consumer information down to the city block or suburban subdivision level, which
allows us to create very targeted marketing programs.
 
     We seek to maximize our revenue per customer through the use of "tiered"
packaging strategies to market premium services and to develop and promote niche
programming services.
 
     We regularly use targeted direct mail campaigns to sell these tiers and
services to our existing customer base. We are developing an in-depth profile
database that goes beyond existing and former customers to include all homes
passed. This database information is expected to improve our targeted direct
marketing efforts, bringing us closer toward our objective of increasing total
customers as well as sales per customer for both new and existing customers. For
example, using customer profile data currently available, we are able to
identify customers who have children under a specified age and do not currently
subscribe to The Disney Channel. We then target our marketing efforts with
respect to The Disney Channel to those households. In 1998, we were chosen by
Claritas Corporation, sponsor of a national marketing competition across all
industries, as the first place winner in their media division, which includes
cable systems operations, telecommunications and newspapers, for our national
segmenting and targeted marketing program.
 
     Our marketing professionals have also received numerous industry awards
within the last two years, including the Cable and Telecommunication Association
of Marketers' awards for consumer research and best advertising and marketing
programs.
 
     In 1998, we introduced a new package of premium services. Customers receive
a substantial discount on bundled premium services of HBO, Showtime, Cinemax and
The Movie Channel. We were able to negotiate favorable terms with premium
networks, which allowed minimal impact on margins and provided substantial
volume incentives to grow the premium category. The MVP package has increased
our premium household penetration, premium revenue and cash flow. As a result of
this package, HBO recognized us as a top performing customer. We are currently
introducing this same premium strategy in the systems we have recently acquired.
 
     We expect to continue to invest significant amounts of time, effort and
financial resources in the marketing and promotion of new and existing services.
To increase customer penetration and increase the level of services used by our
customers, we use a coordinated array of marketing techniques, including
door-to-door solicitation, telemarketing, media advertising and direct mail
solicitation. We believe we have one of the cable television industry's highest
success rates in attracting and retaining
 
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<PAGE>   119
 
customers who have never before subscribed to cable television. Historically,
these "nevers" are the most difficult customers to attract and retain.
 
PROGRAMMING SUPPLY
 
     GENERAL.  We believe that offering a wide variety of conveniently scheduled
programming is an important factor influencing a customer's decision to
subscribe to and retain our cable services. We devote considerable resources to
obtaining access to a wide range of programming that we believe will appeal to
both existing and potential customers of basic and premium services. We rely on
extensive market research, customer demographics and local programming
preferences to determine channel offerings in each of our markets. See "-- Sales
and Marketing."
 
     PROGRAMMING SOURCES.  We obtain basic and premium programming from a number
of suppliers, usually pursuant to a written contract. As of September 30, 1999,
we obtained approximately 64% of our programming through contracts entered into
directly with a programming supplier. We obtained the rest of our programming
through TeleSynergy, Inc., which offers its partners contract benefits in buying
programming by virtue of volume discounts available to a larger buying base.
Recent consolidation in the cable television industry coupled with our growth
through acquisitions has reduced the benefits associated with our participation
in TeleSynergy. As a result of our recent acquisitions, we are reviewing our
programming arrangements and have decided to terminate our agreement with
TeleSynergy, effective January 31, 2000.
 
     Programming tends to be made available to us for a flat fee per customer.
However, some channels are available without cost to us. In connection with the
launch of a new channel, we may receive a distribution fee to support the
channel launch, a portion of which is applied to marketing expenses associated
with the channel launch. The amounts we receive in distribution fees are not
significant.
 
     Our programming contracts generally continue for a fixed period of time,
usually from three to ten years. Although longer contract terms are available,
we prefer to limit contracts to three years so that we retain flexibility to
change programming and include new channels as they become available. Some
program suppliers offer marketing support or volume discount pricing structures.
Some of our programming agreements with premium service suppliers offer cost
incentives under which premium service unit prices decline as certain premium
service growth thresholds are met.
 
     For home shopping channels, we receive a percentage of the amount spent in
home shopping purchases by our customers on channels we carry. In 1998, these
revenues totalled approximately $220,000. These revenues totalled approximately
$1,518,000 for the nine months ended September 30, 1999.
 
     PROGRAMMING COSTS.  Our cable programming costs have increased in recent
years and are expected to continue to increase due to factors including:
 
     - system acquisitions;
 
     - additional programming being provided to customers;
 
     - increased cost to produce or purchase cable programming; and
 
     - inflationary increases.
 
In every year we have operated, our costs to acquire programming have exceeded
customary inflationary and cost-of-living type increases. Sports programming
costs have increased significantly over the past several years. In addition,
contracts to purchase sports programming sometimes contain built-in cost
increases for programming added during the term of the contract which we may or
may not have the option to add to our service offerings.
 
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<PAGE>   120
 
     Under rate regulation of the Federal Communications Commission, cable
operators may increase their rates to customers to cover increased costs for
programming, subject to certain limitations. See "Regulation and Legislation."
We believe we will, as a general matter, be able to pass increases in our
programming costs through to customers, although we cannot assure you that it
will be possible.
 
RATES
 
     Pursuant to the Federal Communications Commission's rules, we have set
rates for cable-related equipment, such as converter boxes and remote control
devices, and installation services. These rates are based on actual costs plus a
11.25% rate of return. We have unbundled these charges from the charges for the
provision of cable service.
 
     Rates charged to customers vary based on the market served and service
selected, and are typically adjusted on an annual basis. As of September 30,
1999, the average monthly fee was $12.57 for basic service and $16.08 for
expanded basic service. Regulation of the expanded basic service was eliminated
by federal law as of March 31, 1999 and such rates are now based on market
conditions. A one-time installation fee, which may be waived in part during
certain promotional periods, is charged to new customers. We believe our rate
practices are in accordance with Federal Communications Commission Guidelines
and are consistent with those prevailing in the industry generally. See
"Regulation and Legislation."
 
THEFT PROTECTION
 
     The unauthorized tapping of cable plant and the unauthorized receipt of
programming using cable converters purchased through unauthorized sources are
problems which continue to challenge the entire cable industry. We have adopted
specific measures to combat the unauthorized use of our plant to receive
programming. For instance, in several of our regions, we have instituted a
"perpetual audit" whereby each technician is required to check at least four
other nearby residences during each service call to determine if there are any
obvious signs of piracy, namely, a drop line leading from the main cable line
into other homes. Addresses where the technician observes drop lines are then
checked against our customer billing records. If the address is not found in the
billing records, a sales representative calls on the unauthorized user to
correct the "billing discrepancy" and persuade the user to become a formal
customer. In our experience, approximately 25% of unauthorized users who are
solicited in this manner become customers. Billing records are then closely
monitored to guard against these new customers reverting to their status as
unauthorized users. Unauthorized users who do not convert are promptly
disconnected and, in certain instances, flagrant violators are referred for
prosecution. In addition, we have prosecuted individuals who have sold cable
converters programmed to receive our signals without proper authorization.
 
FRANCHISES
 
     As of September 30, 1999, without giving effect to acquisitions since that
date, our systems operated pursuant to an aggregate of 1,742 franchises, permits
and similar authorizations issued by local and state governmental authorities.
As of September 30, 1999, giving effect to acquisitions since that date and the
recent transfer of the Fanch, Falcon and Avalon cable systems, we held
approximately 4,210 franchises in the aggregate. Each franchise is awarded by a
governmental authority and is usually not transferable unless the granting
governmental authority consents. Most franchises are subject to termination
proceedings in the event of a material breach. In addition, most franchises
require us to pay the granting authority a franchise fee of up to 5.0% of gross
revenues generated by cable television services under the franchise (i.e., the
maximum amount that may be charged under the Communications Act).
 
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<PAGE>   121
 
     Our franchises have terms which range from four years to more than 32
years. Prior to the scheduled expiration of most franchises, we initiate renewal
proceedings with the granting authorities. This process usually takes three
years but can take a longer period of time and often involves substantial
expense. The Communications Act provides for an orderly franchise renewal
process in which granting authorities may not unreasonably withhold renewals. If
a renewal is withheld and the granting authority takes over operation of the
affected cable system or awards it to another party, the granting authority must
pay the existing cable operator the "fair market value" of the system. The
Communications Act also established comprehensive renewal procedures requiring
that an incumbent franchisee's renewal application be evaluated on its own merit
and not as part of a comparative process with competing applications. In
connection with the franchise renewal process, many governmental authorities
require the cable operator make certain commitments, such as technological
upgrades to the system, which may require substantial capital expenditures. We
cannot assure you, however, that any particular franchise will be renewed or
that it can be renewed on commercially favorable terms. Our failure to obtain
renewals of our franchises, especially those in major metropolitan areas where
we have the most customers, would have a material adverse effect on our
business, results of operations and financial condition. See "Risk
Factors -- Regulatory and Legislative Matters."
 
     The following table summarizes our systems' franchises by year of
expiration, and approximate number of basic customers as of September 30, 1999,
without giving effect to acquisitions since that date.
 

<TABLE>
<CAPTION>
                                                         PERCENTAGE                   PERCENTAGE
                                           NUMBER OF      OF TOTAL     TOTAL BASIC     OF TOTAL
YEAR OF FRANCHISE EXPIRATION               FRANCHISES    FRANCHISES     CUSTOMERS     CUSTOMERS
----------------------------               ----------    ----------    -----------    ----------
<S>                                        <C>           <C>           <C>            <C>
Prior to December 31, 1999...............      186           11%          305,100         10%
2000 to 2002.............................      316           18%          699,100         23%
2003 to 2005.............................      360           21%          724,900         19%
2006 or after............................      880           50%        1,696,600         48%
                                             -----          ---         ---------        ---
     Total...............................    1,742          100%        3,425,700        100%
</TABLE>

 
     Under the 1996 Telecom Act, cable operators are not required to obtain
franchises in order to provide telecommunications services, and granting
authorities are prohibited from limiting, restricting or conditioning the
provision of such services. In addition, granting authorities may not require a
cable operator to provide telecommunications services or facilities, other than
institutional networks, as a condition of an initial franchise grant, a
franchise renewal, or a franchise transfer. The 1996 Telecom Act also limits
franchise fees to an operator's cable-related revenues and clarifies that they
do not apply to revenues that a cable operator derives from providing new
telecommunications services.
 
     We believe our relations with the franchising authorities under which our
systems are operated are generally good. Substantially all of the material
franchises relating to our systems which are eligible for renewal have been
renewed or extended at or prior to their stated expiration dates.
 
COMPETITION
 
     We face competition in the areas of price, service offerings, and service
reliability. We compete with other providers of television signals and other
sources of home entertainment. In addition, as we expand into additional
services such as Internet access, interactive services and telephony, we will
face competition from other providers of each type of service. See "Risk
Factors -- Our Business --
 
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<PAGE>   122
 
We operate in a very competitive business environment which can adversely affect
our business and operations."
 
     To date, we believe that we have not lost a significant number of
customers, or a significant amount of revenue, to our competitors' systems.
However, competition from other providers of the technologies we expect to offer
in the future may have a negative impact on our business in the future.
 
     Through mergers such as the recent merger of Tele-Communications, Inc. and
AT&T, customers will come to expect a variety of services from a single
provider. While the TCI/AT&T merger has no direct or immediate impact on our
business, it encourages providers of cable and telecommunications services to
expand their service offerings. It also encourages consolidation in the cable
industry as cable operators recognize the competitive benefits of a large
customer base and expanded financial resources.
 
     Key competitors today include:
 
     - BROADCAST TELEVISION.  Cable television has long competed with broadcast
television, which consists of television signals that the viewer is able to
receive without charge using an "off-air" antenna. The extent of such
competition is dependent upon the quality and quantity of broadcast signals
available through "off-air" reception compared to the services provided by the
local cable system. The recent licensing of digital spectrum by the Federal
Communications Commission will provide incumbent television licenses with the
ability to deliver high definition television pictures and multiple
digital-quality program streams, as well as advanced digital services such as
subscription video.
 
     - DBS.  Direct broadcast satellite, known as DBS, has emerged as
significant competition to cable systems. The DBS industry has grown rapidly
over the last several years, far exceeding the growth rate of the cable
television industry, and now serves approximately 10 million subscribers
nationwide. DBS service allows the subscriber to receive video services directly
via satellite using a relatively small dish antenna. Moreover, video compression
technology allows DBS providers to offer more than 100 digital channels, thereby
surpassing the typical analog cable system. DBS companies historically were
prohibited from retransmitting popular local broadcast programming, but a change
to the existing copyright laws in November 1999 eliminated this legal
impediment. After an initial six-month grace period, DBS companies will need to
secure retransmission consent from the popular broadcast stations they wish to
carry, and they will face mandatory carriage obligations of less popular
broadcast stations as of January 2002. In response to the legislation, DirecTV,
Inc. and EchoStar Communications Corporation already have initiated plans to
carry the major network stations in the nation's top television markets. DBS,
however, is limited in the local programming it can provide because of the
current capacity limitations of satellite technology. It is, therefore, expected
that DBS companies will offer local broadcast programming only in the larger
U.S. markets for the foreseeable future. The same legislation providing for DBS
carriage of local broadcast stations reduced the compulsory copyright fees paid
by DBS companies and allows them to continue offering distant network signals to
rural customers. America Online Inc., the nation's leading provider of Internet
services has recently announced a plan to invest $1.5 billion in Hughes
Electronics Corp., DirecTV's parent company, and these companies intend to
jointly market America Online's prospective Internet television service to
DirecTV's DBS customers.
 
     - DSL.  The deployment of digital subscriber line technology, known as DSL,
will allow Internet access to subscribers at data transmission speeds greater
than those of modems over conventional telephone lines. Several telephone
companies and other companies are introducing DSL service. The Federal
Communications Commission recently released an order in which it mandated that
incumbent telephone companies grant access to the high frequency portion of the
local loop over
 
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<PAGE>   123
 
which they provide voice services. This will enable competitive carriers to
provide DSL services over the same telephone lines simultaneously used by
incumbent telephone companies to provide basic telephone service. However, in a
separate order the Federal Communications Commission declined to mandate that
incumbent telephone companies unbundle their internal packet switching
functionality or related equipment for the benefit of competitive carriers. This
functionality or equipment could otherwise have been used by competitive
carriers directly to provide DSL or other high-speed broadband services. We are
unable to predict whether the Federal Communications Commission's decisions will
be sustained upon administrative or judicial appeal, the likelihood of success
of the Internet access offered by our competitors or the impact on our business
and operations of these competitive ventures.
 
     - TRADITIONAL OVERBUILDS.  Cable television systems are operated under
non-exclusive franchises granted by local authorities. More than one cable
system may legally be built in the same area. It is possible that a franchising
authority might grant a second franchise to another cable operator and that
franchise might contain terms and conditions more favorable than those afforded
us. In addition, entities willing to establish an open video system, under which
they offer unaffiliated programmers non-discriminatory access to a portion of
the system's cable system may be able to avoid local franchising requirements.
Well financed businesses from outside the cable industry, such as public
utilities which already possess fiber optic and other transmission lines in the
areas they serve may over time become competitors. There has been a recent
increase in the number of cities that have constructed their own cable systems,
in a manner similar to city-provided utility services. Constructing a competing
cable system is a capital intensive process which involves a high degree of
risk. We believe that in order to be successful, a competitor's overbuild would
need to be able to serve the homes and businesses in the overbuilt area on a
more cost-effective basis than us. Any such overbuild operation would require
either significant access to capital or access to facilities already in place
that are capable of delivering cable television programming.
 
     As of September 30, 1999, we are aware of overbuild situations in some of
our cable systems located in Newnan, Columbus and West Point, Georgia; Barron
and Cameron, Wisconsin; Auburn, Rancho Cucamonga and Victorville, California;
and Lanett Valley, Alabama; and Carlton and Addison, Texas. Approximately 56,000
basic customers, approximately 1.4% of our total basic customers, are passed by
these overbuilds. Additionally, we have been notified that franchises have been
awarded, and present potential overbuild situations, in some of our systems
located in Denton, Southlake, Roanoke and Keller, Texas and Willimantic,
Connecticut. These potential overbuild areas service an aggregate of
approximately 54,000 basic customers or approximately 1.6% of our total basic
customers. In response to such overbuilds, these systems have been designated
priorities for the upgrade of cable plant and the launch of new and enhanced
services. We have upgraded each of these systems to at least 750 megahertz
two-way HFC architecture, with the exceptions of our systems in Columbus,
Georgia, and Willimantic, Connecticut. Upgrades to at least 750 megahertz
two-way HFC architecture with respect to these two systems are expected to be
completed by December 31, 2000 and December 31, 2001, respectively.
 
     - TELEPHONE COMPANIES AND UTILITIES.  The competitive environment has been
significantly affected by both technological developments and regulatory changes
enacted in The Telecommunications Act of 1996, which were designed to enhance
competition in the cable television and local telephone markets. Federal
cross-ownership restrictions historically limited entry by local telephone
companies into the cable television business. The 1996 Telecom Act modified this
cross-ownership restriction, making it possible for local exchange carriers who
have considerable resources to provide a wide variety of video services
competitive with services offered by cable systems.
 
     As we expand our offerings to include Internet and other telecommunications
services, we will be subject to competition from other telecommunications
providers. The telecommunications industry is
 
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<PAGE>   124
 
highly competitive and includes competitors with greater financial and personnel
resources, who have brand name recognition and long-standing relationships with
regulatory authorities. Moreover, mergers, joint ventures and alliances among
franchise, wireless or private cable television operators, local exchange
carriers and others may result in providers capable of offering cable
television, Internet, and telecommunications services in direct competition with
us.
 
     Several telephone companies have obtained or are seeking cable television
franchises from local governmental authorities and are constructing cable
systems. Cross-subsidization by local exchange carriers of video and telephony
services poses a strategic advantage over cable operators seeking to compete
with local exchange carriers that provide video services. Some local exchange
carriers may choose to make broadband services available under the open video
regulatory framework of the Federal Communications Commission. In addition,
local exchange carriers provide facilities for the transmission and distribution
of voice and data services, including Internet services, in competition with our
existing or potential interactive services ventures and businesses, including
Internet service, as well as data and other non-video services. We cannot
predict the likelihood of success of the broadband services offered by our
competitors or the impact on us of such competitive ventures. The entry of
telephone companies as direct competitors in the video marketplace, however, is
likely to become more widespread and could adversely affect the profitability
and valuation of the systems.
 
     Additionally, we are subject to competition from utilities which possess
fiber optic transmission lines capable of transmitting signals with minimal
signal distortion.
 
     - SMATV.  Additional competition is posed by satellite master antenna
television systems known as "SMATV systems" serving multiple dwelling units,
referred to in the cable industry as "MDU's", such as condominiums, apartment
complexes, and private residential communities. These private cable systems may
enter into exclusive agreements with such MDUs, which may preclude operators of
franchise systems from serving residents of such private complexes. Such private
cable systems can offer both improved reception of local television stations and
many of the same satellite-delivered program services which are offered by cable
systems. SMATV systems currently benefit from operating advantages not available
to franchised cable systems, including fewer regulatory burdens and no
requirement to service low density or economically depressed communities.
Exemption from regulation may provide a competitive advantage to certain of our
current and potential competitors.
 
     - WIRELESS DISTRIBUTION.  Cable television systems also compete with
wireless program distribution services such as multi-channel multipoint
distribution systems or "wireless cable", known as MMDS. MMDS uses low-power
microwave frequencies to transmit television programming over-the-air to paying
customers. Wireless distribution services generally provide many of the
programming services provided by cable systems, and digital compression
technology is likely to increase significantly the channel capacity of their
systems. Both analog and digital MMDS services require unobstructed "line of
sight" transmission paths. Analog MMDS has impacted our customer growth in
Riverside and Sacramento, California and Missoula, Montana. Digital MMDS is a
more significant competitor, presenting potential challenges to us in Los
Angeles, California and Atlanta, Georgia.
 
PROPERTIES
 
     Our principal physical assets consist of cable television plant and
equipment, including signal receiving, encoding and decoding devices, headend
reception facilities, distribution systems and customer drop equipment for each
of our cable television systems. Our cable television plant and related
equipment are generally attached to utility poles under pole rental agreements
with local public utilities and telephone companies, and in certain locations
are buried in underground ducts or trenches. The physical components of our
cable television systems require maintenance and periodic upgrading to keep pace
with technological advances. We own or lease real property for signal
 
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<PAGE>   125
 
reception sites and business offices in many of the communities served by our
systems and for our principal executive offices. We own most of our service
vehicles.
 
     Our subsidiaries own the real property housing our regional data center in
Town & Country, Missouri, as well as the regional office for the Northeast
Region in Newtown, Connecticut and additional real estate located in Hickory,
North Carolina; Hammond, Louisiana; and West Sacramento and San Luis Obispo,
California. Our subsidiaries lease space for our regional data center located in
Dallas, Texas and additional locations for business offices throughout our
operating regions. Our headend locations are generally located on owned or
leased parcels of land, and we generally own the towers on which our equipment
is located.
 
     We believe that our properties are in good operating condition and are
suitable for our business operations.
 
EMPLOYEES
 
     Charter Communications, Inc. currently has only thirteen employees, all of
whom are senior management and are also executive officers of Charter
Investment, Inc. Pursuant to a services agreement between Charter
Communications, Inc. and Charter Investment, Inc., Charter Investment, Inc. will
provide the necessary personnel and services to manage Charter Communications
Holding Company, Charter Holdings and their subsidiaries. These personnel and
services will be provided to Charter Communications, Inc. on a cost
reimbursement basis. As of December 31, 1999, our subsidiaries had approximately
10,525 full-time equivalent employees of which 350 were represented by the
International Brotherhood of Electrical Workers. We believe we have a good
relationship with our employees and have never experienced a work stoppage. See
"Certain Relationships and Related Transactions."
 
INSURANCE
 
     We have insurance to cover risks incurred in the ordinary course of
business, including general liability, property coverage, business interruption
and workers' compensation insurance in amounts typical of similar operators in
the cable industry and with reputable insurance providers. As is typical in the
cable industry, we do not insure our underground plant. We believe our insurance
coverage is adequate.
 
LEGAL PROCEEDINGS
 
     We are involved from time to time in routine legal matters incidental to
our business. We believe that the resolution of such matters will not have a
material adverse impact on our financial position or results of operations.
 
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<PAGE>   126
 
                           REGULATION AND LEGISLATION
 
     The following summary addresses the key regulatory developments and
legislation affecting the cable television industry.
 
     The operation of a cable system is extensively regulated by the Federal
Communications Commission, some state governments and most local governments.
The 1996 Telecom Act has altered the regulatory structure governing the nation's
communications 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 and encourages additional competition
in the video programming industry by allowing local telephone companies to
provide video programming in their own telephone service areas.
 
     The 1996 Telecom Act requires the Federal Communications Commission to
undertake a host of implementing rulemakings. Moreover, Congress and the Federal
Communications Commission have frequently revisited the subject of cable
regulation. Future legislative and regulatory changes could adversely affect our
operations, and there have been calls in Congress and at the Federal
Communications Commission to maintain or even tighten cable regulation in the
absence of widespread effective competition.
 
     CABLE RATE REGULATION.  The 1992 Cable Act imposed an extensive rate
regulation regime on the cable television industry, which limited the ability of
cable companies to increase subscriber fees. 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 satisfaction of conditions rarely
satisfied in the current marketplace.
 
     Although the Federal Communications Commission has established the
underlying regulatory scheme, local government units, commonly referred to as
local franchising authorities, are primarily responsible for administering the
regulation of the lowest level of cable -- the basic service tier, which
typically contains local broadcast stations and public, educational, and
government access channels. Before a local franchising authority begins basic
service rate regulation, it must certify to the Federal Communications
Commission that it will follow applicable federal rules. Many local franchising
authorities have voluntarily declined to exercise their authority to regulate
basic service rates. Local franchising authorities 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.
 
     As of December 31, 1999, approximately 18% of our local franchising
authorities were certified to regulate basic tier rates. The 1992 Cable Act
permits communities to certify and regulate rates at any time, so that it is
possible that additional localities served by the systems may choose to certify
and regulate rates in the future.
 
     The Federal Communications Commission historically administered rate
regulation of cable programming service tiers, which is the expanded basic
programming package that offers services other than basic programming and which
typically contains satellite-delivered programming. As of December 31, 1999, we
had cable programming service tier rate complaints relating to approximately
420,000 subscribers pending at the Federal Communications Commission. Under the
1996 Telecom Act, however, the Federal Communications Commission's authority to
regulate cable programming service tier rates sunset on March 31, 1999. The
Federal Communications Commission has taken the position that it will still
adjudicate pending cable programming service tier complaints but will strictly
limit its review, and possible refund orders, to the time period predating the
sunset date. We do not believe any adjudications regarding these pre-sunset
complaints will have a material adverse effect on
 
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our business. The elimination of cable programming service tier regulation on a
prospective basis affords us substantially greater pricing flexibility.
 
     Under the rate regulations of the Federal Communication Commission, most
cable systems were required to reduce their basic service tier and cable
programming service tier rates in 1993 and 1994, and have since had their rate
increases governed by a complicated price cap scheme that allows for the
recovery of inflation and certain increased costs, as well as providing some
incentive for expanding channel carriage. The Federal Communications Commission
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 to bypass this "benchmark" regulatory scheme in favor of
traditional "cost-of-service" regulation in cases where the latter methodology
appears favorable. Cost of service regulation is a traditional form of rate
regulation, under which a utility is allowed to recover its costs of providing
the regulated service, plus a reasonable profit. The Federal Communications
Commission and Congress have provided various forms of rate relief for smaller
cable systems owned by smaller operators. Premium cable services offered on a
per-channel or per-program basis remain unregulated. However, federal law
requires that the basic service tier be offered to all cable subscribers and
limits the ability of operators to require purchase of any cable programming
service tier if a customer seeks to purchase premium services offered on a
per-channel or per-program basis, subject to a technology exception which
sunsets in 2002.
 
     As noted above, Federal Communications Commission regulation of cable
programming service tier rates for all systems, regardless of size, sunset
pursuant to the 1996 Telecom Act on March 31, 1999. As a result, the regulatory
regime just discussed is now essentially applicable only to basic services tier
and cable equipment. Certain legislators, however, have called for new rate
regulations if unregulated cost rates increase dramatically. 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 Federal Communications
Commission.
 
     CABLE ENTRY INTO TELECOMMUNICATIONS.  The 1996 Telecom Act creates a more
favorable environment for us to provide telecommunications services beyond
traditional video delivery. It 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. A cable
operator is authorized under the 1996 Telecom Act to provide telecommunications
services without obtaining a separate local franchise. 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. The Federal Communications
Commission recently clarified that a cable operator's favorable pole rates are
not endangered by the provision of Internet access.
 
     Cable entry into telecommunications will be affected by the regulatory
landscape now being developed by the Federal Communications Commission 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 Federal
Communications Commission initial interconnection order but most of that
decision was reversed by the U.S. Supreme Court in January 1999. The Supreme
Court effectively upheld most of the Federal Communications Commission
interconnection regulations. Although these regulations should enable new
telecommuni-
 
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<PAGE>   128
 
cations entrants to reach viable interconnection agreements with incumbent
carriers, many issues, including which specific network elements the Federal
Communications Commission can mandate that incumbent carriers make available to
competitors, remain subject to administrative and judicial appeal. If the
Federal Communications Commission current list of unbundled network elements is
upheld on appeal, it would make it easier for us to provide telecommunications
service.
 
     INTERNET SERVICE.  Although there is at present no significant federal
regulation of cable system delivery of Internet services, and the Federal
Communications Commission recently issued several reports finding no immediate
need to impose such regulation, this situation may change as cable systems
expand their broadband delivery of Internet services. In particular, proposals
have been advanced at the Federal Communications Commission and Congress that
would require cable operators to provide access to unaffiliated Internet service
providers and online service providers. Certain Internet service providers also
are attempting to use existing modes of access that are commercially leased to
gain access to cable system delivery. A petition on this issue is now pending
before the Federal Communications Commission. Finally, some local franchising
authorities are considering the imposition of mandatory Internet access
requirements as part of cable franchise renewals or transfers. A federal
district court in Portland, Oregon recently upheld the legal ability of local
franchising authority to impose such conditions, but an appeal was filed with
the Ninth Circuit Court of Appeals, oral argument has been held and the parties
are awaiting a decision. Other local authorities have imposed or may impose
mandatory Internet access requirements on cable operators. These developments
could, if they become widespread, burden the capacity of cable systems and
complicate our own plans for providing Internet service.
 
     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. Local exchange carriers,
including the regional telephone companies, can now compete with cable operators
both inside and outside their telephone service areas with certain regulatory
safeguards. Because of their resources, local exchange carriers could be
formidable competitors to traditional cable operators. Various local exchange
carriers already are providing video programming services within their telephone
service areas through a variety of distribution methods, including both the
deployment of broadband wire facilities and the use of wireless transmission.
 
     Under the 1996 Telecom Act, local exchange carriers or any other cable
competitor providing video programming to subscribers through broadband wire
should be regulated as a traditional cable operator, subject to local
franchising and federal regulatory requirements, unless the local exchange
carrier or other cable competitor elects to deploy its broadband plant as an
open video system. To qualify for favorable open video system status, the
competitor must reserve two-thirds of the system's activated channels for
unaffiliated entities. The Fifth Circuit Court of Appeals reversed certain of
the Federal Communications Commission's open video system rules, including its
preemption of local franchising. The Federal Communications Commission recently
revised its OVS rules to eliminate this general preemption, thereby leaving
franchising discretion to state and local authorities. It is unclear what effect
this ruling will have on the entities pursuing open video system operation.
 
     Although local exchange carriers and cable operators can now expand their
offerings across traditional service boundaries, the general prohibition remains
on local exchange carrier buyouts of co-located cable systems. Co-located cable
systems are cable systems serving an overlapping territory. Cable operator
buyouts of co-located local exchange carrier systems, and joint ventures between
cable operators and local exchange carriers in the same market are also
prohibited. 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 Federal Communications Commission with the
limited authority to grant waivers of the buyout prohibition.
 
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<PAGE>   129
 
     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 Utility Holding Company Act. Electric utilities must
establish separate subsidiaries, known as "exempt telecommunications companies"
and must apply to the Federal Communications Commission for operating authority.
Like telephone companies, electric utilities have substantial resources at their
disposal, and could be formidable competitors to traditional cable systems.
Several such utilities have been granted broad authority by the Federal
Communications Commission to engage in activities which could include the
provision of video programming.
 
     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 Federal Communications
Commission regulations prohibiting local cross-ownership between co-located
television stations and cable systems.
 
     Pursuant to the 1992 Cable Act, the Federal Communications Commission
adopted rules precluding a cable system from devoting more than 40% of its
activated channel capacity to the carriage of affiliated national video program
services. Also pursuant to the 1992 Cable Act, the Federal Communications
Commission has adopted rules that preclude any cable operator from serving more
than 30% of all U.S. domestic multichannel video subscribers, including cable
and direct broadcast satellite subscribers. However, this provision has been
stayed pending further judicial review.
 
     MUST CARRY/RETRANSMISSION CONSENT.  The 1992 Cable Act contains broadcast
signal carriage requirements. Broadcast signal carriage is the transmission of
broadcast television signals over a cable system to cable customers. These
requirements, among other things, allow local commercial television broadcast
stations to elect once every three years between "must carry" status or
"retransmission consent" status. Less popular stations typically elect must
carry, which is the broadcast signal carriage requirement that allows local
commercial television broadcast stations to require a cable system to carry the
station. More popular stations, such as those affiliated with a national
network, typically elect retransmission consent which is the broadcast signal
carriage requirement that allows local commercial television broadcast stations
to negotiate for payments for granting permission to the cable operator to carry
the stations. Must carry requests can dilute the appeal of a cable system's
programming offerings because a cable system with limited channel capacity may
be required to forego carriage of popular channels in favor of less popular
broadcast stations electing must carry. Retransmission consent demands may
require substantial payments or other concessions. Either option has a
potentially adverse effect on our business. The burden associated with must
carry may increase substantially if broadcasters proceed with planned conversion
to digital transmission and the Federal Communications Commission determines
that cable systems must carry all analog and digital broadcasts in their
entirety. This burden would reduce capacity available for more popular video
programming and new internet and telecommunication offerings. A rulemaking is
now pending at the Federal Communications Commission regarding the imposition of
dual digital and analog must carry.
 
     ACCESS CHANNELS.  Local franchising authorities 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 Federal
Communications Commission has adopted rules regulating the terms, conditions and
maximum rates a cable operator may charge for commercial leased access use. We
believe that requests for commercial leased access carriages have been
relatively limited. A new request has been forwarded to the Federal
Communications Commission, however, requesting that unaffiliated Internet
service providers be found eligible for commercial leased access. Although we do
not believe such use is in accord with
 
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<PAGE>   130
 
the governing statute, a contrary ruling could lead to substantial leased
activity by Internet service providers and disrupt our own plans for Internet
service.
 
     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 their cable operators over new 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. There also has been
interest expressed in further restricting the marketing practices of cable
programmers, including subjecting programmers who are not affiliated with cable
operators to all of the existing program access requirements, and subjecting
terrestrially delivered programming to the program access requirements.
Terrestrially delivered programming is programming delivered other than by
satellite. These changes should not have a dramatic impact on us, but would
limit potential competitive advantages we now enjoy.
 
     INSIDE WIRING; SUBSCRIBER ACCESS.  In an order issued in 1997, the Federal
Communications Commission established rules that require an incumbent cable
operator upon expiration of a multiple dwelling unit service contract to sell,
abandon, or remove "home run" wiring that was installed by the cable operator in
a multiple dwelling unit building. These inside wiring rules are expected to
assist building owners in their attempts to replace existing cable operators
with new programming providers who are willing to pay the building owner a
higher fee, where such a fee is permissible. The Federal Communications
Commission has also proposed abrogating all exclusive multiple dwelling unit
service agreements held by incumbent operators, but allowing such contracts when
held by new entrants. In another proceeding, the Federal Communications
Commission has preempted restrictions on the deployment of private antenna on
rental property within the exclusive use of a tenant, such as balconies and
patios. This Federal Communications Commission ruling may limit the extent to
which we along with multiple dwelling unit owners may enforce certain aspects of
multiple dwelling unit agreements which otherwise prohibit, for example,
placement of digital broadcast satellite receiver antennae in multiple dwelling
unit areas under the exclusive occupancy of a renter. These developments may
make it even more difficult for us to provide service in multiple dwelling unit
complexes.
 
     OTHER REGULATIONS OF THE FEDERAL COMMUNICATIONS COMMISSION.  In addition to
the Federal Communications Commission regulations noted above, there are other
regulations of the Federal Communications Commission covering such areas as:
 
     - equal employment opportunity,
 
     - subscriber privacy,
 
     - programming practices, including, among other things,
 
        (1) syndicated program exclusivity, which is a Federal Communications
            Commission rule which requires a cable system to delete particular
            programming offered by a distant broadcast signal carried on the
            system which duplicates the programming for which a local broadcast
            station has secured exclusive distribution rights,
 
        (2) network program nonduplication,
 
        (3) local sports blackouts,
 
        (4) indecent programming,
 
        (5) lottery programming,
 
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<PAGE>   131
 
        (6) political programming,
 
        (7) sponsorship identification,
 
        (8) children's programming advertisements, and
 
        (9) closed captioning,
 
     - registration of cable systems and facilities licensing,
 
     - maintenance of various records and public inspection files,
 
     - aeronautical frequency usage,
 
     - lockbox availability,
 
     - antenna structure notification,
 
     - tower marking and lighting,
 
     - consumer protection and customer service standards,
 
     - technical standards,
 
     - consumer electronics equipment compatibility, and
 
     - emergency alert systems.
 
     The Federal Communications Commission recently ruled that cable customers
must be allowed to purchase cable converters from third parties and established
a multi-year phase-in during which security functions, which would remain in the
operator's exclusive control, would be unbundled from basic converter functions,
which could then be satisfied by third party vendors.
 
     The Federal Communications Commission 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 Federal Communications Commission licenses needed to
operate certain transmission facilities used in connection with cable
operations.
 
     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, that varies depending on the size
of the system, the number of distant broadcast television signals carried, and
the location of the cable system, cable operators can obtain blanket permission
to retransmit copyrighted material included in broadcast signals. The possible
modification or elimination of this compulsory copyright license is the subject
of continuing legislative review and could adversely affect our ability to
obtain desired broadcast programming. We cannot predict the outcome of this
legislative activity. Copyright clearances for nonbroadcast programming services
are arranged through private negotiations.
 
     Cable operators distribute locally originated programming and advertising
that use music controlled by the two principal major music performing rights
organizations, the American Society of Composers, Authors and Publishers and
Broadcast Music, Inc. The cable industry has had a long series of negotiations
and adjudications with both organizations. A prior voluntarily negotiated
agreement with Broadcast Music has now expired, and is subject to further
proceedings. The governing rate court recently set retroactive and prospective
cable industry rates for American Society of Composers music based on the
previously negotiated Broadcast Music rate. Although we cannot predict the
ultimate outcome of these industry proceedings or the amount of any license fees
we may be required to pay for past and future use of association-controlled
music, we do not believe such license fees will be significant to our business
and operations.
 
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<PAGE>   132
 
     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 local franchising 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
failed to comply with material provisions.
 
     The specific terms and conditions of franchises vary materially between
jurisdictions. Each franchise generally contains provisions governing cable
operations, service rates, franchising fees, system construction and maintenance
obligations, system channel capacity, design and technical performance, customer
service standards, and indemnification protections. A number of states,
including Connecticut, subject cable systems to the jurisdiction of centralized
state governmental agencies, some of which impose regulation of a character
similar to that of a public utility. Although local franchising authorities have
considerable discretion in establishing franchise terms, there are certain
federal limitations. For example, local franchising authorities cannot insist on
franchise fees exceeding 5% of the system's gross cable-related 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 local franchising authority may seek to impose new and more onerous
requirements such as significant upgrades in facilities and service or increased
franchise fees as a condition of renewal. Similarly, if a local franchising
authority's consent is required for the purchase or sale of a cable system or
franchise, such local franchising authority may attempt to impose more
burdensome or onerous franchise requirements in connection with a request for
consent. Historically, most franchises have been renewed for and consents
granted to cable operators that have provided satisfactory services and have
complied with the terms of their franchise.
 
     Under the 1996 Telecom Act, cable operators are not required to obtain
franchises for the provision of telecommunications services, and local
franchising authorities are prohibited from limiting, restricting, or
conditioning the provision of such services. In addition, local franchising
authorities may not require a cable operator to provide any telecommunications
service or facilities, other than institutional networks under certain
circumstances, as a condition of an initial franchise grant, a franchise
renewal, or a franchise transfer. The 1996 Telecom Act also provides that
franchising fees are limited to an operator's cable-related revenues and do not
apply to revenues that a cable operator derives from providing new
telecommunications services.
 
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<PAGE>   133
 
                                   MANAGEMENT
 
EXECUTIVE OFFICERS AND DIRECTORS
 
     Charter Holdings is a holding company with no operations. Charter Capital
is a direct wholly owned finance subsidiary of Charter Holdings that exists
solely for the purpose of serving as co-obligor of the notes and the March 1999
Charter Holdings notes and has no operations. Neither Charter Holdings nor
Charter Capital has any employees. We and our direct and indirect subsidiaries
are managed by Charter Communications, Inc. See "Certain Relationships and
Related Transactions."
 
     The following persons are directors of Charter Communications, Inc.,
Charter Communications Holding Company or an issuer of the notes, as indicated:
 

<TABLE>
<CAPTION>
                  DIRECTORS                    AGE                      POSITION
                  ---------                    ---                      --------
<S>                                            <C>    <C>
Paul G. Allen................................  47     Chairman of the Board of Directors of
                                                      Charter Communications, Inc. and Director of
                                                        Charter Communications Holding Company
William D. Savoy.............................  35     Director of Charter Communications, Inc.,
                                                        Charter Communications Holding Company and
                                                        Charter Holdings
Jerald L. Kent...............................  43     Director of Charter Communications, Inc.,
                                                      Charter Communications Holding Company,
                                                        Charter Holdings and Charter Capital
Marc B. Nathanson............................  54     Director of Charter Communications, Inc.
Ronald L. Nelson.............................  47     Director of Charter Communications, Inc.
Nancy B. Peretsman...........................  45     Director of Charter Communications, Inc.
Howard L. Wood...............................  60     Director of Charter Communications, Inc.
</TABLE>

 
     The following persons are executive officers of each of Charter
Communications, Inc., Charter Communications Holding Company and the issuers of
the notes:
 

<TABLE>
<CAPTION>
             EXECUTIVE OFFICERS                AGE                      POSITION
             ------------------                ---                      --------
<S>                                            <C>    <C>
Jerald L. Kent...............................  43     President and Chief Executive Officer
David G. Barford.............................  41     Senior Vice President of
                                                        Operations -- Western Division
Mary Pat Blake...............................  44     Senior Vice President -- Marketing and
                                                        Programming
Eric A. Freesmeier...........................  46     Senior Vice President -- Administration
Thomas R. Jokerst............................  50     Senior Vice President -- Advanced Technology
                                                        Development
Kent D. Kalkwarf.............................  40     Senior Vice President and Chief Financial
                                                      Officer
Ralph G. Kelly...............................  42     Senior Vice President -- Treasurer
David L. McCall..............................  44     Senior Vice President of
                                                      Operations -- Eastern Division
John C. Pietri...............................  50     Senior Vice President -- Engineering
Michael E. Riddle............................  40     Senior Vice President and Chief Information
                                                        Officer
Steven A. Schumm.............................  47     Executive Vice President, Assistant to the
                                                        President
Curtis S. Shaw...............................  51     Senior Vice President, General Counsel and
                                                        Secretary
Stephen E. Silva.............................  39     Senior Vice President -- Corporate
                                                      Development and Technology
</TABLE>

 
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<PAGE>   134
 
     The following sets forth certain biographical information with respect to
the directors, director nominees and executive officers named above.
 
     PAUL G. ALLEN is the Chairman of the board of directors of Charter
Communications, Inc. and of the board of directors of Charter Investment, Inc.,
and a director of Charter Communications Holding Company. Mr. Allen has been a
private investor for more than five years, with interests in a wide variety of
companies, many of which focus on multimedia digital communications. Such
companies include Interval Research Corporation, of which Mr. Allen is a
director, Vulcan Ventures, Inc., of which Mr. Allen is the President, Chief
Executive Officer and Chairman of the board of directors, Vulcan Northwest,
Inc., of which Mr. Allen is the Chairman of the board, Vulcan Programming, Inc.
and Vulcan Cable III Inc. In addition, Mr. Allen is the owner and the Chairman
of the board of directors of the Portland Trail Blazers of the National
Basketball Association, and is the owner and the Chairman of the board of
directors of the Seattle Seahawks of the National Football League. Mr. Allen
currently serves as a director of Microsoft Corporation and USA Networks, Inc.
and also serves as a director of various private corporations.
 
     WILLIAM D. SAVOY is a director of Charter Communications, Inc., Charter
Communications Holding Company, Charter Holdings and Charter Investment, Inc.
Since 1990, Mr. Savoy has been an officer and a director of many affiliates of
Mr. Allen, including Vice President and a director of Vulcan Ventures, President
of Vulcan Northwest, President and a director of Vulcan Programming and
President and director of Vulcan Cable III Inc. From 1987 until November 1990,
Mr. Savoy was employed by Layered, Inc. and became its President in 1988. Mr.
Savoy serves on the Advisory Board of DreamWorks SKG and also serves as a
director of CNET, Inc., Go2Net, Inc., Harbinger Corporation, High Speed Access
Corp., Metricom, Inc., Telescan, Inc., Ticketmaster Online -- CitySearch, Inc.,
USA Networks, Inc. and Value America, Inc. Mr. Savoy holds a B.S. in computer
science, accounting and finance from Atlantic Union College.
 
     JERALD L. KENT is the President, Chief Executive Officer and director of
Charter Communications, Inc., Charter Communications Holding Company, Charter
Holdings, Charter Capital and Charter Investment, Inc., and previously held the
position of Chief Financial Officer of Charter Investment, Inc. Prior to
co-founding Charter Investment, Inc. in 1993, Mr. Kent was associated with
Cencom Cable Associates, Inc., where he served as Executive Vice President and
Chief Financial Officer. Mr. Kent also served Cencom as Senior Vice President of
Finance from May 1987, Senior Vice President of Acquisitions and Finance from
July 1988, and Senior Vice President and Chief Financial Officer from January
1989. Prior to that time, Mr. Kent was employed by Arthur Andersen LLP,
certified public accountants, where he attained the position of tax manager. Mr.
Kent is a member of the board of directors of High Speed Access Corp., Cable
Television Laboratories, Inc. and Com21 Inc. Mr. Kent, a certified public
accountant, received his undergraduate and M.B.A. degrees with honors from
Washington University (St. Louis).
 
     MARC B. NATHANSON is a director of Charter Communications, Inc. and has
served in the non-executive position of Vice Chairman of that company since
November 1999. Mr. Nathanson has been Chairman of the board of directors and
Chief Executive Officer of Falcon Holding Group, Inc. and its predecessors since
1975, and prior to September 1995 also served as President of that company.
Prior to 1975, Mr. Nathanson was vice president of marketing for Teleprompter
Corporation, then the largest cable operator in the United States. He also held
executive positions with Warner Cable and Cypress Communications Corporation. He
is a former President of the California Cable Television Association and a
member of Cable Pioneers. He is currently a director of the National Cable
Television Association and chaired its 1999 National Convention. Mr. Nathanson
has served as Chairman of the Board, Chief Executive Officer and President of
Enstar Communications Corporation since October 1988, and is a director of
Digital Entertainment Network, Inc. and an
 
                                       131

<PAGE>   135
 
Advisory Board member of TVA (Brazil). Mr. Nathanson was appointed by President
Clinton on November 1, 1998 as Chair of the Board of Governors for the
International Bureau of Broadcasting, which oversees Voice of America, Radio/TV
Marti, Radio Free Asia, Radio Free Europe and Radio Liberty. Mr. Nathanson is a
trustee of the Annenberg School of Communications at the University of Southern
California and a member of the Board of Visitors of the Anderson School of
Management at UCLA. In addition, he serves on the Board of the UCLA Foundation
and the UCLA Center for Communications Policy and is on the Board of Governors
of AIDS Project Los Angeles and Cable Positive.
 
     RONALD L. NELSON is a director of Charter Communications, Inc. He is a
founding member of DreamWorks LLC and has been serving as a member of its
executive management team since 1994 with responsibility for overseeing
operations and corporate finance. Prior to joining DreamWorks, Mr. Nelson was
employed for 15 years by Paramount Communications Inc. (formerly Gulf + Western
Inc.), serving in a variety of operating and executive positions. Mr. Nelson was
elected Executive Vice President of Paramount Communications in 1990 and was
appointed to its board of directors in 1992. He also served as Chief Financial
Officer of Paramount Communications from 1987 until 1994. Mr. Nelson serves on
the board of directors of Advanced Tissue Sciences, a biotechnology firm. Mr.
Nelson has a B.S. in biochemistry from the University of California at Berkeley
and a masters degree in business from the University of California at Los
Angeles.
 
     NANCY B. PERETSMAN is a director of Charter Communications, Inc. She has
been a Managing Director and Executive Vice President of Allen & Company
Incorporated, an investment bank unrelated to Mr. Allen, since June 1995. Prior
to joining Allen & Company Incorporated, Ms. Peretsman had been an investment
banker since 1983 at Salomon Brothers Inc, where she was a Managing Director
since 1990. Ms. Peretsman serves on the board of directors of Oxygen Media,
Inc., an Internet and cable television enterprise. Ms. Peretsman also serves on
the board of directors of Priceline.com Incorporated, as well as on the boards
of several privately held companies. Ms. Peretsman received a B.A. from
Princeton in 1973 and an M.P.P.M. degree from Yale in 1979.
 
     HOWARD L. WOOD is a director of Charter Communications, Inc. and has served
as a consultant to that company since November 1999. Mr. Wood is a co-founder of
Charter Investment, Inc. Prior to co-founding Charter Investment, Inc. in 1993,
Mr. Wood was associated with Cencom Cable Associates, Inc. Mr. Wood joined
Cencom as President, Chief Financial Officer and director and assumed the
additional position of Chief Executive Officer effective January 1, 1989. Prior
to that time, Mr. Wood was a partner in Arthur Andersen LLP, certified public
accountants, where he served as Partner-in-Charge of the St. Louis Tax Division
from 1973 until joining Cencom. Mr. Wood is a certified public accountant and a
member of the American Institute of Certified Public Accountants. He also serves
as a director of VanLiner Group, Inc., First State Community Bank, Gaylord
Entertainment Company and Data Research, Inc. Mr. Wood serves as Commissioner
for the Missouri Department of Conservation. He is also a past Chairman of the
board of directors and former director of the St. Louis College of Pharmacy. Mr.
Wood graduated with honors from Washington University (St. Louis) School of
Business.
 
     DAVID G. BARFORD is Senior Vice President of Operations -- Western Division
of Charter Communications, Inc., Charter Communications Holding Company, Charter
Holdings, Charter Capital and Charter Investment, Inc. He has primary
responsibility for all cable operations in the Central, North Central,
MetroPlex, Southern California, Northwest, Michigan and National regions. Prior
to joining Charter Investment, Inc. in July 1995, he served as Vice President of
Operations and New Business Development for Comcast Cable Communications, Inc.,
where he held various senior marketing and operating roles since November 1986.
Mr. Barford received a B.A. degree from California State University, Fullerton
and an M.B.A. from National University in La Jolla, California.
 
                                       132

<PAGE>   136
 
     MARY PAT BLAKE is Senior Vice President -- Marketing and Programming of
Charter Communications, Inc., Charter Communications Holding Company, Charter
Holdings, Charter Capital and Charter Investment, Inc. and is responsible for
all aspects of marketing, advertising, sales and programming. Prior to joining
Charter Investment, Inc. in August 1995, Ms. Blake was active in the emerging
business sector, and formed Blake Investments, Inc. in September 1993, which
created, operated and sold a branded coffeehouse and bakery. From September 1990
to August 1993, Ms. Blake served as Director -- Marketing for Brown Shoe
Company. Ms. Blake has 18 years of experience with senior management
responsibilities in marketing, sales, finance, systems, and general management
with companies such as The West Coast Group, Pepsico Inc.-Taco Bell Division,
General Mills, Inc. and ADP Network Services, Inc. Ms. Blake received a B.S.
degree from the University of Minnesota, and an M.B.A. degree from the Harvard
Business School.
 
     ERIC A. FREESMEIER is Senior Vice President -- Administration of Charter
Communications, Inc., Charter Communications Holding Company, Charter Holdings,
Charter Capital and Charter Investment, Inc. and is responsible for human
resources, public relations and communications, corporate facilities and
aviation. From 1986 until joining Charter Investment, Inc. in April 1998, he
served in various executive management positions at Edison Brothers Stores,
Inc., a specialty retail company where his most recent position was Executive
Vice President -- Human Resources and Administration. From 1974 to 1986, Mr.
Freesmeier held management and executive positions with Montgomery Ward, a
national mass merchandise retailer, and its various subsidiaries. Mr. Freesmeier
holds Bachelor of Business degrees in marketing and industrial relations from
the University of Iowa and a Masters of Management degree in finance from
Northwestern University's Kellogg Graduate School of Management.
 
     THOMAS R. JOKERST is Senior Vice President -- Advanced Technology
Development of Charter Communications, Inc., Charter Communications Holding
Company, Charter Holdings, Charter Capital and Charter Investment, Inc. Prior to
his appointment as Senior Vice President, Mr. Jokerst held the position of
Senior Vice President -- Engineering of Charter Investment, Inc. since January
1994. From March 1991 to March 1993, Mr. Jokerst served as Vice
President -- Office of Science and Technology for Cable Television Laboratories
in Boulder, Colorado. From June 1976 to March 1991, Mr. Jokerst was Director of
Engineering for the midwest region of Continental Cablevision. Mr. Jokerst
participates in professional activities with the National Cable Television
Association, SCTE and Cable Television Laboratories. Mr. Jokerst is a graduate
of Ranken Technical Institute in St. Louis with a degree in communications
electronics and computer technology and of Southern Illinois University in
Carbondale, Illinois with a degree in electronics technology.
 
     KENT D. KALKWARF is Senior Vice President and Chief Financial Officer of
Charter Communications, Inc., Charter Communications Holding Company, Charter
Holdings, Charter Capital and Charter Investment, Inc. From July 1995 to May
1997, Mr. Kalkwarf served as a Vice President of Charter Investment, Inc. Prior
to joining Charter Investment, Inc. in 1995, Mr. Kalkwarf was employed by Arthur
Andersen LLP, from 1982 to July 1995, where he attained the position of senior
tax manager. Mr. Kalkwarf has extensive experience in cable, real estate and
international tax issues. Mr. Kalkwarf has a B.S. degree from Illinois Wesleyan
University and is a certified public accountant.
 
     RALPH G. KELLY is Senior Vice President -- Treasurer of Charter
Communications, Inc., Charter Communications Holding Company, Charter Holdings,
Charter Capital and Charter Investment, Inc. Mr. Kelly joined Charter
Investment, Inc. in 1993 as Vice President -- Finance, a position he held until
early 1994 when he became Chief Financial Officer of CableMaxx, Inc., a wireless
cable television operator. Mr. Kelly returned to Charter Investment, Inc. as
Senior Vice President -- Treasurer in February 1996, and has responsibility for
treasury operations, investor relations and financial reporting. From 1984 to
1993, Mr. Kelly was associated with Cencom Cable Associates, Inc.
 
                                       133

<PAGE>   137
 
where he held the positions of Controller from 1984 to 1989 and Treasurer from
1990 to 1993. Mr. Kelly is a certified public accountant and was in the audit
division of Arthur Andersen LLP from 1979 to 1984. Mr. Kelly received his
undergraduate degree in accounting from the University of Missouri -- Columbia
and his M.B.A. from Saint Louis University.
 
     DAVID L. MCCALL is Senior Vice President of Operations -- Eastern Division
of Charter Communications, Inc., Charter Communications Holding Company, Charter
Holdings, Charter Capital and Charter Investment, Inc. Mr. McCall joined Charter
Investment, Inc. in January 1995 as Regional Vice President Operations and has
primary responsibility for all cable system operations managed by Charter
Communications, Inc. in the Southeast, Mid-South, Northeast, Gulf Coast and
Mid-Atlantic regions. Prior to joining Charter Investment, Inc., Mr. McCall was
associated with Crown Cable and its predecessor company, Cencom Cable
Associates, Inc., from 1983 to 1994. As a Regional Manager of Cencom, Mr.
McCall's responsibilities included supervising all aspects of operations for
systems located in North Carolina, South Carolina and Georgia, consisting of
over 142,000 customers. From 1977 to 1982, Mr. McCall was System Manager of
Coaxial Cable Developers (known as Teleview Cablevision) in Simpsonville, South
Carolina. Mr. McCall has served as a director of the South Carolina Cable
Television Association for the past ten years.
 
     JOHN C. PIETRI is Senior Vice President -- Engineering of Charter
Communications, Inc., Charter Communications Holding Company, Charter Holdings,
Charter Capital and Charter Investment, Inc. Prior to joining Charter
Investment, Inc. in Nov. 1998, Mr. Pietri was with Marcus Cable in Dallas, Texas
for eight years, most recently serving as Senior Vice President and Chief
Technical Officer. Prior to Marcus, Mr. Pietri served as Regional Technical
Operations Manager for West Marc Communications in Denver, Colorado, and before
that he served as Operations Manager with Minnesota Utility Contracting. Mr.
Pietri attended the University of Wisconsin-Oshkosh.
 
     MICHAEL E. RIDDLE is Senior Vice President and Chief Information Officer of
Charter Communications, Inc., Charter Communications Holding Company, Charter
Holdings and Charter Capital. From October 1995 to October 1999, Mr. Riddle
served as Director, Applied Technologies of Cox Communications. From January
1991 to October 1995, Mr. Riddle was a member of the Technical Staff of
Southwestern Bell Technology Resources, Inc. From July 1990 to January 1991, Mr.
Riddle served as Area Manager with Southwestern Bell. From 1986 to 1990, Mr.
Riddle was a member of the Technical Staff of Bell Communications Research, Inc.
From 1980 to 1986, Mr. Riddle held various management positions with
Southwestern Bell. Mr. Riddle attended Fort Hays State University.
 
     STEVEN A. SCHUMM is Executive Vice President and Assistant to the President
of Charter Communications, Inc., Charter Communications Holding Company, Charter
Holdings, Charter Capital and Charter Investment, Inc. Mr. Schumm joined Charter
Investment, Inc. in December 1998 and currently has overall responsibility for
the MIS, Regulatory and Financial Controls Groups. Prior to joining Charter
Investment, Inc., Mr. Schumm was managing partner of the St. Louis office of
Ernst & Young LLP. Mr. Schumm was with Ernst & Young LLP for 24 years and was a
partner of the firm for 14 of those years. Mr. Schumm held various management
positions with Ernst & Young LLP, including the Director of Tax Services for the
three-city area of St. Louis, Kansas City and Wichita and then National Director
of Industry Tax Services. He served as one of 10 members comprising the firm's
National Tax Committee. Mr. Schumm earned a B.S. degree from Saint Louis
University with a major in accounting.
 
     CURTIS S. SHAW is Senior Vice President, General Counsel and Secretary of
Charter Communications, Inc., Charter Communications Holding Company, Charter
Holdings, Charter Capital and Charter Investment, Inc. and is responsible for
all legal aspects of their businesses, government relations and the duties of
the corporate secretary. Prior to joining Charter Investment, Inc. in February
1997, Mr. Shaw served as Corporate Counsel to NYNEX since 1988.
 
                                       134

<PAGE>   138
 
From 1983 until 1988, Mr. Shaw served as Associate General Counsel for
Occidental Chemical Corporation, and, from 1986 until 1988, as Vice President
and General Counsel of its largest operating division. Mr. Shaw has over 25
years of experience as a corporate lawyer, specializing in mergers and
acquisitions, joint ventures, public offerings, financings, and federal
securities and antitrust law. Mr. Shaw received a B.A. with honors from Trinity
College and a J.D. from Columbia University School of Law.
 
     STEPHEN E. SILVA is Senior Vice President -- Corporate Development and
Technology of Charter Communications, Inc., Charter Communications Holding
Company, Charter Holdings, Charter Capital and Charter Investment, Inc. and is
responsible for strategic development, testing and initial rollout of new
products and services. From 1983 until joining Charter Investment, Inc. in April
1995, Mr. Silva served in various management positions at U.S. Computer
Services, Inc. (doing business as CableData), a service bureau organization
engaged in customer billing services. Mr. Silva joined Charter Investment, Inc.
as Director of Billing Services, and was promoted to Vice President --
Information Services in January 1997. Mr. Silva became Vice
President -- Corporate Development and Technology in April 1998, and was
promoted to Senior Vice President -- Corporate Development and Technology in
September 1999. Mr. Silva is a member of the board of directors of High Speed
Access Corp.
 
DIRECTOR COMPENSATION
 
     The directors of Charter Holdings and Charter Capital are not entitled to
any compensation for serving as a director, nor are they paid any fees for
attendance at any meeting of the board of directors. Directors may also be
reimbursed for the actual reasonable costs incurred in connection with
attendance at board meetings.
 
     The employee directors of Charter Communications, Inc. are not entitled to
any compensation for serving as a director, nor are they paid any fees for
attendance at any meeting of the board of directors. Each non-employee director
and director nominee has been issued 40,000 options in connection with joining
or agreeing to join the board of directors and may receive additional
compensation to be determined. Directors may also be reimbursed for the actual
reasonable costs incurred in connection with attendance at board meetings.
 
EMPLOYMENT AND CONSULTING AGREEMENTS
 
     Effective as of December 23, 1998, Jerald L. Kent entered into an
employment agreement with Mr. Allen for a three-year term with automatic
one-year renewals. The employment agreement was assigned by Mr. Allen to Charter
Investment, Inc. as of December 23, 1998. Charter Investment, Inc. subsequently
assigned Mr. Kent's employment agreement to Charter Communications, Inc. and
Charter Communications, Inc. has assumed all rights and obligations of Charter
Investment, Inc. under the agreement, except with respect to the grant of
options, which will be obligations of Charter Communications Holding Company.
 
     Under this agreement, Mr. Kent agrees to serve as President and Chief
Executive Officer of Charter Communications, Inc., with responsibility for the
nationwide general management, administration and operation of all present and
future business of Charter Communications, Inc. and its subsidiaries. During the
initial term of the agreement, Mr. Kent will receive an annual base salary of
$1,250,000, or such higher rate as may from time to time be determined by
Charter Communications, Inc.'s board of directors in its discretion. In
addition, Mr. Kent will be eligible to receive an annual bonus in an aggregate
amount not to exceed $625,000, to be determined by the board based on an
assessment of the performance of Mr. Kent as well as the achievement of certain
financial targets.
 
                                       135

<PAGE>   139
 
     Under the agreement, Mr. Kent is entitled to participate in any disability
insurance, pension, or other benefit plan afforded to employees generally or
executives of Charter Communications, Inc. Mr. Kent will be reimbursed by
Charter Communications, Inc. for life insurance premiums up to $30,000 per year,
and is granted personal use of the corporate airplane. Mr. Kent was also granted
a car valued at up to $100,000 and the fees and dues for his membership in a
country club of his choice, but has not accepted use of the car as of the date
of this offering circular. He may choose to do so in the future. Also under this
agreement and a related agreement with Charter Communications Holding Company,
Mr. Kent received options to purchase 7,044,127 Charter Communications Holding
Company membership units. The options have a term of ten years and vested 25% on
December 23, 1998. The remaining 75% vest 1/36 on the first day of each of the
36 months commencing on the first day of the thirteenth month following December
23, 1998. The terms of these options provide that immediately following the
issuance of Charter Communications Holding Company membership units, these units
will automatically convert to shares of Class A common stock. This exchange will
occur on a one-for-one basis.
 
     Charter Communications, Inc. agrees to indemnify and hold harmless Mr. Kent
to the maximum extent permitted by law from and against any claims, damages,
liabilities, losses, costs or expenses in connection with or arising out of the
performance by Mr. Kent of his duties.
 
     If the agreement expires because Charter Communications, Inc. gives Mr.
Kent notice of its intention not to extend the initial term, or if the agreement
is terminated by Mr. Kent for good reason or by Charter Communications, Inc.
without cause:
 
     - Charter Communications, Inc. will pay to Mr. Kent an amount equal to the
       aggregate base salary due to Mr. Kent for the remaining term and the
       board will consider additional amounts, if any, to be paid to Mr. Kent;
       and
 
     - any unvested options of Mr. Kent shall immediately vest.
 
     Effective as of November 12, 1999, Charter Communications, Inc. entered
into a consulting agreement with Howard L. Wood. In connection with this
agreement, Mr. Wood received options to purchase 40,000 membership units of
Charter Communications Holding Company, which vested immediately. The consulting
agreement has a one-year term with automatic one-year renewals. Under this
agreement, Mr. Wood provides consulting services to Charter Communications, Inc.
and will also be responsible for such other duties as the Chief Executive
Officer determines. During the term of this agreement, Mr. Wood will receive
annual cash compensation initially at a rate of $60,000. In addition, Mr. Wood
is entitled to receive disability and health benefits as well as use of an
office and a full-time secretary.
 
     Charter Communications, Inc. will indemnify and hold harmless Mr. Wood to
the maximum extent permitted by law from and against any claims, damages,
liabilities, losses, costs or expenses incurred in connection with or arising
out of the performance by him of his duties.
 
     Charter Communications, Inc. and Marc B. Nathanson have entered into an
agreement pursuant to which Mr. Nathanson is entitled to receive $125,000 per
year and certain other benefits.
 
EXECUTIVE COMPENSATION
 
     None of the executive officers listed above has ever received any
compensation from Charter Holdings or Charter Capital, nor do such individuals
expect to receive compensation from Charter Holdings or Charter Capital at any
time in the future. Such executive officers receive their compensation from
Charter Communications, Inc. Pursuant to a mutual services agreement between
Charter Communications, Inc. and Charter Investment, Inc., each of those
entities provides services to each other, including the knowledge and expertise
of their respective officers. See "Certain Relationships and Related
Transactions."
                                       136

<PAGE>   140
 
     The following table sets forth information regarding the compensation paid
by Charter Investment, Inc., the previous manager of our cable systems prior to
Charter Communications, Inc. becoming our manager, during the fiscal year ended
December 31, 1998 to the President and Chief Executive Officer and each of the
other four most highly compensated executive officers of Charter Investment,
Inc. as of December 31, 1998.
 
                           SUMMARY COMPENSATION TABLE
 

<TABLE>
<CAPTION>
                                                                                           LONG-TERM
                                                                                          COMPENSATION
                                                          ANNUAL COMPENSATION                AWARD
                                                ---------------------------------------   ------------
                                       YEAR                                  OTHER         SECURITIES
                                       ENDED                                ANNUAL         UNDERLYING       ALL OTHER
NAME AND PRINCIPAL POSITION           DEC. 31   SALARY($)   BONUS($)    COMPENSATION($)    OPTIONS(#)    COMPENSATION($)
---------------------------           -------   ---------   --------    ---------------   ------------   ---------------
<S>                                   <C>       <C>         <C>         <C>               <C>            <C>
Jerald L. Kent......................   1998      790,481    641,353              --        7,044,127(1)        18,821(2)
President and Chief Executive
Officer
Barry L. Babcock(3).................   1998      575,000    925,000(4)           --               --           41,866(5)
  Vice Chairman
Howard L. Wood......................   1998      575,000    675,000(6)           --               --           15,604(7)
  Vice Chairman
David G. Barford....................   1998      220,000    225,000(8)           --               --        8,395,235(9)
  Senior Vice President of
    Operations -- Western Division
Curtis S. Shaw......................   1998      190,000     80,000              --               --        8,182,303(10)
  Senior Vice President, General
    Counsel and Secretary
</TABLE>

 
-------------------------
 
 (1) Options for membership units in Charter Communications Holding Company
     granted pursuant to an employment agreement and a related option agreement.
 
 (2) Includes $4,000 in 401(k) plan matching contribution, $918 in life
     insurance premiums, $418 in gasoline reimbursement and $13,485 attributed
     to personal use of Charter Investment, Inc.'s airplane.
 
 (3) Mr. Babcock resigned as an executive officer of Charter Communications,
     Inc. in October 1999.
 
 (4) Includes $500,000 earned as a one-time bonus upon signing of an employment
     agreement.
 
 (5) Includes $4,000 in 401(k) plan matching contributions, $2,493 in life
     insurance premiums, $970 in gasoline reimbursement and $34,403 attributed
     to personal use of Charter Investment, Inc.'s airplane.
 
 (6) Includes $250,000 earned as a one-time bonus upon signing of an employment
     agreement.
 
 (7) Includes $4,000 in 401(k) plan matching contributions, $4,050 in life
     insurance premiums, $1,242 in gasoline reimbursement and $6,312 attributed
     to personal use of Charter Investment, Inc.'s airplane.
 
 (8) Includes $150,000 received as a one-time bonus after completion of three
     years of employment.
 
 (9) Includes $4,000 in 401(k) plan matching contribution, $347 in life
     insurance premiums, and $8,390,888 received in March 1999, in connection
     with a one-time change of control payment under the terms of a previous
     equity appreciation rights plan. This payment was triggered by the
     acquisition of us by Mr. Allen on December 23, 1998, but is income for
     1999.
 
(10) Includes $2,529 in 401(k) plan matching contribution, $807 in life
     insurance premiums, and $8,178,967 received in March 1999, in connection
     with a one-time change of control payment
 
                                       137

<PAGE>   141
 
     under the terms of a previous equity appreciation rights plan. This payment
     was triggered by the acquisition of us by Mr. Allen on December 23, 1998,
     but is income for 1999.
 
1998 OPTION GRANTS
 
     The following table shows individual grants of options made to certain
executive officers during the fiscal year ended December 31, 1998.
 

<TABLE>
<CAPTION>
                             NUMBER OF                                               POTENTIAL REALIZABLE VALUE AT
                             MEMBERSHIP     % OF TOTAL                                  ASSUMED ANNUAL RATES OF
                               UNITS         OPTIONS                               MEMBERSHIP UNIT PRICE APPRECIATION
                             UNDERLYING     GRANTED TO                                     FOR OPTION TERM(1)
                              OPTIONS       EMPLOYEES     EXERCISE    EXPIRATION   ----------------------------------
NAME                          GRANTED        IN 1998        PRICE        DATE            5%                10%
----                         ----------    ------------   ---------   ----------   ---------------   ----------------
<S>                          <C>           <C>            <C>         <C>          <C>               <C>
Jerald L. Kent.............  7,044,127(2)      100%        $20.00      12/22/08      $88,600,272       $224,530,486
Barry L. Babcock...........         --          --             --            --               --                 --
Howard L. Wood.............         --          --             --            --               --                 --
David G. Barford...........         --          --             --            --               --                 --
Curtis S. Shaw.............         --          --             --            --               --                 --
</TABLE>

 
---------------
(1) This column shows the hypothetical gains on the options granted based on
    assumed annual compound price appreciation of 5% and 10% over the full
    ten-year term of the options. The assumed rates of appreciation are mandated
    by the SEC and do not represent our estimate or projection of future prices.
 
(2) Options for membership units in Charter Communications Holding Company
    granted pursuant to an employment agreement and a related option agreement
    which amends the options granted under the employment agreement. Under these
    agreements, Mr. Kent received an option to purchase 3% of the net equity
    value of all of the cable systems managed by Charter Investment, Inc. on the
    date of the grant. The option has a term of 10 years and vested one fourth
    on December 23, 1998, with the remaining portion vesting monthly at a rate
    of 1/36th on the first of each month for months 13 through 48. Upon the
    exercise of an option, each membership unit received will automatically be
    exchanged on a one-for-one basis for shares of Charter Communications, Inc.
    Class A common stock.
 
                                       138

<PAGE>   142
 
1998 AGGREGATED OPTION EXERCISES AND OPTION VALUE TABLE
 
     The following table sets forth for certain executive officers information
concerning the options granted during the fiscal year ended December 31, 1998,
and the value of unexercised options as of December 31, 1998.
 

<TABLE>
<CAPTION>
                                                     NUMBER OF                  VALUE OF UNEXERCISED
                                               SECURITIES UNDERLYING                IN-THE-MONEY
                                                UNEXERCISED OPTIONS                  OPTIONS AT
                                                AT DECEMBER 31, 1998            DECEMBER 31, 1998(1)
                                            ----------------------------    ----------------------------
                                            EXERCISABLE    UNEXERCISABLE    EXERCISABLE    UNEXERCISABLE
                                            -----------    -------------    -----------    -------------
<S>                                         <C>            <C>              <C>            <C>
Jerald L. Kent............................   1,761,032       5,283,095              --              --
Barry L. Babcock..........................          --              --              --              --
Howard L. Wood............................          --              --              --              --
David G. Barford..........................          --              --              --              --
Curtis S. Shaw............................          --              --              --              --
</TABLE>

 
---------------
(1) No options were in-the-money as of December 31, 1998.
 
1999 OPTION GRANTS
 
     The following table shows individual grants of options made to certain
executive officers during 1999, as of November 30, 1999. All such grants were
made under the option plan.
 

<TABLE>
<CAPTION>
                              NUMBER OF                              AGGREGATE VALUE OF OPTIONS TO HOLDER IF
                              MEMBERSHIP                                 CHARTER COMMUNICATIONS, INC.'S
                                UNITS                                    COMMON STOCK PRICE PER SHARE AT
                              UNDERLYING                                      SOME FUTURE DATE IS:
                               OPTIONS     EXERCISE   EXPIRATION   -------------------------------------------
NAME                           GRANTED      PRICE        DATE      $19.00    $22.00      $26.00       $30.00
----                          ----------   --------   ----------   ------   --------   ----------   ----------
<S>                           <C>          <C>        <C>          <C>      <C>        <C>          <C>
Jerald L. Kent..............        --          --          --        --          --           --           --
Barry L. Babcock............    65,000      $20.00      2/9/09      $  0    $130,000   $  390,000   $  650,000
Howard L. Wood..............    65,000       20.00      2/9/09         0     130,000      390,000      650,000
                                80,000       19.00     11/8/09         0     240,000      560,000      880,000
David G. Barford............   200,000       20.00      2/9/09         0     400,000    1,200,000    2,000,000
Curtis S. Shaw..............   200,000       20.00      2/9/09         0     400,000    1,200,000    2,000,000
</TABLE>

 
OPTION PLAN
 
     Charter Holdings adopted an option plan on February 9, 1999, which was
assumed by Charter Communications Holding Company on May 25, 1999. This plan
provides for the grant of options to purchase up to 25,009,798 membership units
in Charter Communications Holding Company, which is equal to 10% of the
aggregate equity value of the subsidiaries of Charter Communications Holding
Company as of February 9, 1999, the date of adoption of the plan. The plan
provides for grants of options to current and prospective to employees and
consultants of Charter Communications Holding Company and its affiliates and
current and prospective non-employee directors of Charter Communications, Inc.
The plan is intended to promote the long-term financial interest of Charter
Communications Holding Company and its affiliates by encouraging eligible
individuals to acquire an ownership position in Charter Communications Holding
Company and its affiliates and providing incentives for performance. The options
expire after ten years from the date of grant. As of December 31, 1999, a total
of 13,713,481 options are outstanding under the plan. Of the options granted on
February 9, 1999, there remain outstanding 8,626,081 options with an exercise
price of $20.00. Of the options granted on April 5, 1999, there remain
outstanding 416,600 options with an exercise price of $20.73. Of the options
granted on November 8, 1999, there remain outstanding 4,670,800 options with an
exercise price of $19.00. Of the options granted on February 9, 1999,
 
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<PAGE>   143
 
130,000 options have vested. Of the remaining 8,496,081 options granted on that
date, one-fourth vest on April 3, 2000 and the remainder vest 1/45 on each
monthly anniversary following April 3, 2000. One-fourth of the options granted
on April 5, 1999 vest on the 15-month anniversary from April 5, 1999, with the
remainder vesting 1/45 on each monthly anniversary for 45 months following the
15-month anniversary of the date of grant. Of the options granted on November 8,
1999, 200,000 options have vested. Of the remaining 4,470,800 options granted on
that date, one-fourth vest on February 12, 2001, with the remainder vesting 1/45
on each monthly anniversary following the 15-month anniversary of the date of
grant. The options expire after ten years from the date of grant. Under the
plan, the plan administrator has the discretion to accelerate the vesting of any
options.
 
     Under the terms of the plan, each membership unit held as a result of
exercise of options will be exchanged automatically for shares of Class A common
stock of Charter Communications, Inc. on a one-for-one basis.
 
     Any unvested options issued under the plan vest immediately upon a change
of control of Charter Communications Holding Company. Options will not vest upon
a change of control, however, to the extent that any such acceleration of
vesting would result in the disallowance of specified tax deductions that would
otherwise be available to Charter Communications Holding Company or any of its
affiliates or to the extent that any optionee would be liable for any excise tax
under a specified section of the tax code. In the plan, a change of control
includes:
 
          (1) a sale of more than 49.9% of the outstanding membership units in
     Charter Communications Holding Company, except where Mr. Allen and his
     affiliates retain effective voting control of Charter Communications
     Holding Company;
 
          (2) a merger or consolidation of Charter Communications Holding
     Company with or into any other corporation or entity, except where Mr.
     Allen and his affiliates retain effective voting control of Charter
     Communications Holding Company; or
 
          (3) any other transaction or event, including a sale of the assets of
     Charter Communications Holding Company, that results in Mr. Allen holding
     less than 50.1% of the voting power of the surviving entity, except where
     Mr. Allen and his affiliates retain effective voting control of Charter
     Communications Holding Company.
 
The sale of Charter Communications, Inc. Class A common stock in the initial
public offering was not a change of control under the option plan.
 
     If an optionee's employment with or service to Charter Communications
Holding Company or its affiliates is terminated other than for cause, the
optionee has the right to exercise any vested options within sixty days of the
termination of employment. After this sixty-day period, all vested and unvested
options held by the optionee are automatically canceled. If an optionee's
employment or service is terminated for cause, any unexercised options are
automatically canceled. In this case, Mr. Allen, or, at his option, Charter
Communications Holding Company will have the right for ninety days after
termination to purchase all membership units held by the optionee for a purchase
price equal to the exercise price at which the optionee acquired the membership
units, or the optionee's purchase price for the membership units if they were
not acquired on the exercise of an option.
 
     In the event of an optionee's death or disability, all vested options may
be exercised until the earlier of their expiration and one year after the date
of the optionee's death or disability. Any options not so exercised will
automatically be canceled.
 
                                       140

<PAGE>   144
 
     Upon termination for any other reason, all unvested options will
immediately be canceled and the optionee will not be entitled to any payment.
All vested options will be automatically canceled if not exercised within ninety
days after termination.
 
LIMITATION OF DIRECTORS' LIABILITY AND INDEMNIFICATION MATTERS
 
     The limited liability company agreement of Charter Holdings and the
certificate of incorporation of Charter Capital limit the liability of their
respective directors to the maximum extent permitted by Delaware law. The
Delaware General Corporation Law provides that a limited liability company and a
corporation may eliminate or limit the personal liability of a director for
monetary damages for breach of fiduciary duty as a director, except for
liability for:
 
     (1) any breach of the director's duty of loyalty to the corporation and its
stockholders;
 
     (2) acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
 
     (3) unlawful payments of dividends or unlawful stock purchases or
redemptions; or
 
     (4) any transaction from which the director derived an improper personal
benefit.
 
     The limited liability company agreement of Charter Holdings and the by-laws
of Charter Capital provide that directors and officers shall be indemnified for
acts or omissions performed or omitted that are determined, in good faith, to be
in our best interest. No such indemnification is available for actions
constituting bad faith, willful misconduct or fraud.
 
     Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling Charter Holdings
and Charter Capital pursuant to the foregoing provisions, we have been informed
that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
 
                                       141

<PAGE>   145
 
                            PRINCIPAL EQUITY HOLDERS
 
     Charter Holdings is a direct, wholly owned subsidiary of Charter
Communications Holding Company. Charter Communications, Inc. holds a 38%
economic interest and 100% of the voting interest in Charter Communications
Holding Company.
 
     The following table sets forth certain information regarding beneficial
ownership of Charter Communications, Inc. common stock and Charter
Communications Holding Company common membership units as of December 15, 1999
by:
 
     - each person known by us to own beneficially 5% or more of the outstanding
       shares of Charter Communications, Inc. common stock and Charter
       Communications Holding Company membership units;
 
     - each of our directors who beneficially owns Charter Communications, Inc.
       common stock or Charter Communications Holding Company membership units;
 
     - each of our named executive officers who beneficially owns Charter
       Communications, Inc. common stock or Charter Communications Holding
       Company membership units; and
 
     - all current directors and executive officers as a group.
 
     With respect to the percentage of voting power set forth in the following
table:
 
     - each holder of Class A common stock is entitled to one vote per share;
       and
 
     - each holder of Class B common stock is entitled to a number of votes
       based on the number of outstanding Class B common stock and outstanding
       membership units exchangeable for Class B common stock. For example, Mr.
       Allen will be entitled to ten votes for each share of Class B common
       stock held by him or his affiliates and ten votes for each membership
       unit held by him or his affiliates.
 

<TABLE>
<CAPTION>
                                                         NUMBER OF           PERCENTAGE OF
NAME AND ADDRESS OF                                 SHARES BENEFICIALLY   SHARES BENEFICIALLY     PERCENTAGE OF
BENEFICIAL OWNER                                         OWNED(1)              OWNED(1)          VOTING POWER(1)
-------------------                                 -------------------   -------------------   ------------------
<S>                                                 <C>                   <C>                   <C>
Paul G. Allen(2)(3)...............................       324,320,544              55.6%                93.6%
Charter Investment, Inc.(4).......................       217,585,246              37.3%                 0.0%
Vulcan Cable III Inc.(2)(5).......................       106,685,298              18.3%                 0.0%
Jerald L. Kent(4)(6)..............................         5,266,032                 *                    *
Barry L. Babcock(4)(7)............................         2,565,000                 *                  0.0%
Howard L. Wood(4)(8)..............................         1,145,000                 *                  0.0%
Marc B. Nathanson(9)..............................         7,401,366               1.3%                   *
Ronald L. Nelson(10)..............................            40,000                 *                  0.0%
Nancy B. Peretsman(10)............................            40,000                 *                  0.0%
William D. Savoy(11)..............................           429,184                 *                  0.0%
Curtis S. Shaw(12)................................             5,000                 *                    *
David G. Barford(12)..............................             2,500                 *                    *
All directors and executive officers as a group
  (19 persons)....................................       333,928,442              57.3%                93.8%
</TABLE>

 
---------------
  *  Less than 1%.
 
 (1) Membership units of Charter Communications Holding Company are exchangeable
     for Charter Communications, Inc. common stock on a one-for-one basis. Class
     B common stock is convertible into Class A common stock on a one-for-one
     basis. In calculating the voting power percentages, we have assumed that
     membership units have not been exchanged for Class A or Class B common
     stock. In calculating beneficial share ownership and percentages, we have
 
                                       142

<PAGE>   146
 
     assumed that specified sellers in the Bresnan acquisition have received $1
     billion of their consideration in Charter Communications Holding Company
     membership units rather than in cash and these membership units have not
     been exchanged for shares of Class A common stock.
 
 (2) The address of these persons is 110 110th Street, NE, Suite 500, Bellevue,
     WA 98004.
 
 (3) Represents 217,585,246 membership units held by Charter Investment, Inc.;
     106,685,298 membership units held by Vulcan Cable III Inc.; and 50,000
     shares of Class B common stock held directly by Mr. Allen. Of this amount,
     389,184 shares of Class A common stock are subject to options to purchase
     granted by Vulcan Cable III Inc. to Mr. Savoy that have vested or will vest
     within 60 days.
 
 (4) The address of these persons is Charter Communications, Inc., 12444
     Powerscourt Drive, St. Louis, MO 63131.
 
 (5) Of this amount, 389,184 shares of Class A common stock are subject to
     options to purchase granted by Vulcan Cable III Inc. to Mr. Savoy that have
     vested or will vest within 60 days.
 
 (6) Represents 3,500,000 shares of Class A common stock issuable upon the
     exchange of membership units attributable to such holder because of his
     equity interest in Charter Investment, Inc.; 1,761,032 shares of Class A
     common stock issuable upon the exchange of membership units issuable upon
     the exercise of options to purchase such membership units that have vested
     or will vest within 60 days; and 5,000 shares of Class A common stock.
 
 (7) Represents 2,500,000 shares of Class A common stock issuable upon the
     exchange of membership units attributable to such holder because of his
     equity interest in Charter Investment, Inc. and 65,000 shares of Class A
     common stock issuable upon exchange of membership units issuable upon
     exercise of options to purchase such membership units that have vested.
 
 (8) Represents 1,000,000 shares of Class A common stock issuable upon the
     exchange of membership units attributable to such holder because of his
     equity interest in Charter Investment, Inc. and 145,000 shares of Class A
     common stock issuable upon exchange of membership units issuable upon
     exercise of options to purchase such membership units that have vested or
     will vest within 60 days.
 
 (9) Represents 40,000 shares of Class A common stock issuable upon exchange of
     membership units issuable upon exercise of options to purchase such
     membership units that have vested and 7,361,366 shares of Class A common
     stock attributable to such holder because of his ownership interests in or
     control of various entities that hold shares of Class A common stock. The
     address of this person is c/o Falcon Communications LP and Affiliates,
     10900 Wilshire Blvd., Los Angeles, CA 90024.
 
(10) Represents 40,000 shares of Class A common stock issuable upon the exchange
     of membership units issuable upon exercise of options to purchase such
     membership units that have vested or will vest within 60 days.
 
(11) Represents 40,000 shares of Class A common stock issuable upon the exchange
     of membership units issuable upon exercise of options to purchase such
     membership units that have vested or will vest within 60 days and 389,184
     shares of Class A common stock subject to options to purchase granted to
     such holder by Vulcan Cable III Inc. that have vested or will vest within
     60 days.
 
(12) Represents shares of Class A common stock.
 
                                       143

<PAGE>   147
 
                 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
     The following sets forth certain transactions in which we and our
directors, executive officers and affiliates, including the directors and
executive officers of Charter Communications, Inc., Charter Holdings, Charter
Capital and Charter Investment, Inc., are involved. We believe that each of the
transactions described below was on terms no less favorable to us than could
have been obtained from independent third parties.
 
TRANSACTIONS WITH MANAGEMENT AND OTHERS
 
MERGER WITH MARCUS
 
     On April 23, 1998, Mr. Allen acquired approximately 99% of the non-voting
economic interests in Marcus Cable, and agreed to acquire the remaining
interests in Marcus Cable. The aggregate purchase price was approximately $1.4
billion, excluding $1.8 billion in debt assumed. On February 22, 1999, Marcus
Holdings was formed, and all of Mr. Allen's interests in Marcus Cable were
transferred to Marcus Holdings on March 15, 1999. On March 31, 1999, Mr. Allen
completed the acquisition of all remaining interests in Marcus Cable.
 
     On December 23, 1998, Mr. Allen acquired approximately 94% of the equity of
Charter Investment, Inc. for an aggregate purchase price of approximately $2.2
billion, excluding $2.0 billion in debt assumed. On February 9, 1999, Charter
Holdings was formed as a wholly owned subsidiary of Charter Investment, Inc. On
February 10, 1999, Charter Operating was formed as a wholly owned subsidiary of
Charter Holdings. In April 1999, Mr. Allen merged Marcus Holdings into Charter
Holdings, and the operating subsidiaries of Marcus Holdings and all of the cable
systems they owned came under the ownership of Charter Holdings, and, in turn,
Charter Operating. On May 25, 1999, Charter Communications Holding Company was
formed as a wholly owned subsidiary of Charter Investment, Inc. All of Charter
Investment, Inc.'s equity interests in Charter Holdings were transferred to
Charter Communications Holding Company.
 
     In March 1999, we paid $20 million to Vulcan Northwest, an affiliate of Mr.
Allen, for reimbursement of direct costs incurred in connection with Mr. Allen's
acquisition of Marcus Cable. Such costs were principally comprised of financial,
advisory, legal and accounting fees.
 
     On April 7, 1999, Mr. Allen merged Marcus Holdings into Charter Holdings.
Charter Holdings survived the merger, and the operating subsidiaries of Marcus
Holdings became subsidiaries of Charter Holdings.
 
     At the time Charter Holdings issued $3.6 billion in principal amount of
notes in March 1999, this merger had not yet occurred. Consequently, Marcus
Holdings was a party to the indentures governing the March 1999 Charter Holdings
notes as a guarantor of Charter Holdings' obligations. Charter Holdings loaned
some of the proceeds from the sale of the March 1999 Charter Holdings notes to
Marcus Holdings, which amounts were used to complete the cash tender offers for
then-outstanding notes of subsidiaries of Marcus Holdings. Marcus Holdings
issued a promissory note in favor of Charter Holdings. The promissory note was
in the amount of $1.7 billion, with an interest rate of 9.92% and a maturity
date of April 1, 2007. Marcus Holdings guaranteed its obligations under the
promissory note by entering into a pledge agreement in favor of Charter Holdings
pursuant to which Marcus Holdings pledged all of its equity interests in Marcus
Cable as collateral for the payment and performance of the promissory note.
Charter Holdings pledged this promissory note to the trustee under the
indentures for the March 1999 Charter Holdings notes as collateral for the equal
and ratable benefit of the holders of the March 1999 Charter Holdings notes.
Upon the closing of the merger, and in accordance with the terms of the March
1999 Charter Holdings notes and the indentures for the March 1999 Charter
Holdings notes:
 
     - the guarantee issued by Marcus Holdings was automatically terminated;
 
                                       144

<PAGE>   148
 
     - the promissory note issued by Marcus Holdings was automatically
       extinguished, with no interest having accrued or being paid; and
 
     - the pledge in favor of Charter Holdings of the equity interests in Marcus
       Cable as collateral under the promissory note and the pledge in favor of
       the trustee of the promissory note as collateral for the March 1999
       Charter Holdings notes were automatically released.
 
MANAGEMENT AGREEMENTS WITH CHARTER COMMUNICATIONS, INC.
 
     PREVIOUS MANAGEMENT AGREEMENTS.  Prior to March 18, 1999, pursuant to a
series of management agreements with certain of our subsidiaries, Charter
Investment, Inc. provided management and consulting services to those
subsidiaries. In exchange for these services, Charter Investment, Inc. was
entitled to receive management fees of 3% to 5% of the gross revenues of all of
our systems plus reimbursement of expenses. However, our previous credit
facilities limited such management fees to 3% of gross revenues. The balance of
management fees payable under the previous management agreements was accrued.
Payment is at the discretion of Charter Investment, Inc. Certain deferred
portions of management fees bore interest at the rate of 8% per annum. Following
the closing of Charter Operating's current credit facilities, the previous
management agreements were replaced by a revised management agreement. The
material terms of our previous management agreements are substantially similar
to the material terms of the revised management agreement.
 
     PREVIOUS MANAGEMENT AGREEMENT WITH MARCUS.  On October 6, 1998, Marcus
Cable entered into a management consulting agreement with Charter Investment,
Inc. pursuant to which Charter Investment, Inc. agreed to provide certain
management and consulting services to Marcus Cable and its subsidiaries, in
exchange for a fee equal to 3% of the gross revenues of Marcus Cable's systems
plus reimbursement of expenses. Management fees expensed by Marcus Cable during
the period from October 1998 to December 31, 1998 were approximately $3.3
million. Upon Charter Holdings' merger with Marcus Holdings and the closing of
Charter Operating's current credit facilities, this agreement was terminated and
the subsidiaries of Marcus Cable began to receive management and consulting
services from Charter Investment, Inc. under the revised management agreement
described below.
 
     THE REVISED MANAGEMENT AGREEMENT.  On February 23, 1999, Charter
Investment, Inc. entered into a revised management agreement with Charter
Operating, which was amended and restated as of March 17, 1999. Upon the closing
of Charter Operating's current credit facilities on March 18, 1999, our previous
management agreements and the management consulting agreement with Marcus Cable
terminated and the revised management agreement became operative. Under the
revised management agreement, Charter Investment, Inc. agreed to manage the
operations of the cable television systems owned by Charter Operating's
subsidiaries, as well as any cable television systems Charter Operating
subsequently acquires. The term of the revised management agreement is ten
years.
 
     The revised management agreement provided that Charter Operating would pay
Charter Investment, Inc. a management fee equal to its actual costs to provide
these services and a management fee of 3.5% of gross revenues. Gross revenues
include all revenues from the operation of Charter Operating's cable systems,
including, without limitation, subscriber payments, advertising revenues, and
revenues from other services provided by Charter Operating's cable systems.
Gross revenues do not include interest income or income from investments
unrelated to our cable systems.
 
     Payment of the management fee to Charter Investment, Inc. is permitted
under Charter Operating's current credit facilities, but ranks below Charter
Operating's payment obligations under its current credit facilities. In the
event any portion of the management fee due and payable is not paid by Charter
Operating, it is deferred and accrued as a liability. Any deferred amount of the
 
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<PAGE>   149
 
management fee will bear interest at the rate of 10% per annum, compounded
annually, from the date it was due and payable until the date it is paid. As of
September 30, 1999, no interest had accrued.
 
     Pursuant to the terms of the revised management agreement, Charter
Operating agreed to indemnify and hold harmless Charter Investment, Inc. and its
shareholders, directors, officers and employees. This indemnity extends to any
and all claims or expenses, including reasonable attorneys' fees, incurred by
them in connection with any action not constituting gross negligence or willful
misconduct taken by them in good faith in the discharge of their duties to
Charter Operating.
 
     The total management fees, including expenses, earned by Charter
Investment, Inc. under all management agreements were as follows:
 

<TABLE>
<CAPTION>
                                                                           TOTAL FEES
YEAR                                                          FEES PAID      EARNED
----                                                          ---------    ----------
                                                                  (IN THOUSANDS)
<S>                                                           <C>          <C>
Nine Months Ended September 30, 1999........................   $23,830      $33,095
Year Ended December 31, 1998................................    17,073       27,500
Year Ended December 31, 1997................................    14,772       20,290
Year Ended December 31, 1996................................    11,792       15,443
</TABLE>

 
     As of September 30, 1999, approximately $29.2 million remains unpaid under
all management agreements.
 
     ASSIGNMENT AND AMENDMENT OF REVISED CHARTER OPERATING MANAGEMENT
AGREEMENT.  On November 12, 1999, Charter Investment, Inc. assigned to Charter
Communications, Inc. all of its rights and obligations under the revised Charter
Operating management agreement. In connection with the assignment, the revised
Charter Operating management agreement was amended to eliminate the 3.5%
management fee. Under the amended agreement, Charter Communications, Inc. is
entitled to reimbursement from Charter Operating for all of its expenses, costs,
losses, liabilities and damages paid or incurred by it in connection with the
performance of its services under the amended agreement, with no cap on the
amount of reimbursement.
 
     MANAGEMENT AGREEMENT WITH CHARTER COMMUNICATIONS, INC.  On November 12,
1999, Charter Communications, Inc. entered into a management agreement with
Charter Communications Holding Company. Under this agreement, Charter
Communications, Inc. manages and operates the cable television systems owned or
to be acquired by Charter Communications Holding Company and its subsidiaries,
to the extent such cable systems are not subject to management agreements
between Charter Communications, Inc. and specific subsidiaries of Charter
Communications Holding Company.
 
     The terms of this management agreement are substantially similar to the
terms of the Charter Operating management agreement. Charter Communications,
Inc. is entitled to reimbursement from Charter Communications Holding Company
for all expenses, costs, losses, liabilities and damages paid or incurred by
Charter Communications, Inc. in connection with the performance of its services,
which expenses will include any fees Charter Communications, Inc. is obligated
to pay under the mutual services agreement described below. There is no cap on
the amount of reimbursement to which Charter Communications, Inc. is entitled.
 
     MUTUAL SERVICES AGREEMENT WITH CHARTER INVESTMENT, INC.  Charter
Communications, Inc. has only thirteen employees, all of whom are also executive
officers of Charter Investment, Inc. Effective November 12, 1999, Charter
Communications, Inc. and Charter Investment, Inc. entered into a mutual services
agreement pursuant to which each entity provides services to the other as may be
reasonably requested in order to manage Charter Communications Holding Company
and to manage
 
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<PAGE>   150
 
and operate the cable systems owned by its subsidiaries, including Charter
Holdings. In addition, officers of Charter Investment, Inc. also serve as
officers of Charter Communications, Inc. The officers and employees of each
entity are available to the other to provide the services described above. All
expenses and costs incurred with respect to the services provided are paid by
Charter Communications, Inc. Charter Communications, Inc. will indemnify and
hold harmless Charter Investment, Inc. and its directors, officers and employees
from and against any and all claims that may be made against any of them in
connection with the mutual services agreement except due to its or their gross
negligence or willful misconduct. The term of the mutual services agreement is
ten years, commencing on November 12, 1999, and the agreement may be terminated
at any time by either party upon thirty days' written notice to the other.
 
     FALCON MANAGEMENT AGREEMENT.  On November 12, 1999, Falcon Cable
Communications, a parent company of the Falcon operating companies, entered into
a management consulting agreement with Charter Communications, Inc. pursuant to
which Charter Communications, Inc. agreed to provide certain management and
consulting services to Falcon and its subsidiaries. The term of the management
agreement is ten years. The management agreement provides that Falcon will pay
Charter Communications, Inc. a management fee equal to its actual costs to
provide these services but limited to 5% of gross revenues.
 
     Gross revenues include all revenues from the operation of Falcon's cable
systems, including, without limitation, subscriber payments, advertising
revenues, and revenues from other services provided by Falcon's cable systems.
Gross revenues do not include interest income or income from investments
unrelated to cable systems.
 
     Payment of the management fee is permitted under Falcon's current credit
facilities, but ranks below Falcon's senior debt and shall not be paid except to
the extent allowed under the Falcon credit facilities. In the event any portion
of the management fee due and payable is not paid by Falcon, it is deferred and
accrued as a liability. Any deferred amount of the management fee will bear
interest at the rate of 10% per annum, compounded annually, from the date it was
due and payable until the date it is paid.
 
     FANCH MANAGEMENT AGREEMENT.  On November 12, 1999, CC VI Operating Company,
LLC, the parent company of the Fanch operating companies, entered into a
management consulting agreement with Charter Communications, Inc. pursuant to
which Charter Communications, Inc. agreed to provide certain management and
consulting services to Fanch and its subsidiaries. The term of the management
agreement is ten years. The management agreement provides that Fanch will pay
Charter Communications, Inc. a management fee equal to its actual costs to
provide these services but limited to 5% of gross revenues.
 
     Gross revenues include all revenues from the operation of Fanch's cable
systems, including, without limitation, subscriber payments, advertising
revenues, and revenues from other services provided by Fanch's cable systems.
Gross revenues do not include interest income or income from investments
unrelated to cable systems.
 
     Payment of the management fee is permitted under Fanch's current credit
facilities, but ranks below Fanch's senior debt and shall not be paid except to
the extent allowed under the Fanch credit facilities. In the event any portion
of the management fee due and payable is not paid by Fanch, it is deferred and
accrued as a liability. Any deferred amount of the management fee will bear
interest at the rate of 10% per annum, compounded annually, from the date it was
due and payable until the date it is paid.
 
     AVALON MANAGEMENT ARRANGEMENT.  Under the Avalon limited liability company
agreements, Charter Communications, Inc. agreed to provide certain management
and consulting services to CC Michigan, CC New England and their subsidiaries.
Under these arrangements, CC Michigan and
 
                                       147

<PAGE>   151
 
CC New England will pay Charter Communications, Inc. a management fee equal to
their actual costs to provide these services but limited to 2% of gross
revenues.
 
     Gross revenues include all revenues from the operation of the Avalon cable
systems, including, without limitation, subscriber payments, advertising
revenues, and revenues from other services provided by Avalon's cable systems.
Gross revenues do not include interest income or income from investments
unrelated to cable systems.
 
     Payment of the management fee is permitted under the current credit
facilities of CC Michigan and CC New England, but ranks below the senior debt of
such companies and shall not be paid except to the extent allowed under such
credit facilities. In the event any portion of the management fee due and
payable is not paid by CC Michigan or CC New England, it is deferred and accrued
as a liability. Any deferred amount of the management fee will bear interest at
the rate of 10% per annum, compounded annually, from the date it was due and
payable until the date it is paid.
 
     BRESNAN MANAGEMENT AGREEMENT.  It is anticipated that upon closing of the
Bresnan acquisition, Charter Communications, Inc. will enter into a management
agreement with Bresnan similar to those described above.
 
CONSULTING AGREEMENT
 
     On March 10, 1999, Charter Holdings entered into a consulting agreement
with Vulcan Northwest and Charter Investment, Inc. Pursuant to the terms of the
consulting agreement, Charter Holdings retained Vulcan Northwest and Charter
Investment, Inc. to provide advisory, financial and other consulting services
with respect to acquisitions of the business, assets or stock of other companies
by Charter Holdings or by any of its affiliates. Such services include
participation in the evaluation, negotiation and implementation of these
acquisitions. The agreement expires on December 31, 2000, and automatically
renews for successive one-year terms unless otherwise terminated.
 
     All reasonable out-of-pocket expenses incurred by Vulcan Northwest and
Charter Investment, Inc. are Charter Holdings' responsibility and must be
reimbursed. Charter Holdings must also pay Vulcan Northwest and Charter
Investment, Inc. a fee for their services rendered for each acquisition made by
Charter Holdings or any of its affiliates. This fee equals 1% of the aggregate
value of such acquisition. Neither Vulcan Northwest nor Charter Investment, Inc.
received or will receive a fee in connection with the American Cable,
Renaissance, Greater Media, Helicon, Vista, Cable Satellite, InterMedia, Rifkin,
Avalon, Falcon and Fanch acquisitions. No such fee is or will be payable to
either Vulcan Northwest or Charter Investment, Inc. in connection with the
Bresnan acquisition or the Swap Transaction. Charter Holdings has also agreed to
indemnify and hold harmless Vulcan Northwest and Charter Investment, Inc., and
their respective officers, directors, stockholders, agents, employees and
affiliates, for all claims, actions, demands and expenses that arise out of this
consulting agreement and the services they provide to Charter Holdings.
 
     Mr. Allen owns 100% of Vulcan Northwest and is the Chairman of the board.
William D. Savoy, another of Charter Communications, Inc.'s directors, is the
President and a director of Vulcan Northwest.
 
TRANSACTIONS WITH MR. ALLEN
 
     On December 21, 1998, Mr. Allen contributed approximately $431 million to
Charter Investment, Inc. and received non-voting common stock of Charter
Investment, Inc. Such non-voting common stock was converted to voting common
stock on December 23, 1998.
 
     On December 23, 1998, Mr. Allen contributed approximately $1.3 billion to
Charter Investment, Inc. and received voting common stock of Charter Investment,
Inc. Additionally, Charter Investment,
 
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<PAGE>   152
 
Inc. borrowed approximately $6.2 million in the form of a bridge loan from Mr.
Allen. This bridge loan was contributed by Mr. Allen to Charter Investment, Inc.
in March 1999. No interest on such bridge loan was accrued or paid by Charter
Investment, Inc. On the same date, Mr. Allen also contributed approximately
$223.5 million to Vulcan Cable II, Inc., a company owned by Mr. Allen. Vulcan II
was merged with and into Charter Investment, Inc.
 
     On January 5, 1999, Charter Investment, Inc. borrowed approximately $132.2
million in the form of a bridge loan from Mr. Allen. This bridge loan was
contributed by Mr. Allen to Charter Investment, Inc. in March 1999. No interest
on such bridge loan was accrued or paid by Charter Investment, Inc. On the same
date, Mr. Allen also acquired additional voting common stock of Charter
Investment, Inc. from Jerald L. Kent, Howard L. Wood and Barry L. Babcock for an
aggregate purchase price of approximately $176.7 million.
 
     On January 11, 1999, Charter Investment, Inc. borrowed $25 million in the
form of a bridge loan from Mr. Allen. This bridge loan was contributed by Mr.
Allen to Charter Investment, Inc. in March 1999. No interest on such bridge loan
was accrued or paid by Charter Investment, Inc.
 
     On March 16, 1999, Charter Investment, Inc. borrowed approximately $124.8
million in the form of a bridge loan from Mr. Allen. This bridge loan was
contributed by Mr. Allen to Charter Investment, Inc. in March 1999. No interest
on such bridge loan was accrued or paid by Charter Investment, Inc.
 
     The $431 million contribution was used to redeem stock of certain
shareholders in Charter Investment, Inc. The $1.3 billion and $223.5 million
contributions by Mr. Allen were used by Charter Investment, Inc. to purchase the
remaining interest in CCA Group and CharterComm Holdings. All other
contributions to Charter Investment, Inc. by Mr. Allen were used in operations
of Charter Investment, Inc. and were not contributed to Charter Holdings.
 
     On August 10, 1999, Vulcan Cable III Inc. purchased 24.1 million Charter
Communications Holding Company membership units for $500 million. On September
22, 1999, Mr. Allen, through Vulcan Cable III Inc., contributed an additional
$825 million, consisting of approximately $644.3 million in cash and
approximately $180.7 million in equity interests in Rifkin that Vulcan Cable III
Inc. had acquired in the Rifkin acquisition in exchange for 39.8 million Charter
Communications Holding Company membership units. Charter Communications Holding
Company in turn contributed the cash and equity interests to Charter Holdings.
 
     As part of the membership interests purchase agreement, Vulcan Ventures
Incorporated, Charter Communications, Inc., Charter Investment, Inc. and Charter
Communications Holding Company entered into an agreement on September 21, 1999
regarding the right of Vulcan Ventures to use up to eight of our digital cable
channels. Specifically, we will provide Vulcan Ventures with exclusive rights
for carriage of up to eight digital cable television programming services or
channels on each of the digital cable television systems with local control of
the digital product now or hereafter owned, operated, controlled or managed by
us of 550 megahertz or more. If the system offers digital services but has less
than 550 megahertz of capacity, then the programming services will be equitably
reduced. The programming services will consist of any designated by Vulcan
Ventures. Upon request of Vulcan Ventures, we will attempt to reach a
comprehensive programming agreement pursuant to which we will pay the
programmer, if possible, a fee per digital subscriber. If such fee arrangement
is not achieved, then we and the programmer shall enter into a standard
programming agreement. We believe that this transaction is on terms at least as
favorable to us as Mr. Allen would negotiate with other cable operators.
 
     In November 1999, in connection with Charter Communications, Inc.'s initial
public offering, Mr. Allen, through Vulcan Cable III Inc., purchased $750
million of membership units of Charter
 
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Communications Holding Company at a per membership unit price equal to the net
initial public offering price.
 
     During the second and third quarters of 1999, one of our subsidiaries sold
shared interests in several airplanes to Mr. Allen for approximately $8 million.
We believe that the purchase price paid by Mr. Allen for these interests was the
fair market price.
 
ALLOCATION OF BUSINESS OPPORTUNITIES WITH MR. ALLEN
 
     As described under "-- Business Relationships," Mr. Allen and a number of
his affiliates have interests in various entities that provide services or
programming to a number of our subsidiaries. Given the diverse nature of Mr.
Allen's investment activities and interests, and to avoid the possibility of
future disputes as to potential business, Charter Communications Holding Company
and Charter Communications, Inc., under the terms of their respective
organizational documents, may not, and may not allow their subsidiaries to,
engage in any business transaction outside the cable transmission business
except for the joint venture with Broadband Partners and incidental businesses
engaged in as of the closing of the initial public offering of Charter
Communications, Inc. This restriction will remain in effect until all of the
shares of Charter Communications, Inc.'s high-vote Class B common stock have
been converted into shares of Class A common stock due to Mr. Allen's equity
ownership falling below specified threshholds.
 
     Should Charter Communications, Inc. or Charter Communications Holding
Company wish to pursue, or allow their subsidiaries to pursue, a business
transaction outside of this scope, it must first offer Mr. Allen the opportunity
to pursue the particular business transaction. If he decides not to do so and
consents to Charter Communications, Inc., Charter Communications Holding Company
or any of their subsidiaries engaging in the business transaction, it will be
able to do so. In any such case, the restated certificate of incorporation and
the limited liability company agreement of Charter Communications, Inc. and
Charter Communications Holding Company would be amended accordingly to
appropriately modify the current restrictions on their ability to engage in any
business other than the cable transmission business. The cable transmission
business means the business of transmitting video, audio, including telephony,
and data over cable television systems owned, operated or managed by us from
time to time. The businesses of RCN Corporation, a company in which Mr. Allen
has made a significant investment, are not considered cable transmission
businesses under these provisions. See "-- Business Relationships -- RCN
Corporation."
 
     Under Delaware corporate law, each director of Charter Communications,
Inc., including Mr. Allen, is generally required to present to Charter
Communications, Inc. any opportunity he or she may have to acquire any cable
transmission business or any company whose principal business is the ownership,
operation or management of cable transmission businesses so that we may
determine whether we wish to pursue such opportunities. However, Mr. Allen and
the other directors generally will not have an obligation to present to Charter
Communications, Inc. other business opportunities and they may exploit such
opportunities for their own account.
 
ASSIGNMENTS OF ACQUISITIONS
 
     On January 1, 1999, Charter Investment, Inc. entered into a membership
purchase agreement with ACEC Holding Company, LLC for the acquisition of
American Cable. On February 23, 1999, Charter Investment, Inc. assigned its
rights and obligations under this agreement to one of our subsidiaries, Charter
Communications Entertainment II, LLC, effective as of March 8, 1999, or such
earlier date as mutually agreed to by the parties. The acquisition of American
Cable was completed in May 1999.
 
     On February 17, 1999, Charter Investment, Inc. entered into an asset
purchase agreement with Greater Media, Inc. and Greater Media Cablevision, Inc.
for the acquisition of the Greater Media
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<PAGE>   154
 
systems. On February 23, 1999, Charter Investment, Inc. assigned its rights and
obligations under this agreement to one of our subsidiaries, Charter
Communications Entertainment I, LLC. The acquisition of the Greater Media
systems was completed in June 1999.
 
     On April 26, 1999, Charter Investment, Inc. entered into a purchase and
sale agreement with InterLink Communications Partners, LLLP and the other
sellers listed on the signature pages of the agreement. On June 30, 1999,
Charter Investment, Inc. assigned its rights and obligations under this
agreement to Charter Operating. The acquisition contemplated by these agreements
was completed in September 1999.
 
     On April 26, 1999, Charter Investment, Inc. entered into a purchase and
sale agreement with Rifkin Acquisition Partners L.L.L.P and the other sellers
listed on the signature pages of the agreement. On June 30, 1999, Charter
Investment, Inc. assigned its rights and obligations under this agreement to
Charter Operating. The acquisition contemplated by these agreements was
completed in September 1999.
 
     On April 26, 1999, Charter Investment, Inc. entered into the RAP indemnity
agreement with InterLink Communications Partners, LLLP and the other sellers and
InterLink partners listed on the signature pages of the agreement. On June 30,
1999, Charter Investment, Inc. assigned its rights and obligations under this
agreement to Charter Operating.
 
     In May 1999, Charter Investment, Inc. entered into the Falcon purchase
agreement. As of June 22, 1999, pursuant to the first amendment to the Falcon
purchase agreement, Charter Investment, Inc. assigned its rights under the
Falcon purchase agreement to Charter LLC, a subsidiary of Charter Communications
Holding Company.
 
     In May 1999, Charter Investment, Inc. entered into the Fanch purchase
agreement. On September 21, 1999, Charter Investment, Inc. assigned its rights
and obligations to purchase stock interests under this agreement to Charter
Communications Holding Company and its rights and obligations to purchase
partnership interests and assets under this agreement to Charter Communications
VI, LLC, an indirect wholly owned subsidiary of Charter Communications Holding
Company.
 
INTERCOMPANY LOANS
 
     In November 1999, Charter Communications Holding Company loaned $856
million to Charter Operating, maturing March 18, 2009. As of November 30, 1999,
the loan bore interest at a rate of 7.75% per year. The funds were used by
Charter Operating to pay down amounts outstanding under the Charter Operating
credit facilities.
 
     In November 1999, Charter Communications Holding Company loaned $20 million
to CC VI Operating Company, LLC, maturing November 30, 2009. As of November 30,
1999, the loan bore interest at a rate of 8.00% per year. The funds were used by
CC VI Operating Company to pay down a portion of amounts outstanding under the
Fanch credit facilities.
 
     In November 1999, Charter Communications Holding Company loaned $173.0
million to Falcon Cable Communications, LLC, maturing December 31, 2008. As of
November 30, 1999, the loan bore interest at a rate of 7.75% per year. The funds
were used by Falcon Cable Communications to pay down a portion of the debt under
the Falcon credit facilities.
 
EMPLOYMENT AND CONSULTING AGREEMENTS
 
     Mr. Kent has entered into an employment agreement with Charter
Communications, Inc. We have summarized this agreement in
"Management -- Employment and Consulting Agreements."
 
     Effective as of December 23, 1998, Barry L. Babcock entered into an
employment agreement with Charter Investment, Inc. for a one-year term with
automatic one-year renewals. Under this
 
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<PAGE>   155
 
agreement, Mr. Babcock agreed to serve as Vice Chairman of Charter Investment,
Inc. with responsibilities including the government and public relations of
Charter Investment, Inc. During the initial term of the agreement, Mr. Babcock
was entitled to receive a base salary of $625,000, or such higher rate as may
have been determined by the Chief Executive Officer in his discretion.
 
     This employment agreement has ceased to be effective. Mr. Babcock received
an amount equal to his base salary plus a $312,500 bonus. In addition, the
options held by Mr. Babcock vested in full.
 
     Effective as of November 12, 1999, Charter Communications, Inc. entered
into a consulting agreement with Mr. Babcock. Under this agreement, which will
expire in March 2000, Mr. Babcock provides consulting services to Charter
Communications, Inc. and will be responsible for such other duties as the Chief
Executive Officer determines. During the term of this agreement, Mr. Babcock
will receive monthly cash compensation at a rate of $10,000 per month. In
addition, Mr. Babcock is entitled to receive disability and health benefits as
well as the use of an office and secretarial services, upon request.
 
     Charter Communications, Inc. will indemnify and hold harmless Mr. Babcock
to the maximum extent permitted by law from and against any claims, damages,
liabilities, losses, costs or expenses incurred in connection with or arising
out of the performance by Mr. Babcock of his duties.
 
     Effective as of December 23, 1998, Howard L. Wood entered into an
employment agreement with Charter Investment, Inc. for a one-year term with
automatic one-year renewals. Under this agreement, Mr. Wood agreed to serve as
an officer of Charter Investment, Inc. During the initial term of the agreement,
Mr. Wood was entitled to receive a base salary of $312,500, or such higher rate
as determined by the Chief Executive Officer in his discretion. In addition, Mr.
Wood was eligible to receive an annual bonus to be determined by the board of
directors in its discretion. Mr. Wood received a one-time payment as part of his
employment agreement of $250,000. Under the agreement, Mr. Wood was entitled to
participate in any disability insurance, pension or other benefit plan afforded
to employees generally or executives of Charter Investment, Inc.
 
     Charter Investment, Inc. agreed to indemnify and hold harmless Mr. Wood to
the maximum extent permitted by law from and against any claims, damages,
liabilities, losses, costs or expenses incurred in connection with or arising
out of the performance by Mr. Wood of his duties.
 
     Effective on November 12, 1999, this employment agreement ceased to be
effective. Mr. Wood received an amount equal to his base salary plus a bonus of
$312,500. In addition, the options held by Mr. Wood vested in full.
 
     Mr. Wood has entered into a consulting agreement with Charter
Communications, Inc. We have summarized this agreement in
"Management -- Employment and Consulting Agreements."
 
     Effective as of May 25, 1999, Marc B. Nathanson entered into an employment
agreement with Charter Communications, Inc. for a three-year term. Under this
agreement, Mr. Nathanson agreed to serve as Vice-Chairman and as a director of
Charter Communications, Inc. During the term of this agreement, Mr. Nathanson is
entitled to the rights and benefits provided to other directors of Charter
Communications, Inc.
 
     Charter Communications, Inc. will indemnify and hold harmless Mr. Nathanson
to the maximum extent permitted by law from and against any claims, damages,
liabilities, losses, costs or expenses incurred in connection with or arising
out of the performance by Mr. Nathanson of his duties.
 
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<PAGE>   156
 
INSURANCE
 
     We receive insurance and workers' compensation coverage through Charter
Investment, Inc. Charter Investment, Inc.'s insurance policies provide coverage
for Charter Investment, Inc. and its
 
     - subsidiaries, and associated, affiliated and inter-related companies,
 
     - majority (51% or more) owned partnerships and joint ventures,
 
     - interest in (or its subsidiaries' interest in) any other partnerships,
       joint ventures or limited liability companies,
 
     - interest in (or its subsidiaries' interest in) any company or
       organization coming under its active management or control, and
 
     - any entity or party required to be insured under any contract or
       agreement, which may now exist, may have previously existed, or may
       hereafter be created or acquired.
 
     Charter Holdings expensed approximately $13,740,000 for the year ended
December 31, 1999, approximately $603,000 for the year ended December 31, 1998,
approximately $172,100 for the year ended December 31, 1997, and approximately
$108,000, for the year ended December 31, 1996, relating to insurance
allocations.
 
OTHER RELATIONSHIPS
 
     David L. McCall, Senior Vice President of Operations -- Eastern Division,
is a partner in a partnership that leases office space to us. The partnership
has received approximately $138,000 pursuant to such lease for the nine months
ended September 30, 1999.
 
     In January 1999, Charter Investment, Inc. issued bonuses to executive
officers in the form of three-year promissory notes. One-third of the original
outstanding principal amount of each of these notes is forgiven, as long as the
employee is still employed by Charter Investment, Inc. or any of its affiliates,
at the end of each of the first three anniversaries of the issue date. The
promissory notes bear interest at 7% per year. Outstanding balances as of
September 30, 1999 are as follows:
 

<TABLE>
<CAPTION>
                    INDIVIDUAL                       AMOUNT
                    ----------                      --------
<S>                                                 <C>
David G. Barford..................................  $450,000
Mary Pat Blake....................................  $450,000
Eric A. Freesmeier................................  $450,000
Thomas R. Jokerst.................................  $450,000
Kent D. Kalkwarf..................................  $450,000
Ralph G. Kelly....................................  $450,000
David L. McCall...................................  $450,000
John C. Pietri....................................  $225,000
Steven A. Schumm..................................  $900,000
Curtis S. Shaw....................................  $450,000
Stephen E. Silva..................................  $300,000
</TABLE>

 
     An affiliate of Mr. Wood has agreed to lease, from time to time, to Charter
Communications, Inc. and its subsidiaries and affiliates an airplane owned by
such affiliate of Mr. Wood for business travel. Charter Communications, Inc. or
its subsidiaries or affiliates, as applicable, would, in turn, pay such
affiliate of Mr. Wood market rates for such use. When Mr. Wood uses the plane
for personal matters, Charter Communications, Inc. has agreed to provide, if
available, Charter-employed airplane operating personnel. This agreement with
Mr. Wood is not in writing.
 
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<PAGE>   157
 
     Marc B. Nathanson was the Chairman of the board of directors of Falcon
Holding Group, Inc., which was the general partner of Falcon Holding Group, L.P.
from whom the Falcon cable systems were acquired.
 
BUSINESS RELATIONSHIPS
 
     Paul G. Allen or certain affiliates of Mr. Allen own equity interests or
warrants to purchase equity interests in various entities which provide a number
of our affiliates with services or programming. Among these entities are High
Speed Access Corp., WorldGate Communications, Inc., Wink Communications, Inc.,
ZDTV, L.L.C., USA Networks, Oxygen Media, Inc., Broadband Partners LLC, Go2Net,
Inc. and RCN Corporation. These affiliates include Charter Investment, Inc. and
Vulcan Ventures, Inc. Mr. Allen owns 100% of the equity of Vulcan Ventures, and
is its Chief Executive Officer. Mr. Savoy is also a Vice President and a
director of Vulcan Ventures. The various cable, Internet and telephony companies
that Mr. Allen has invested in may mutually benefit one another. The recently
announced Broadband Partners Internet portal joint venture is an example of a
cooperative business relationship among his affiliated companies. We can give no
assurance, nor should you expect, that this joint venture will be successful,
that we will realize any benefits from this or other relationships with Mr.
Allen's affiliated companies or that we will enter into any joint ventures or
business relationships in the future with Mr. Allen's affiliated companies.
 
     Mr. Allen and his affiliates have made, and in the future likely will make,
numerous investments outside of us and our business. We cannot assure you that,
in the event that we or any of our subsidiaries enter into transactions in the
future with any affiliate of Mr. Allen, such transactions will be on terms as
favorable to us as terms we might have obtained from an unrelated third party.
Also, conflicts could arise with respect to the allocation of corporate
opportunities between us and Mr. Allen and his affiliates.
 
     We have not instituted any formal plan or arrangement to address potential
conflicts of interest.
 
     HIGH SPEED ACCESS.  High Speed Access is a provider of high-speed Internet
access over cable modems. In November 1998, Charter Investment, Inc. entered
into a systems access and investment agreement with Vulcan Ventures and High
Speed Access and a related network services agreement with High Speed Access.
Additionally, Vulcan Ventures and High Speed Access entered into a programming
content agreement. Charter Investment Inc.'s rights and obligations under these
agreements were assigned by Charter Investment, Inc. to Charter Communications
Holding Company upon closing of Charter Communications, Inc's initial public
offering. Under these agreements, High Speed Access will have exclusive access
to at least 750,000 of our homes with an installed cable drop from our cable
system or which is eligible for a cable drop by virtue of our cable system
passing the home. The term of the systems access and investment agreement
continues until midnight of the day High Speed Access ceases to provide High
Speed Access services to cable subscribers in any geographic area or region. The
term of the network services agreement is, as to a particular cable system, five
years from the date revenue billing commences for that cable system. Following
the five year initial term, the network services agreement automatically renews
itself on a year-to-year basis. Additionally, Charter Communications Holding
Company can terminate High Speed Access' exclusivity rights, on a
system-by-system basis, if High Speed Access fails to meet performance
benchmarks or otherwise breaches the agreements including their commitment to
provide content designated by Vulcan Ventures. The programming content agreement
is effective until terminated for any breach and will automatically terminate
upon the expiration of the systems access and investment agreement. During the
term of the agreements, High Speed Access has agreed not to deploy WorldGate,
Web TV, digital television or related products in the market areas of any
committed system or in any area in which we operate a cable system. All of
Charter Communications Holding Company's operations take place at the subsidiary
level and it is as subsidiaries of Charter
 
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<PAGE>   158
 
Communications Holding Company that we derive our rights and obligations with
respect to High Speed Access. Under the terms of the network services agreement,
we split revenue with High Speed Access based on set percentages of gross
revenues in each category of service. The programming content agreement provides
each of Vulcan Ventures and High Speed Access with a license to use certain
content and materials of the other on a non-exclusive, royalty-free basis.
Operations began in the first quarter of 1999. Net receipts from High Speed
Access for the nine months ended September 30, 1999 were approximately $461,000.
 
     Concurrently with entering into these agreements, High Speed Access issued
8 million shares of series B convertible preferred stock to Vulcan Ventures at a
purchase price of $2.50 per share. Vulcan Ventures also subscribed to purchase
2.5 million shares of series C convertible preferred stock, at a purchase price
of $5.00 per share on or before November 25, 2000, and received an option to
purchase an additional 2.5 million shares of series C convertible preferred
stock at a purchase price of $5.00 per share. In April 1999, Vulcan Ventures
purchased the entire 5 million shares of series C convertible preferred stock
for $25 million in cash. The shares of series B and series C convertible
preferred stock issued to Vulcan Ventures automatically converted at a price of
$3.23 per share into 20.15 million shares of common stock upon completion of
High Speed Access' initial public offering in June 1999.
 
     Additionally, High Speed Access granted Vulcan Ventures warrants to
purchase up to 5,006,500 shares of common stock at a purchase price of $5.00 per
share. These warrants were converted to warrants to purchase up to 7,750,000
shares of common stock at a purchase price of $3.23 per share upon completion of
High Speed Access' initial public offering. The warrants were subsequently
assigned to Charter Communications Holding Company. The warrants are exercisable
at the rate of 1.55 shares of common stock for each home passed in excess of
750,000. 3.875 million warrants may be earned on or before July 31, 2001 and
must be exercised on or before July 31, 2002. 3.875 million warrants may be
earned on or before July 31, 2003 and must be exercised on or before July 31,
2004. The warrants may be forfeited in certain circumstances, generally if the
number of homes passed in a committed system is reduced.
 
     In May 1999, Charter Investment, Inc. and High Speed Access entered into a
limited service agreement which reduced the number of warrants issued per home
passed in exchange for a reduction in the revenue share per end user and a more
beneficial cost sharing arrangement for High Speed Access in certain specified
cable systems. Under the terms of this limited service agreement, Charter
Communications Holding Company will earn only one warrant per every three homes
passed if it commits systems totaling less than 1 million homes passed, and one
warrant for every two homes passed if the systems total 1 million or more homes
passed.
 
     Jerald L. Kent, our President and Chief Executive Officer and a director of
the issuers of the notes and of Charter Communications Holding Company and
Charter Communications, Inc. Stephen E. Silva, our Senior Vice
President -- Corporate Development and Technology, and Mr. Savoy, a member of
the boards of directors of Charter Holdings, Charter Communications Holding
Company and Charter Communications, Inc. are all members of the board of
directors of High Speed Access Corp.
 
     WORLDGATE.  WorldGate is a provider of Internet access through cable
television systems. On November 7, 1997, Charter Investment, Inc. signed an
affiliation agreement with WorldGate pursuant to which WorldGate's services will
be offered to some of our customers. This agreement was assigned by Charter
Investment, Inc. to Charter Communications Holding Company upon the closing of
Charter Communications, Inc.'s initial public offering. The term of the
agreement is five years unless terminated by either party for failure of the
other party to perform any of its obligations or undertakings required under the
agreement. The agreement automatically renews for additional successive two-year
periods upon expiration of the initial five-year term. All of Charter
 
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<PAGE>   159
 
Communications Holding Company's operations take place at the subsidiary level
and it is as subsidiaries of Charter Communications Holding Company that we
derive our rights and obligations with respect to WorldGate. Pursuant to the
agreement, we have agreed to use our reasonable best efforts to deploy the
WorldGate Internet access service within a portion of our cable television
systems and to install the appropriate headend equipment in all of our major
markets in those systems. Major markets for purposes of this agreement include
those in which we have more than 25,000 customers. We incur the cost for the
installation of headend equipment. In addition, we have agreed to use our
reasonable best efforts to deploy such service in all non-major markets that are
technically capable of providing interactive pay-per-view service, to the extent
we determine that it is economically practical. When WorldGate has a telephone
return path service available, we will, if economically practical, use all
reasonable efforts to install the appropriate headend equipment and deploy the
WorldGate service in our remaining markets. Telephone return path service is the
usage of telephone lines to connect to the Internet to transmit data or receive
data. We have also agreed to market the WorldGate service within our market
areas. We pay a monthly subscriber access fee to WorldGate based on the number
of subscribers to the WorldGate service. We have the discretion to determine
what fees, if any, we will charge our subscribers for access to the WorldGate
service. We started offering WorldGate service in 1998. For the year ended
December 31, 1999, we paid to WorldGate approximately $1,661,000. For the year
ended December 31, 1998, we paid to WorldGate approximately $276,000. We charged
our subscribers approximately $263,000 for the nine months ended September 30,
1999, and approximately $22,000 for the year ended December 31, 1998.
 
     On November 24, 1997, Charter Investment, Inc. acquired 70,423 shares of
WorldGate's series B preferred stock at a purchase price of $7.10 per share.
These shares of WorldGate's series B preferred stock were assigned to Charter
Communications Holding Company upon the closing of Charter Communications Inc.'s
initial public offering. On February 3, 1999, a subsidiary of Charter Holdings
acquired 90,909 shares of series C preferred stock at a purchase price of $11.00
per share. As a result of a stock split and WorldGate's initial public offering,
each share of series B preferred stock converted into two-thirds of a share of
WorldGate's common stock, and each share of series C preferred stock converted
into two-thirds of a share of WorldGate's common stock.
 
     WINK.  Wink offers an enhanced broadcasting system that adds interactivity
and electronic commerce opportunities to traditional programming and
advertising. Viewers can, among other things, find news, weather and sports
information on-demand and order products through use of a remote control. On
October 8, 1997, Charter Investment, Inc. signed a cable affiliation agreement
with Wink to deploy this enhanced broadcasting technology in our systems.
 
     This agreement was assigned by Charter Investment, Inc. to Charter
Communications Holding Company upon the closing of Charter Communications,
Inc.'s initial public offering. The term of the agreement is three years. Either
party has the right to terminate the agreement for the other party's failure to
comply with any of its respective material obligations under the agreement. All
of Charter Communications Holding Company's operations take place at the
subsidiary level and it is as subsidiaries of Charter Communications Holding
Company that we derive our rights and obligations with respect to Wink. Pursuant
to the agreement, Wink granted us the non-exclusive license to use their
software to deliver the enhanced broadcasting to all of our cable systems. We
pay a fixed monthly license fee to Wink. We also supply all server hardware
required for deployment of Wink services. In addition, we agreed to promote and
market the Wink service to our customers within the area of each system in which
such service is being provided. We share in the revenue Wink generates from all
fees collected by Wink for transactions generated by our customers. The amount
of revenue shared is based on the number of transactions per month. As of
December 31, 1999, no revenue or expenses have been recognized as a result of
this agreement.
 
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<PAGE>   160
 
     On November 30, 1998, Vulcan Ventures acquired 1,162,500 shares of Wink's
series C preferred stock for approximately $9.3 million. In connection with such
acquisition, Wink issued to Vulcan Ventures warrants to purchase shares of
common stock. Additionally, Microsoft Corporation, of which Mr. Allen is a
director, owns an equity interest in Wink.
 
     ZDTV.  ZDTV operates a cable television channel which broadcasts shows
about technology and the Internet. Pursuant to a carriage agreement which
Charter Communications Holding Company intends to enter into with ZDTV, ZDTV has
agreed to provide us with programming for broadcast via our cable television
systems at no cost. The term of the proposed carriage agreement, with respect to
each of our cable systems, is from the date of launch of ZDTV on that cable
system until April 30, 2008. The carriage agreement grants us a limited
non-exclusive right to receive and to distribute ZDTV to our subscribers in
digital or analog format. The carriage agreement does not grant us the right to
distribute ZDTV over the Internet. We pay a monthly subscriber fee to ZDTV for
the ZDTV programming based on the number of our subscribers subscribing to ZDTV.
Additionally, we agreed to use commercially reasonable efforts to publicize the
programming schedule of ZDTV in each of our cable systems that offers or will
offer ZDTV. Upon reaching a specified threshold number of ZDTV subscribers,
then, in the event ZDTV inserts any informercials, advertorials and/or home
shopping into in the ZDTV programming, we receive from ZDTV a percentage of net
product revenues resulting from our distribution of these services. ZDTV may not
offer its services to any other cable operator which serves the same or fewer
number of subscribers at a more favorable rate or on more favorable carriage
terms.
 
     On February 5, 1999, Vulcan Programming acquired an approximate one-third
interest in ZDTV. Mr. Allen owns 100% of Vulcan Programming. Mr. Savoy is the
president and director of Vulcan Programming. The remaining approximate
two-thirds interest in ZDTV is owned by Ziff-Davis Inc. Vulcan Ventures owns
approximately 3% of the interests in Ziff-Davis. The total current investment
made by Vulcan Programming and Vulcan Ventures is $104 million. On November 19,
1999, Vulcan Ventures announced that it would acquire an additional 64% in ZDTV
for $204.8 million bringing its interest in ZDTV to 97%. The remaining 3% of
ZDTV would be owned by its management and employees. The purchase was completed
on January 21, 2000.
 
     USA NETWORKS.  USA Networks operates USA Network and The Sci-Fi Channel,
which are cable television networks. USA Networks also operates Home Shopping
Network, which is a retail sales program available via cable television systems.
On May 1, 1994, Charter Investment, Inc. signed an affiliation agreement with
USA Networks.
 
     This agreement was assigned by Charter Investment, Inc. to Charter
Communications Holding Company upon the closing of Charter Communications,
Inc.'s initial public offering. Pursuant to this affiliation agreement, USA
Networks has agreed to provide their programming for broadcast via our cable
television systems. The term of the affiliation agreement is until December 30,
1999. The affiliation agreement grants us the nonexclusive right to cablecast
the USA Network programming service. We pay USA Networks a monthly fee for the
USA Network programming service based on the number of subscribers in each of
our systems and the number and percentage of such subscribers receiving the USA
Network programming service. Additionally, we agreed to use best efforts to
publicize the schedule of the USA Network programming service in the television
listings and program guides which we distribute. We have paid to USA Networks
for programming approximately $16,740,000 for the nine months ended September
30, 1999, approximately $556,000 for the year ended December 31, 1998,
approximately $204,000 for the year ended December 31, 1997, and approximately
$134,000 for the year ended December 31, 1996. In addition, we received
commissions from Home Shopping Network for sales generated by our customers
totaling approximately $1,556,000 for the eleven months ended November 30, 1999,
approximately $121,000 for the year
 
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ended December 31, 1998, approximately $62,000 for the year ended December 31,
1997, and approximately $35,000 for the year ended December 31, 1996.
 
     Mr. Allen and Mr. Savoy are also directors of USA Networks. As of August
1999, Mr. Allen owned approximately 9.4% and Mr. Savoy owned less than 1% of the
capital stock of USA Networks.
 
     OXYGEN MEDIA, INC.  Oxygen Media provides content aimed at the female
audience for distribution over the Internet and cable television systems. Vulcan
Ventures invested $50 million in 1999 in Oxygen Media. In addition, Charter
Communications Holding Company plans to enter into a carriage agreement with
Oxygen Media pursuant to which we will carry Oxygen Media programming content on
certain of our cable systems. Nancy B. Peretsman, a director of Charter
Communications, Inc., serves on the board of directors of Oxygen Media.
 
     BROADBAND PARTNERS, LLC.  Charter Communications, Inc. has entered into a
joint venture with Vulcan Ventures and Go2Net to provide broadband portal
services. See "Business -- Products and Services." Mr. Allen owns approximately
33% of the outstanding equity of Go2Net. Mr. Savoy, a director of Charter
Communications, Inc., is also a director of Go2Net.
 
     RCN CORPORATION.  On October 1, 1999, Vulcan Ventures entered into an
agreement to purchase shares of convertible preferred stock of RCN Corporation
for an aggregate purchase price of approximately $1.65 billion. If Vulcan
Ventures immediately converts the RCN preferred stock it has agreed to purchase
into common stock, it will own 27.4% of RCN when combined with the common stock
that Vulcan Ventures already owns. None of Charter Communications, Inc., Charter
Communications Holding Company, Charter Holdings or their respective
stockholders, members or subsidiaries, other than Vulcan Ventures, has any
interest in the RCN investment and none of them is expected to have any interest
in any subsequent investment in RCN that Vulcan Ventures may make. Charter
Communications, Inc.'s certificate of incorporation and Charter Communications
Holding Company's limited liability company agreement provide that the
businesses of RCN are not deemed to be "cable transmission businesses."
 
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<PAGE>   162
 
                      DESCRIPTION OF CERTAIN INDEBTEDNESS
 
     The following description of our indebtedness is qualified in its entirety
by reference to the relevant credit facilities, indentures and related documents
governing the debt.
 
EXISTING CREDIT FACILITIES
 
     CHARTER OPERATING CREDIT FACILITIES.  On March 18, 1999, Charter Operating
entered into senior secured credit facilities arranged by Chase Securities Inc.,
NationsBanc Montgomery Securities LLC and TD Securities (USA) Inc. Obligations
under the Charter Operating credit facilities are guaranteed by Charter
Operating's parent, Charter Holdings, and by Charter Operatings' subsidiaries.
The obligations under the Charter Operating credit facilities are secured by
pledges by Charter Operating of intercompany obligations and the ownership
interests of Charter Operating and its subsidiaries, but are not secured by the
other assets of Charter Operating or its subsidiaries. The obligations under the
Charter Operating credit facilities are also secured by pledges of intercompany
obligations and the ownership interests of Charter Holdings in Charter
Operating, but are not secured by the other assets of Charter Holdings or
Charter Operating.
 
     The Charter Operating credit facilities provide for borrowings of up to
$4.1 billion consisting of:
 
     - an eight and one-half year reducing revolving loan in the amount of $1.25
       billion;
 
     - an eight and one-half year Tranche A term loan in the amount of $1.0
       billion; and
 
     - a nine-year Tranche B term loan in the amount of $1.85 billion.
 
     The Charter Operating credit facilities provide for the amortization of the
principal amount of the Tranche A term loan facility and the reduction of the
revolving loan facility beginning on June 30, 2002 with respect to the Tranche A
term loan and on March 31, 2004 with respect to the revolving credit facility,
with a final maturity date, in each case, of September 18, 2007. The
amortization of the principal amount of the Tranche B term loan facility is
substantially "back-ended," with more than 90% of the principal balance due in
the year of maturity. The final maturity date of the Tranche B term loan
facility is March 18, 2008. The Charter Operating credit facilities also provide
for an incremental term facility of up to $500 million which is conditioned upon
receipt of additional new commitments from lenders. If the incremental term
facility becomes available, up to 50% of the borrowings under it may be repaid
on terms substantially similar to that of the Tranche A term loan and the
remaining portion on terms substantially similar to that of the Tranche B term
loan.
 
     The Charter Operating credit facilities also contain provisions requiring
mandatory loan prepayments under some circumstances, such as when significant
amounts of assets are sold and the proceeds are not promptly reinvested in
assets useful in the business of Charter Operating. In the event that any
Existing 8.250% Charter Holdings Notes remain outstanding on the date which is
six months prior to the scheduled final maturity, the term loans under the
Charter Operating credit facility will mature and the revolving credit facility
will terminate on such date.
 
     The Charter Operating credit facilities provide Charter Operating with two
interest rate options, to which a margin is added: a base rate option, generally
the "prime rate" of interest; and an interest rate option based on the interbank
eurodollar rate. Interest rate margins for the Charter Operating credit
facilities depend upon performance measured by a leverage ratio, which is the
ratio of indebtedness to annualized operating cash flow. This leverage ratio is
based on the debt of Charter Operating and its subsidiaries, exclusive of
outstanding notes and other debt for money borrowed,
 
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including guarantees by Charter Operating and by Charter Holdings. The interest
rate margins for the Charter Operating credit facilities are as follows:
 
     - with respect to the revolving loan and the Tranche A term loan, the
       margin ranges from 1.5% to 2.25% for eurodollar loans and from 0.5% to
       1.25% for base rate loans; and
 
     - with respect to the Tranche B term loan, the margin ranges from 2.25% to
       2.75% for eurodollar loans and from 1.25% to 1.75% for base rate loans.
 
     The Charter Operating credit facilities contain representations and
warranties, affirmative and negative covenants, information requirements, events
of default and financial covenants. The events of default include a
cross-default provision that is triggered by the failure of Charter Operating,
Charter Holdings or Charter Operating's subsidiaries to make payment on debt
with an outstanding total principal amount exceeding $50 million, the
acceleration of debt of this amount prior to its maturity or the failure to
comply with specified covenants. The financial covenants, which are generally
tested on a quarterly basis, measure performance against standards set for
leverage, debt service coverage, and operating cash flow coverage of cash
interest expense.
 
     The Charter Operating credit facilities also contain a change of control
provision, making it an event of default, and permitting acceleration of the
debt, in the event that either:
 
     - Mr. Allen, including his estate, heirs and other related entities, fails
       to maintain a 25% direct or indirect voting and economic interest in
       Charter Operating; or
 
     - a change of control occurs under the indentures governing the March 1999
       Charter Holdings notes or the notes.
 
     The various negative covenants place limitations on the ability of Charter
Holdings, Charter Operating and their subsidiaries to, among other things:
 
     - incur debt;
 
     - pay dividends or make other distributions;
 
     - incur liens;
 
     - make acquisitions;
 
     - make investments or asset sales; or
 
     - enter into transactions with affiliates.
 
     Distributions under the Charter Operating credit facilities to Charter
Holdings to pay interest on the March 1999 Charter Holdings notes are generally
permitted. Distributions under the Charter Operating credit facilities to
Charter Holdings to pay interest on the notes are generally permitted, provided
Charter Operating's cash flow for the four complete quarters preceding the
distribution exceeds 1.75 times its cash interest expense, including the amount
of such distribution. In each case, such distributions to Charter Holdings are
not permitted during the existence of a default under the Charter Operating
credit facilities.
 
     As of December 31, 1999, $2.91 billion was outstanding and $1.19 billion
was available for borrowing under the Charter Operating credit facilities.
 
     FALCON CREDIT FACILITIES.  In connection with the Falcon acquisition, the
required percentage of lenders under the senior secured credit facilities of
Falcon Cable Communications agreed to amend and restate the Falcon credit
agreement, which amendment and restatement was effective as of November 12,
1999, the date that we closed the Falcon acquisition. The obligations under the
Falcon credit facilities are guaranteed by the direct parent of Falcon Cable
Communications, Charter Communications VII, LLC, and by the subsidiaries of
Falcon Cable Communications. The
 
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obligations under the Falcon credit facilities are secured by pledges of the
ownership interests and intercompany obligations of Falcon Cable Communications
and its subsidiaries, but are not secured by other assets of Falcon Cable
Communications or its subsidiaries.
 
     The Falcon credit facilities have maximum borrowing availability of $1.25
billion consisting of the following:
 
     - a revolving facility in the amount of approximately $646.0 million;
 
     - a term loan B in the amount of approximately $198.0 million;
 
     - a term loan C in the amount of approximately $297.0 million; and
 
     - a supplemental revolving facility of $110.0 million.
 
     The revolving facility and the supplemental revolving facility amortize
beginning in 2001 and 2003, respectively, and ending on December 29, 2006 and
December 31, 2007, respectively. The term loan B and term loan C facilities
amortize beginning in 1999 and ending on June 29, 2007 and December 31, 2007,
respectively.
 
     The Falcon credit facilities also contain provisions requiring mandatory
loan prepayments under certain circumstances, such as when significant amounts
of assets are sold and the proceeds are not promptly reinvested in assets useful
in the business of Falcon Cable Communications.
 
     The Falcon credit facilities provide Falcon Cable Communications with two
interest rate options, to which a margin is added: a base rate option, generally
the "prime rate" of interest; and an interest rate option based on the interbank
eurodollar rate. Interest rates for these credit facilities, as well as a fee
payable on unborrowed amounts available thereunder, depend upon performance
measured by a "leverage ratio" which is the ratio of indebtedness to annualized
operating cash flow. This leverage ratio is based on the debt of Falcon Cable
Communications and its subsidiaries, exclusive of the Falcon debentures
described below. The interest rate margins for the Falcon credit facilities are
as follows:
 
     - with respect to the revolving loan facility, the margin ranges from 1.0%
       to 2.0% for eurodollar loans and from 0.0% to 1.0% for base rate loans;
 
     - with respect to Term Loan B, the margin ranges from 1.75% to 2.25% for
       eurodollar loans and from 0.75% to 1.25% for base rate loans; and
 
     - with respect to Term Loan C, the margin ranges from 2.0% to 2.5% for
       eurodollar loans and from 1.0% to 1.5% for base rate loans.
 
     The Falcon credit facilities contain representations and warranties,
affirmative and negative covenants, information requirements, events of default
and financial covenants. The events of default for the Falcon credit facilities
include a cross-default provision that is triggered by, among other things, the
failure to make payment relating to specified outstanding debt of Falcon Cable
Communications, its direct and indirect parent companies, CC VII Holdings, LLC
and Charter Communications VII, LLC, or specified subsidiary guarantors in a
total amount of principal and accrued interest exceeding $10 million, the
acceleration of debt of this amount prior to its maturity or the failure to
comply with specified covenants. The financial covenants, which are generally
tested on a quarterly basis, measure performance against standards set for
leverage, debt service coverage, and operating cash flow coverage of cash
interest expense.
 
     The Falcon credit facilities also contain a change of control provision,
making it an event of default, and permitting acceleration of the debt, in the
event that either:
 
     - Mr. Allen, including his estate, heirs and other related entities, fails
       to maintain a 25% direct or indirect voting and economic interest in
       Falcon Cable Communications; or
 
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<PAGE>   165
 
     - a change of control occurs under the indentures governing the Falcon
       debentures or under the terms of other specified debt of Falcon.
 
     The various negative covenants place limitations on the ability of Falcon
Cable Communications and its subsidiaries to, among other things:
 
     - incur debt;
 
     - pay dividends or make other distributions;
 
     - incur liens;
 
     - make acquisitions;
 
     - make investments or asset sales; or
 
     - enter into transactions with affiliates.
 
     Distributions under the Falcon credit facilities to pay interest on the
Falcon debentures are generally permitted, except during the existence of a
default under the Falcon credit facilities.
 
     Distributions under the Falcon credit facilities to Charter Holdings to pay
interest on the notes and the March 1999 Charter Holdings notes will not be
permitted until CC VII Holdings, LLC is merged with and into Charter Holdings,
which merger Charter Holdings intends to effect on or about the time of the
closing of the Falcon change of control offers. After the merger, distributions
to Charter Holdings to pay interest on the notes and the March 1999 Charter
Holdings notes will generally be permitted, provided Falcon Cable
Communications' cash flow for the most recent fiscal quarter preceding the
distribution exceeds 1.75 times its cash interest expense, including the amount
of such distribution. Distributions to Charter Holdings will also be permitted
if Falcon Cable Communications meets specified financial ratios. In each case,
such distributions to Charter Holdings are not permitted during the existence of
a default under the Falcon credit facilities.
 
     As of December 31, 1999, $865.5 million was outstanding and $385.5 million
was available for borrowing under the Falcon credit facilities.
 
     FANCH CREDIT FACILITIES.  On November 12, 1999, the Fanch acquisition was
closed and CC VI Operating Company, LLC, the parent company of the Fanch cable
systems, entered into senior secured credit facilities arranged by Chase
Securities Inc. and Banc of America Securities LLC. The obligations under the
Fanch credit facilities are guaranteed by CC VI Operating's parent, CC VI
Holdings, LLC, and by the subsidiaries of CC VI Operating. The obligations under
the Fanch credit facilities are secured by pledges of the ownership interests
and intercompany obligations of CC VI Operating and its subsidiaries, but are
not secured by other assets of CC VI Operating or its subsidiaries.
 
     The Fanch credit facilities have maximum borrowings of $1.2 billion,
consisting of:
 
     - a revolving facility in the amount of approximately $350 million;
 
     - a term loan A in the amount of approximately $450 million; and
 
     - a term loan B in the amount of approximately $400 million.
 
     The revolving facility amortizes beginning in 2004 and ending in May 2008.
The term loan A and term loan B facilities amortize beginning in 2003 and ending
in May 2008 and November 2008, respectively.
 
     In addition to the foregoing, the Fanch credit facilities provide for
supplemental credit facilities in the maximum amount of $300 million. These
supplemental credit facilities may be in the form of an additional term loan or
an aggregate increase in the amount of the term loan A or the revolving
 
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<PAGE>   166
 
facility. These supplemental credit facilities are available, subject to the
borrower's ability to obtain additional commitments from lenders. The
amortization of the additional term loans under the supplemental credit
facilities prior to May 2009 is limited to 1% per annum of the aggregate
principal amount of such additional term loans.
 
     The Fanch credit facilities also contain provisions requiring mandatory
loan prepayments under specific circumstances, including when significant
amounts of assets are sold and the proceeds are not promptly reinvested in
assets useful in the business of CC VI Operating.
 
     The Fanch credit facilities provide CC VI Operating with the following two
interest rate options, to which a margin is added: a base rate option, generally
the prime rate of interest; and an interest rate option rate based on the
interbank Eurodollar rate. Interest rates for the Fanch credit facilities, as
well as a fee payable on unborrowed amounts available thereunder, depend upon
performance measured by a leverage ratio, which is the ratio of indebtedness to
annualized operating cash flow. This leverage ratio is based on the debt of CC
VI Operating and its subsidiaries. The interest rate margins for the Fanch
credit facilities are as follows:
 
     - with respect to the revolving loan facility and term loan A, the margin
       ranges from 1.0% to 2.25% for eurodollar loans and from 0.0% to 1.25% for
       base rate loans; and
 
     - with respect to term loan B, the margin ranges from 2.50% to 3.00% for
       eurodollar loans and from 1.50% to 2.00% for base rate loans.
 
     The Fanch credit facilities contain representations and warranties,
affirmative and negative covenants, information requirements, events of default
and financial covenants. The events of default for the Fanch credit facilities
include a cross-default provision that is triggered by the failure to make
payment on debt of CC VI Operating, CC VI Holdings and the subsidiaries of CC VI
Operating in a total amount of $25 million, the acceleration of debt of this
amount prior to its maturity or the failure to comply with specified covenants.
The financial covenants, which are generally tested on a quarterly basis,
measure performance against standards set for leverage, debt service coverage,
and operating cash flow coverage of cash interest expense.
 
     The Fanch credit facilities also contain a change of control provision,
making it an event of default, and permitting acceleration of the debt, in the
event of any of the following:
 
     - Mr. Allen, including his estate, heirs and other related entities, fails
       to maintain a 25% direct or indirect voting and economic interest in CC
       VI Operating;
 
     - CC VI Operating is no longer a direct or indirect subsidiary of Charter
       Communications Holding Company; or
 
     - A change of control occurs under specified indebtedness of CC VI
       Holdings, CC VI Operating or CC VI Operating's subsidiaries.
 
     Various negative covenants place limitations on the ability of CC VI
Operating and its subsidiaries to, among other things:
 
     - incur debt;
 
     - pay dividends or make other distributions;
 
     - incur liens;
 
     - make acquisitions;
 
     - make investments or asset sales; or
 
     - enter into transactions with affiliates.
 
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     Distributions under the Fanch credit facilities to Charter Holdings to pay
interest on the notes and the March 1999 Charter Holdings notes are generally
permitted, provided CC VI Operating's cash flow for the four complete quarters
preceding the distribution exceeds 1.75 times its cash interest expense,
including the amount of such distribution. Distributions to Charter Holdings
will also be permitted if CC VI Operating meets specified financial ratios. In
each case, such distributions to Charter Holdings are not permitted during the
existence of a default under the Fanch credit facilities.
 
     As of December 31, 1999, approximately $850 million was outstanding and
$350 million was available for borrowing under the Fanch credit facilities.
 
     AVALON CREDIT FACILITIES.  On November 15, 1999 the Avalon acquisition was
closed and CC Michigan, LLC and CC New England, LLC (formerly Avalon Cable of
Michigan, Inc. and Avalon Cable of New England LLC, respectively) entered into
senior secured credit facilities arranged by Bank of Montreal. The obligations
under the Avalon credit facilities are guaranteed by the parent of the Avalon
borrowers, CC V Holdings, LLC (formerly Avalon Cable LLC) and by the
subsidiaries of the Avalon borrowers. The obligations under the Avalon credit
facilities are secured by pledges of the ownership interests and intercompany
obligations of the Avalon borrowers and their subsidiaries, but are not secured
by other assets of the Avalon borrowers or their subsidiaries. The Avalon credit
facilities are also secured by a pledge of CC V Holdings' equity interest in the
Avalon borrowers and intercompany obligations with respect to the Avalon
borrowers.
 
     The Avalon credit facilities have maximum borrowings of $300 million,
consisting of:
 
        - a revolving facility in the amount of approximately $175 million; and
 
        - a term loan B in the amount of approximately $125 million.
 
     We borrowed $165 million under the Avalon credit facilities to fund a
portion of the Avalon purchase price.
 
     Amounts available under the revolving facility reduce annually in specified
percentages beginning in the fourth year following the closing date of the
facility. The term loan B facility amortizes beginning in the fourth year
following the closing date.
 
     In addition to the foregoing, the Avalon credit facilities provide for
supplemental credit facilities in the maximum amount of $75 million. These
supplemental credit facilities may be in the form of an additional term loan or
an aggregate increase in the amount of the revolving facility. These
supplemental credit facilities will be available, subject to the borrowers'
ability to obtain additional commitments from lenders. These supplemental credit
facilities are available to the Avalon borrowers until December 31, 2003, and,
if borrowed, the weighted average life and final maturity will not be less than
that of the revolving facility.
 
     The Avalon credit facilities also contain provisions requiring mandatory
loan prepayments under specific circumstances, including when significant
amounts of assets are sold and the proceeds are not promptly reinvested in
assets useful in the business of the Avalon borrowers.
 
     The Avalon credit facilities provide the following two interest rate
options, to which a margin is added: a base rate option, generally the "prime
rate" of interest; and an interest rate option based on the interbank eurodollar
rate. Interest rates for the Avalon credit facilities, as well as a fee payable
on unborrowed amounts available thereunder, will depend upon performance
measured by a leverage ratio, which is the ratio of indebtedness to annualized
operating cash flow. This leverage ratio is based on the debt of the Avalon
borrowers and their subsidiaries. The interest rate margins for the Avalon
credit facilities are as follows:
 
     - with respect to the revolving loan facility, the margin ranges from 1.0%
       to 1.875% for eurodollar loans and from 0.0% to 0.875% for base rate
       loans; and
 
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<PAGE>   168
 
     - with respect to term loan B, the margin ranges from 2.50% to 2.75% for
       eurodollar loans and from 1.50% to 1.750% for base rate loans.
 
     The Avalon credit facilities contain representations and warranties,
affirmative and negative covenants, information requirements, events of default
and financial covenants. The events of default for the Avalon credit facilities
include a cross-default provision that is triggered by the failure to make
payment on debt of the Avalon borrowers, CC V Holdings and specified
subsidiaries of the Avalon borrowers in a total amount of $20 million, the
acceleration of debt of this amount prior to its maturity or the failure to
comply with specified covenants. The financial covenants, which are generally
tested on a quarterly basis, measure performance against standards set for
leverage, debt service coverage, and operating cash flow coverage of cash
interest expense.
 
     The Avalon credit facilities also contain a change of control provision,
making it an event of default, and permitting acceleration of the debt, in the
event that Mr. Allen, including his estate, heirs and other related entities,
fails to maintain a 25% direct or indirect voting and economic interest in the
Avalon borrowers.
 
     Various negative covenants place limitations on the ability of the Avalon
borrowers and their subsidiaries to, among other things:
 
     - incur debt;
 
     - pay dividends or make other distributions;
 
     - incur liens;
 
     - make acquisitions;
 
     - make investments or asset sales; or
 
     - enter into transactions with affiliates.
 
     Distributions under the Avalon credit facilities to pay interest on certain
indebtedness of CC V Holdings are generally permitted, except during the
existence of a default under the Avalon credit facilities.
 
     Distributions under the Avalon credit facilities to Charter Holdings to pay
interest on the notes and the March 1999 Charter Holdings notes are generally
permitted, provided the Avalon borrowers' consolidated cash flow for the four
complete quarters preceding the distribution exceeds 2.1 times their combined
cash interest expense, including the amount of such distribution. Distributions
to Charter Holdings will also be permitted if the Avalon borrowers meet
specified financial ratios. In each case, such distributions to Charter Holdings
are not permitted during the existence of a default under the Avalon credit
facilities.
 
     As of December 31, 1999, approximately $170 million was outstanding and
$130 million was available for borrowing under the Avalon credit facilities.
 
CREDIT FACILITIES TO BE ASSUMED OR ARRANGED IN CONNECTION WITH THE BRESNAN
ACQUISITION
 
     In connection with the Bresnan acquisition, we intend to amend and assume
the existing senior secured credit facilities entered into by Bresnan
Telecommunications Company LLC, including by increasing the available borrowings
thereunder. We cannot assure you that we will be able to do this. If we amend
and assume the Bresnan credit facilities, we will attempt, as we have succeeded
with respect to the Falcon credit facilities, to renegotiate the terms of such
indebtedness on terms substantially similar or identical to the terms of the
Charter Operating credit facilities and increase borrowing availability. In the
event we are unable to do so, we will refinance such indebtedness and repay all
borrowings outstanding under the Bresnan credit facilities. However, we cannot
assure you
 
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that we will be successful in our effort to amend and assume or to refinance the
Bresnan credit facilities.
 
     The obligations under the Bresnan credit facilities are guaranteed by
Bresnan Telecommunications Company's parent company, Bresnan Communications
Group LLC, and by the restricted subsidiaries of Bresnan Telecommunications
Company. The obligations under the Bresnan credit facilities are secured by
pledges of the ownership interests and intercompany obligations of Bresnan
Telecommunications Company and its subsidiaries, but are not secured by other
assets of Bresnan Telecommunications Company or its subsidiaries.
 
     The Bresnan credit facilities provide for borrowings of up to $650 million,
consisting of:
 
     - a reducing revolving loan facility in the amount of $150 million;
 
     - a term loan A facility in the amount of $328 million; and
 
     - a term loan B facility in the amount of $172 million.
 
     The Bresnan credit facilities provide for the amortization of the principal
amount of the term loan A facility and the reduction of the revolving loan
facility beginning March 31, 2002, with a final maturity date of June 30, 2007.
The amortization of the term loan B facility is substantially "back-ended", with
more than ninety percent of the principal balance due on the final maturity date
of February 2, 2008. The Bresnan credit facilities also provide for an
incremental facility of up to $200 million, which is conditioned upon receipt of
additional commitments from lenders. If the incremental facility becomes
available, it may be in the form of revolving loans or term loans, but may not
amortize more quickly than the reducing revolving loan facility or the term loan
A facility, and may not have a final maturity date earlier than six calendar
months after the maturity date of the term loan B facility.
 
     The Bresnan credit facilities provide Bresnan Telecommunications Company
with two interest rate options, to which a margin is added: a base rate,
generally the "prime rate" of interest; and an interest rate option based on the
interbank eurodollar rate. Interest rate margins for the Bresnan credit
facilities depend upon performance measured by a leverage ratio, that is, the
ratio of total debt to annualized operating cash flow of Bresnan
Telecommunications Company and its restricted subsidiaries. The interest rate
margins for the Bresnan credit facilities are as follows:
 
     - with respect to the term loan A facility and the revolving loan facility,
       the margin ranges from 0.75% to 2.25% for eurodollar loans and from 0.0%
       to 1.25% for base rate loans; and
 
     - with respect to the term loan B facility, the margin ranges from 2.5% to
       2.75% for eurodollar loans and from 1.5% to 1.75% for base rate loans.
 
     The Bresnan credit facilities contain various representations and
warranties, affirmative and negative covenants, information requirements, events
of default and financial covenants. The events of default for the Bresnan credit
facilities include a cross-default provision that is triggered by, among other
things, the failure to make payment on the debt of Bresnan Telecommunications
Company in a total amount of $5 million or more or the acceleration of debt of
Bresnan Telecommunications Company or its parent companies, Bresnan
Communications Group LLC and Bresnan Communications Company Limited Partnership,
in a total amount of at least $15 million prior to its maturity. The financial
covenants, which are generally tested on a quarterly basis, measure performance
against standards set for leverage, debt service coverage, and operating cash
flow coverage of cash interest expense. Certain negative covenants place
limitations on the ability of Bresnan Telecommunications Company and its
restricted subsidiaries to, among other things:
 
     - incur debt;
 
     - pay dividends or make other distributions;
 
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<PAGE>   170
 
     - incur liens;
 
     - make acquisitions;
 
     - make investments or asset sales; or
 
     - enter into transactions with affiliates.
 
     The Bresnan credit facilities contain a change of control provision, making
it an event of default, and permitting acceleration of the debt, in the event of
any of the following:
 
     - TCI Communications, including its affiliates, fails to own at least 25%
       of the membership interests of Bresnan Telecommunications Company;
 
     - entities affiliated with the Blackstone Funds fail to own at least 20% of
       the membership interest in Bresnan Telecommunications Company prior to
       January 29, 2002; or
 
     - after January 29, 2002, if the entities affiliated with the Blackstone
       Funds fail to own at least 20% of the membership interests in Bresnan
       Telecommunications Company, any party(other than Bresnan Communications,
       Inc. or its affiliates), owns a greater percentage interest in Bresnan
       Telecommunications Company than the percentage interest held by TCI
       Communications and its affiliates.
 
     The foregoing provisions, among others, will require material amendments
to, or a refinancing of, the Bresnan credit facilities upon the Bresnan
acquisition.
 
     As of December 31, 1999, there was $534.2 million total principal amount
outstanding under the Bresnan credit facilities.
 
EXISTING PUBLIC DEBT
 
     THE MARCH 1999 CHARTER HOLDINGS NOTES.  The March 1999 Charter Holdings
notes were issued under three separate indentures, each dated as of March 17,
1999, among Charter Holdings and Charter Capital, as the issuers, and Harris
Trust and Savings Bank, as trustee. Charter Holdings and Charter Capital
recently exchanged these notes for new March 1999 Charter Holdings notes with
substantially similar terms, except that the new March 1999 Charter Holdings
notes are registered under the Securities Act and, therefore, do not bear
legends restricting their transfer.
 
     The March 1999 Charter Holdings notes are general unsecured obligations of
the issuers. The March 1999 8.250% Charter Holdings notes mature on April 1,
2007 and as of November 30, 1999, there was $600.0 million in total principal
amount outstanding. The March 1999 8.625% Charter Holdings notes mature on April
1, 2009 and as of November 30, 1999, there was $1.5 billion in total principal
amount outstanding. The March 1999 9.920% Charter Holdings notes mature on April
1, 2011 and as of November 30, 1999, the total accreted value was $969.4
million. Cash interest on the March 1999 9.920% Charter Holdings notes will not
accrue prior to April 1, 2004.
 
     The March 1999 Charter Holdings notes are senior debts of Charter Holdings
and Charter Capital. They rank equally with the current and future unsecured and
unsubordinated debt of Charter Holdings, including the notes.
 
     The issuers will not have the right to redeem the March 1999 8.250% Charter
Holdings notes prior to their maturity date on April 1, 2007. Before April 1,
2002, the issuers may redeem up to 35% of each of the March 1999 8.625% Charter
Holdings notes and the March 1999 9.920% Charter Holdings notes, in each case,
at a premium with the proceeds of certain offerings of equity securities. In
addition, on or after April 1, 2004, the issuers may redeem some or all of the
March 1999 8.625% Charter Holdings notes and the March 1999 9.920% Charter
Holdings notes at any time, in each case, at a premium. The optional redemption
price declines to 100% of the principal amount of
 
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<PAGE>   171
 
March 1999 Charter Holdings notes redeemed, plus accrued and unpaid interest, if
any, for redemption on or after April 1, 2007.
 
     In the event of a specified change of control event, the issuers must offer
to repurchase any then outstanding March 1999 Charter Holdings notes at 101% of
their principal amount or accreted value, as applicable, plus accrued and unpaid
interest, if any.
 
     The indentures governing the March 1999 Charter Holdings notes contain
substantially identical events of default, affirmative covenants and negative
covenants as those contained in the indentures governing the notes.
 
     RENAISSANCE NOTES.  The 10% senior discount notes due 2008 were issued by
Renaissance Media (Louisiana) LLC, Renaissance Media (Tennessee) LLC and
Renaissance Media Capital Corporation, with Renaissance Media Group LLC as
guarantor and the United States Trust Company of New York as trustee.
Renaissance Media Group LLC, which is the direct or indirect parent company of
these issuers, is now a subsidiary of Charter Operating. The Renaissance 10%
notes and the Renaissance guarantee are unsecured, unsubordinated debt of the
issuers and the guarantor, respectively. In October 1998, the issuers exchanged
$163.175 million of the original issued and outstanding Renaissance 10% notes
for an equivalent value of new Renaissance 10% notes. The form and terms of the
new Renaissance 10% notes are the same in all material respects as the form and
terms of the original Renaissance 10% notes except that the issuance of the new
10% Renaissance notes was registered under the Securities Act.
 
     There will not be any payment of interest in respect of the Renaissance 10%
notes prior to October 15, 2003. Interest on the Renaissance 10% notes shall be
paid semi-annually in cash at a rate of 10% per annum beginning on October 15,
2003. The Renaissance 10% notes are redeemable at the option of the issuer, in
whole or in part, at any time on or after April 15, 2003, initially at 105% of
their principal amount at maturity, plus accrued interest, declining to 100% of
the principal amount at maturity, plus accrued interest, on or after April 15,
2006. In addition, at any time prior to April 15, 2001, the issuers may redeem
up to 35% of the original total principal amount at maturity of the Renaissance
10% notes with the proceeds of one or more sales of equity interests at 110% of
their accreted value on the redemption date, provided that after any such
redemption at least $106 million total principal amount at maturity of
Renaissance 10% notes remains outstanding.
 
     Our acquisition of Renaissance triggered change of control provisions of
the Renaissance 10% notes that required us to offer to purchase the Renaissance
10% notes at a purchase price equal to 101% of their accreted value on the date
of the purchase, plus accrued interest, if any. In May 1999, we made an offer to
repurchase the Renaissance 10% notes, and holders of Renaissance 10% notes
representing 30% of the total principal amount outstanding at maturity tendered
their Renaissance 10% notes for repurchase.
 
     The indenture governing the Renaissance 10% notes contains certain
covenants that restrict the ability of the issuers and their restricted
subsidiaries to:
 
     - incur additional debt;
 
     - create liens;
 
     - engage in sale-leaseback transactions;
 
     - pay dividends or make other distributions in respect of their equity
       interests;
 
     - redeem capital stock;
 
     - make investments or certain other restricted payments;
 
     - sell assets;
 
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<PAGE>   172
 
     - issue or sell capital stock of restricted subsidiaries;
 
     - enter into transactions with stockholders or affiliates; and
 
     - effect a consolidation or merger.
 
     The Renaissance 10% notes contain events of default that include a
cross-default provision triggered by the failure of Renaissance Media Group LLC
or any of its specified subsidiaries to make payment on debt at maturity with a
total principal amount of $10 million or more or the acceleration of debt of
this amount prior to maturity.
 
     As of December 31, 1999, there was outstanding $114.4 million total
principal amount at maturity of Renaissance 10% notes, with an accreted value of
$83.0 million.
 
  THE FALCON DEBENTURES.  The Falcon debentures, consisting of 8.375% series A
senior debentures due 2010 and 9.285% Series A senior discount debentures due
2010, were issued by CC VII Holdings, LLC, formerly known as Falcon
Communications, L.P., and Falcon Funding Corporation on April 3, 1998. On August
5, 1998, the issuers commenced an exchange offer whereby the outstanding $375
million Falcon 8.375% debentures and $435.3 million Falcon 9.285% debentures
were exchanged for an equivalent value of series B senior debentures and series
B senior discount debentures. The form and terms of the new Falcon debentures
are the same as the form and terms of the corresponding original Falcon
debentures, except that the issuance of the new Falcon debentures was registered
under the Securities Act and, therefore, the new Falcon debentures do not bear
legends restricting their transfer.
 
     The Falcon debentures mature on April 15, 2010. Interest on the Falcon
debentures accrues from the issue date or from the most recent interest payment
date to which interest has been paid or commenced for, payable semiannually on
April 15 and October 15 of each year. No interest on the Falcon 9.285%
debentures will be paid prior to April 15, 2003. The issuers may, however, elect
to commence accrual of cash interest on any payment date, in which case the
outstanding principal amount at maturity of Falcon 9.285% debenture will be
reduced to the accreted value of such Falcon 9.285% debenture as of such
interest payment date and the interest will be payable semiannually in cash on
each interest payment date thereafter.
 
     The Falcon debentures will be redeemable at the option of the issuers, in
whole or in part, at any time on or after April 15, 2003, at a premium and, in
each case, plus accrued and unpaid interest, if any, to the date of redemption.
The optional redemption price declines over time to 100% of their principal
amount, plus accrued and unpaid interest, if any, on or after April 15, 2006. In
addition, at any time prior to April 15, 2001, the issuers may redeem, at a
premium, up to 35% of the total principal amount or accreted value, as
applicable, of the Falcon debentures with the net cash proceeds of specified
equity issuances, in each case plus accrued and unpaid interest, if any, to the
date of redemption. Following a redemption, at least 65% in total principal
amount at maturity of the Falcon 9.285% debentures and $195 million of the total
principal amount of Falcon 8.375% debentures must remain outstanding.
 
     In the event of specified change of control events, the holders of the
Falcon debentures have the right to require the issuers to purchase their Falcon
debentures at a price equal to 101% of their principal amount or accreted value,
as applicable, plus accrued and unpaid interest, if any, to the date of
purchase. The Falcon acquisition gave rise to this right. On December 10, 1999,
we commenced the Falcon change of control offers and have offered to repurchase
the Falcon debentures at purchase prices of 101% of principal amount or accreted
value, as applicable. Because the Falcon debentures are trading at or near the
change of control repurchase price, we expect that the Falcon debentures will be
put to us. The Falcon change of control offers will remain open until February
3, 2000. We
 
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intend to finance the Falcon change of control offers with a portion of the
proceeds of the sale of the original notes.
 
     The Falcon debentures are joint and several senior unsecured obligations of
the issuers. The Falcon debentures are the obligations of the issuers only, and
the issuers' subsidiaries do not have any obligation to pay any amounts due
under the Falcon debentures. Therefore, the Falcon debentures are effectively
subordinated to all existing and future liabilities of the issuers'
subsidiaries.
 
     Among other restrictions, the indentures governing the Falcon debentures
contain certain limitations on the issuers' and their specified subsidiaries'
ability to:
 
     - incur additional debt;
 
     - make restricted payments or certain investments;
 
     - create certain liens;
 
     - create or permit to exist dividend or payment restrictions on restricted
       subsidiaries;
 
     - sell all or substantially all of their assets or merge with or into other
       companies;
 
     - engage in sale-leaseback transactions;
 
     - invest in unrestricted subsidiaries and affiliates;
 
     - issue or sell equity interests of restricted subsidiaries;
 
     - pay dividends or make any other distributions on any equity interests;
 
     - redeem equity interests; and
 
     - guarantee any debt which is equal or subordinate in right of payment to
       the Falcon debentures.
 
     The Falcon debentures contain events of default that include a
cross-default provision triggered by the failure of CC VII Holdings, LLC or any
specified subsidiary to make payment on debt with a total amount in excess of
$25 million or the acceleration of debt of this amount prior to maturity.
 
     As of December 31, 1999, there was $375 million total principal amount
outstanding on the Falcon 8.375% debentures, and the accreted value of the
Falcon 9.285% debentures was $323.0 million.
 
     THE AVALON 11.875% NOTES.  On December 10, 1998, CC V Holdings, LLC,
formerly known as Avalon Cable LLC, and CC V Holdings Finance, Inc. (formerly
Avalon Cable Holdings Finance, Inc.) jointly issued $196 million total principal
amount at maturity of 11.875% senior discount notes due 2008. On July 22, 1999,
the issuers exchanged $196 million of the original issued and outstanding Avalon
11.875 % notes for an equivalent amount of new Avalon 11.875% notes. The form
and terms of the new Avalon 11.875% notes are substantially identical to the
original Avalon 11.875% notes except that they are registered under the
Securities Act and, therefore, are not subject to the same transfer
restrictions.
 
     The Avalon 11.875% notes are guaranteed by certain subsidiaries of CC V
Holdings.
 
     There will be no current payments of cash interest on the Avalon 11.875%
notes before December 1, 2003. The Avalon 11.875% notes accrete in value at a
rate of 11.875% per annum,
 
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<PAGE>   174
 
compounded semi-annually, to an aggregate principal amount of $196 million on
December 1, 2003. After December 1, 2003, cash interest on the Avalon 11.875%
notes:
 
     - will accrue at the rate of 11.875% per year on the principal amount at
       maturity; and
 
     - will be payable semi-annually in arrears on June 1 and December 1 of each
       year, commencing June 1, 2004.
 
     On December 1, 2003, the issuers will be required to redeem an amount equal
to $369.79 per $1,000 in principal amount at maturity of each Avalon 11.875%
note, on a pro rata basis, at a redemption price of 100% of the principal amount
then outstanding at maturity of the Avalon 11.875% notes so redeemed.
 
     On or after December 1, 2003, the issuers may redeem the Avalon 11.875%
notes, in whole or in part, at a specified premium. The optional redemption
price declines to 100% of the principal amount of the Avalon 11.875% notes
redeemed, plus accrued and unpaid interest, if any, for redemptions on or after
December 1, 2006. Before December 1, 2001, the issuers may redeem up to 35% of
the total principal amount at maturity of the Avalon 11.875% notes with the
proceeds of one or more equity offerings and/or equity investments.
 
     In the event of specified change of control events, holders of the Avalon
11.875% notes have the right to sell their Avalon 11.875% notes to the issuers
at 101% of:
 
     - the accreted value of the Avalon 11.875% notes in the case of repurchases
       of Avalon 11.875% notes prior to December 1, 2003; or
 
     - the total principal amount of the Avalon 11.875% notes in the case of
       repurchases of Avalon 11.875% notes on or after December 1, 2003, plus
       accrued and unpaid interest and liquidated damages, if any, to the date
       of purchase.
 
     Our acquisition of Avalon triggered this right. On December 3, 1999, we
commenced a change of control repurchase offer with respect to the Avalon
11.875% notes. Because the Avalon 11.875% notes are trading above the change of
control repurchase price, we do not expect these notes to be put to us. The
change of control repurchase offer will remain open until January 26, 2000.
 
     Among other restrictions, the indenture governing the Avalon 11.875% notes
limits the ability of the issuers and their specified subsidiaries to:
 
     - incur additional debt;
 
     - pay dividends or make specified other restricted payments;
 
     - enter into transactions with affiliates;
 
     - make certain investments;
 
     - sell assets or subsidiary stock;
 
     - engage in sale-leaseback transactions;
 
     - create liens;
 
     - create or permit to exist restrictions dividends or other payments from
       restricted subsidiaries;
 
     - redeem equity interests;
 
     - merge, consolidate or sell all or substantially all of their combined
       assets; and
 
     - with respect to restricted subsidiaries, issue capital stock.
 
     The Avalon 11.875% notes contain events of default that include a
cross-default provision triggered by the failure of CC V Operating, CC V
Holdings Finance, Inc. or any specified subsidiary to make payment on debt with
a total principal amount of $5 million or more or the acceleration of debt of
this amount prior to maturity.
 
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<PAGE>   175
 
     As of December 31, 1999, the total accreted value of the outstanding Avalon
11.875% notes was $124.8 million.
 
     THE AVALON 9.375% NOTES.  On December 10, 1998, CC New England, LLC,
formerly known as Avalon Cable of New England LLC, and CC V Finance Inc.,
formerly known as Avalon Cable Finance, Inc., jointly issued $150 million total
principal amount of 9.375% senior subordinated notes due December 1, 2008. On
July 22, 1999, the issuers exchanged $150 million of the Avalon 9.375% notes for
an equivalent amount of new Avalon 9.375% notes. The form and terms of the new
Avalon 9.375% notes are substantially the same as the form and terms of the
original Avalon 9.375% notes except that the new Avalon 9.375% notes are
registered under the Securities Act and do not bear a legend restricting the
transfer thereof.
 
     The Avalon 9.375% notes are guaranteed by the issuers' parent company, CC
Michigan, LLC, formerly known as Avalon Cable of Michigan, Inc.
 
     Interest on the Avalon 9.375% notes accrues at a rate of 9.375% per annum
from the date of issuance and is payable semiannually in arrears on June 1 and
December 1.
 
     On or after December 1, 2003, the issuers may redeem the Avalon 9.375%
notes in whole or in part at a specified premium. The optional redemption price
declines to 100% of the principal amount of the Avalon 9.375% notes redeemed,
plus accrued and unpaid interest, if any, for redemptions on or after December
1, 2006. Before December 1, 2001, the issuers may redeem up to 35% of the total
principal amount of the Avalon 9.375% notes at a redemption price equal to
109.375% of the principal amount thereof, plus accrued and unpaid interest, if
any, and liquidated damages, if any, with the net cash proceeds of a equity
investment and/or an equity offering. Following the redemption, at least 65% of
the total principal amount of the Avalon 9.375% notes must remain outstanding
after each redemption.
 
     Upon the occurrence of specified change of control events or the sale of
certain assets, holders of the Avalon 9.375% notes will have the opportunity to
sell their Avalon 9.375% notes to the issuers at 101% of their face amount, plus
accrued and unpaid interest and liquidated damages, if any, to the date of
purchase. Our acquisition of Avalon triggered this right. On December 3, 1999,
we commenced the Avalon change of control offer with respect to the Avalon
9.375% notes. Because the Avalon 9.375% notes are trading at or near the change
of control repurchase price, we expect these notes to be put to us. The Avalon
change of control offer will remain open until January 26, 2000. We intend to
finance the Avalon change of control offer with a portion of the proceeds of the
sale of the original notes.
 
     The Avalon 9.375% notes are general unsecured obligations of the issuers
and are subordinate in right of payment to all existing and future senior debt
of the issuers. The Avalon 9.375% notes rank equal in right of payment to any
senior subordinated debt of the issuers and rank senior in the right of payment
to all subordinated debt of the issuers.
 
     Among other restrictions, the indenture governing the Avalon 9.375% notes
limits the activities of the issuers and of their specified subsidiaries to:
 
     - incur additional debt;
 
     - pay dividends or make other restricted payments;
 
     - enter into transactions with affiliates;
 
     - engage in sale-leaseback transactions;
 
     - sell assets or subsidiary stock;
 
     - make certain investments;
 
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<PAGE>   176
 
     - create liens;
 
     - create or permit to exist dividend or payment restrictions on restricted
       subsidiaries;
 
     - merge, consolidate or sell all or substantially all of their combined
       assets;
 
     - incur debt that is senior to the Avalon 9.375% notes but junior to senior
       debt; and
 
     - issue capital stock.
 
     The Avalon 9.375% notes contain events of default that include a
cross-default provision triggered by the failure of CC New England, LLC, CC V
Finance, Inc., CC Michigan, LLC or any specified subsidiary to make payment on
debt with an aggregate principal amount of $5 million or more or the
acceleration of debt of this amount prior to maturity.
 
     As of November 30, 1999, there was $150 million total principal outstanding
on the Avalon 9.375% notes.
 
PUBLIC DEBT TO BE ASSUMED OR REPURCHASED IN CONNECTION WITH THE BRESNAN
ACQUISITION
 
     On February 2, 1999, Bresnan Communications Group LLC and Bresnan Capital
Corporation jointly issued $170 million total principal amount of 8% series A
senior notes due 2009 and $275 million total principal amount at maturity of
9.25% series A senior discount notes due 2009. In September 1999, the issuers of
the Bresnan notes completed an exchange offer in which the Bresnan 8% notes and
the Bresnan 9.25% notes representing 100% of the principal amount of all Bresnan
notes outstanding were exchanged for new Bresnan notes. The form and terms of
the new Bresnan notes are the same in all material respects as the form and
terms of the original Bresnan notes except that the new Bresnan notes have been
registered under the Securities Act and do not bear a legend restricting their
transfer.
 
     The Bresnan 8% notes bear interest at 8% per year from the original issue
date or from the most recent date to which interest has been paid or provided
for, payable semiannually on February 1 and August 1 of each year, commencing on
August 1, 1999. The Bresnan 9.25% notes accrete interest at a rate of 9.25% per
year, compounded semiannually, to a total principal amount of $275 million by
February 1, 2004, unless the issuers elect to accrue interest on or after
February 1, 2002. On and after August 1, 2004, interest on the Bresnan 9.25%
notes will accrete at a rate of 9.25% per year and will be payable in cash
semiannually in arrears on February 1 and August 1.
 
     The Bresnan 8% notes are not redeemable prior to February 1, 2004. During
the year 2004, the Bresnan 8% notes are redeemable at 104% of the principal
amount plus accrued and unpaid interest. The premium decreases to 102.667% in
2005, 101.333% in 2006 and 100% on or after February 1, 2007.
 
     The Bresnan 9.25% notes are not redeemable prior to February 1, 2004.
During the year 2004, the Bresnan 9.25% notes will be redeemable at 104.625% of
their accreted value plus accrued and unpaid interest. The premium decreases to
103.083% in 2005, 101.542% in 2006 and 100% in 2007.
 
     At any time prior to February 1, 2002, the issuers may redeem up to 35% of
the total principal amount of the Bresnan 8% notes at a redemption price equal
to 108% of the principal amount thereof plus accrued and unpaid interest, if
any, to the date of redemption with the net cash proceeds of one or more equity
offerings. Following such redemption, at least 65% of the total principal amount
of the Bresnan 8% notes must remain outstanding.
 
     At any time prior to February 1, 2002, the issuers may also redeem up to
35% of the total principal amount at maturity of the Bresnan 9.25% notes at a
redemption price equal to 109.250% of the accreted value thereof plus accrued
and unpaid interest, if any, to the date of redemption, with
 
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the net cash proceeds of one or more equity offerings. Following such
redemption, at least 65% of the total principal amount of the Bresnan 9.25%
notes must remain outstanding.
 
     Upon the occurrence of specified change of control events, each holder of
Bresnan notes shall have the right to require the issuers to purchase all or any
part of such holder's notes at a purchase price of 101% of the principal amount,
plus accrued and unpaid interest, if any, to the purchase date, in the case of
the Bresnan 8% notes, and 101% of the accreted value thereof in the case of the
Bresnan 9.25% notes. The Bresnan acquisition will trigger this right. We expect
that the Bresnan notes will be tendered and we intend to fund the repurchase of
a portion of the Bresnan notes with a portion of the net proceeds of the sale of
the original notes.
 
     Among other restrictions, the indenture governing the Bresnan notes limits
the ability of Bresnan Communications Group LLC and its specified subsidiaries
to:
 
          - incur additional debt;
 
          - pay dividends or make other specified restricted payments;
 
          - create liens;
 
          - make certain investments;
 
          - create or permit any restrictions on the payment of dividends or
            other distributions to Bresnan Communications Group LLC;
 
          - redeem equity interests;
 
          - guarantee debt;
 
          - issue or sell equity interests of equity interests;
 
          - consolidate with, merge into or transfer all or substantially all of
            their assets;
 
          - engage in sale-leaseback transactions;
 
          - sell assets; and
 
          - transact business with their affiliates.
 
     The Bresnan notes contain events of default that include a cross-default
provision triggered by any acceleration of the maturity of debt of Bresnan
Telecommunications Company or its specified subsidiaries in a total amount in
excess of $15 million or the failure to pay debt in this amount at final
maturity.
 
     As of December 31, 1999, there was $170 million total principal outstanding
on the Bresnan 8% notes and the accreted value of the outstanding Bresnan 9.25%
notes was $190.1 million.
 
INTERCOMPANY LOANS
 
     For a description of certain intercompany loans made by Charter
Communications Holding Company to certain of its subsidiaries, see "Certain
Relationships and Related Transactions -- Transactions with Management and
Others -- Intercompany Loans."
 
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                              DESCRIPTION OF NOTES
 
     You can find the definitions of certain terms used in this description
under the subheading "Certain Definitions."
 
     The original notes were issued, and the new notes will be issued, under
three separate indentures, each dated as of January 12, 2000, among the issuers
and Harris Trust and Savings Bank, as trustee. The terms of the notes include
those stated in the indentures and those made part of the indentures by
reference to the Trust Indenture Act of 1939, as amended.
 
     The form and terms of the new notes are the same in all material respects
to the form and terms of the original notes, except that the new notes will have
been registered under the Securities Act of 1933 and, therefore, will not bear
legends restricting the transfer thereof. The original notes have not been
registered under the Securities Act of 1933 and are subject to certain transfer
restrictions.
 
     The following description is a summary of the material provisions of the
indentures. It does not restate the indentures in their entirety. We urge you to
read the indentures because they, and not this description, define your rights
as holders of the new notes. Copies of the indentures are available as set forth
under "Business -- Additional Information."
 
BRIEF DESCRIPTION OF THE NOTES
 
     The notes:
 
     - are general unsecured obligations of the issuers;
 
     - are effectively subordinated in right of payment to all existing and
       future secured Indebtedness of the issuers to the extent of the value of
       the assets securing such Indebtedness and to all liabilities, including
       trade payables, of Charter Holdings' Subsidiaries, other than Charter
       Capital;
 
     - are equal in right of payment to all existing and future unsubordinated,
       unsecured Indebtedness of the issuers; and
 
     - are senior in right of payment to any future subordinated Indebtedness of
       the issuers.
 
     At September 30, 1999, on a pro forma basis giving effect to the offering
of the notes, acquisitions closed since that date, the recent transfer to us of
the Fanch, Falcon and Avalon cable systems and the Pending Transactions, the
outstanding Indebtedness of Charter Holdings and its Subsidiaries would have
totaled approximately $10.7 billion, $6.4 billion of which would have been
Indebtedness of our Subsidiaries and effectively senior to the notes.
 
     The notes will rank equally with the senior notes and senior discount notes
of the issuers which were issued in March 1999.
 
     As of the date of the indentures, all the Subsidiaries of Charter Holdings
will be "Restricted Subsidiaries." However, under the circumstances described
below under "-- Certain Covenants -- Investments," we will be permitted to
designate certain of our Subsidiaries as "Unrestricted Subsidiaries."
Unrestricted Subsidiaries will generally not be subject to the restrictive
covenants in the indentures.
 
PRINCIPAL, MATURITY AND INTEREST OF NOTES
 
10.00% NOTES
 
     The 10.00% notes are limited in aggregate principal amount to $675 million,
and will be issued in denominations of $1,000 and integral multiples of $1,000.
The 10.00% notes will mature on April 1, 2009.
 
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<PAGE>   179
 
     Interest on the 10.00% notes will accrue at the rate of 10.00% per annum
and will be payable semi-annually in arrears on April 1 and October 1,
commencing on April 1, 2000. The issuers will make each interest payment to the
holders of record of the 10.00% notes on the immediately preceding March 15 and
September 15.
 
     Interest on the 10.00% notes will accrue from the date of issuance of the
original notes or, if interest has already been paid, from the date it was most
recently paid. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months.
 
10.25% NOTES
 
     The 10.25% notes are limited in aggregate principal amount to $325 million,
and will be issued in denominations of $1,000 and integral multiples of $1,000.
The 10.25% notes will mature on January 15, 2010.
 
     Interest on the 10.25% notes will accrue at the rate of 10.25% per annum
and will be payable semi-annually in arrears on January 15 and July 15,
commencing on July 15, 2000. The issuers will make each interest payment to the
holders of record of the 10.25% notes on the immediately preceding January 1 and
July 1.
 
     Interest on the 10.25% notes will accrue from the date of issuance of the
original notes or, if interest has already been paid, from the date it was most
recently paid. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months.
 
11.75% NOTES
 
     The 11.75% notes are limited in aggregate principal amount at maturity to
$532 million and originally were issued at an issue price of $564.48 per $1,000
principal amount at maturity, representing a yield to maturity of 11.75%,
calculated on a semi-annual bond equivalent basis, calculated from January 12,
2000. The issuers will issue 11.75% notes, in denominations of $1,000 principal
amount at maturity and integral multiples of $1,000 principal amount at
maturity. The 11.75% notes will mature on January 15, 2010.
 
     Cash interest on the 11.75% notes will not accrue prior to January 15,
2005. Thereafter, cash interest on the 11.75% notes will accrue at a rate of
11.75% per annum and will be payable semi-annually in arrears on January 15 and
July 15, commencing on July 15, 2005. The issuers will make each interest
payment to the holders of record of the 11.75% notes on the immediately
preceding January 1 and July 1. Interest will be computed on the basis of a
360-day year comprised of twelve 30-day months.
 
     The 11.75% notes will accrete at a rate of 11.75% per year to an aggregate
amount of $532 million as of January 15, 2005. For United States federal income
tax purposes, holders of the 11.75% notes will be required to include amounts in
gross income in advance of the receipt of the cash payments to which the income
is attributable. See "Certain United States Federal Tax Considerations."
 
OPTIONAL REDEMPTION
 
10.00% NOTES
 
     The 10.00% notes will not be redeemable at the issuers' option prior to
maturity.
 
10.25% NOTES
 
     At any time prior to January 15, 2003, the issuers may, on any one or more
occasions, redeem up to 35% of the aggregate principal amount of the 10.25%
notes on a pro rata basis or nearly as pro
 
                                       176

<PAGE>   180
 
rata as practicable, at a redemption price of 110.25% of the principal amount
thereof, plus accrued and unpaid interest to the redemption date, with the net
cash proceeds of one or more Equity Offerings; provided that
 
          (1) at least 65% of the aggregate principal amount of 10.25% notes
     remains outstanding immediately after the occurrence of such redemption
     excluding 10.25% notes held by Charter Holdings and its Subsidiaries; and
 
          (2) the redemption must occur within 60 days of the date of the
     closing of such Equity Offering.
 
     Except pursuant to the preceding paragraph, the 10.25% notes will not be
redeemable at the issuers' option prior to January 15, 2005.
 
     On or after January 15, 2005, the issuers may redeem all or a part of the
10.25% notes upon not less than 30 nor more than 60 days notice, at the
redemption prices, expressed as percentages of principal amount, set forth below
plus accrued and unpaid interest thereon, if any, to the applicable redemption
date, if redeemed during the twelve-month period beginning on January 15 of the
years indicated below:
 

<TABLE>
<CAPTION>
YEAR                                                          PERCENTAGE
----                                                          ----------
<S>                                                           <C>
2005........................................................   105.125%
2006........................................................   103.417%
2007........................................................   101.708%
2008 and thereafter.........................................   100.000%
</TABLE>

 
11.75% NOTES
 
     At any time prior to January 15, 2003, the issuers may, on any one or more
occasions, redeem up to 35% of the aggregate principal amount at maturity of the
11.75% notes on a pro rata basis or nearly as pro rata as practicable, at a
redemption price of 111.75% of the Accreted Value thereof, with the net cash
proceeds of one or more Equity Offerings; provided that
 
          (1) at least 65% of the aggregate principal amount at maturity of
     11.75% notes remains outstanding immediately after the occurrence of such
     redemption, excluding 11.75% notes held by Charter Holdings and its
     Subsidiaries; and
 
          (2) the redemption must occur within 60 days of the date of the
     closing of such Equity Offering.
 
     Except pursuant to the preceding paragraph, the 11.75% notes will not be
redeemable at the issuers' option prior to January 15, 2005.
 
     On or after January 15, 2005, the issuers may redeem all or a part of the
11.75% notes upon not less than 30 nor more than 60 days notice, at the
redemption prices, expressed as percentages of principal amount, set forth below
plus accrued and unpaid interest thereon, if any, to the applicable
 
                                       177

<PAGE>   181
 
redemption date, if redeemed during the twelve-month period beginning on January
15 of the years indicated below:
 

<TABLE>
<CAPTION>
YEAR                                                          PERCENTAGE
----                                                          ----------
<S>                                                           <C>
2005........................................................   105.875%
2006........................................................   103.917%
2007........................................................   101.958%
2008 and thereafter.........................................   100.000%
</TABLE>

 
REPURCHASE AT THE OPTION OF HOLDERS
 
CHANGE OF CONTROL
 
     If a Change of Control occurs, each holder of new notes will have the right
to require the issuers to repurchase all or any part, equal to $1,000 or an
integral multiple thereof, of that holder's new notes pursuant to a "Change of
Control Offer." In the Change of Control Offer, the issuers will offer a "Change
of Control Payment" in cash equal to
 
     (x) with respect to the 10.00% notes and the 10.25% notes, 101% of the
aggregate principal amount thereof repurchased plus accrued and unpaid interest
thereon, if any, to the date of purchase and
 
     (y) with respect to the 11.75% notes, 101% of the Accreted Value plus, for
any Change of Control offer occurring after the Full Accretion Date, accrued and
unpaid interest, if any, on the date of purchase.
 
     Within ten days following any Change of Control, the issuers will mail a
notice to each holder describing the transaction or transactions that constitute
the Change of Control and offering to repurchase notes on a certain date, the
"Change of Control Payment Date", specified in such notice, pursuant to the
procedures required by the indentures and described in such notice. The issuers
will comply with the requirements of Rule 14e-1 under the Securities Exchange
Act of 1934 or any successor rules, and any other securities laws and
regulations thereunder to the extent such laws and regulations are applicable in
connection with the repurchase of the notes as a result of a Change of Control.
 
     On the Change of Control Payment Date, the issuers will, to the extent
lawful:
 
          (1) accept for payment all notes or portions thereof properly tendered
     pursuant to the Change of Control Offer;
 
          (2) deposit with the paying agent an amount equal to the Change of
     Control payment in respect of all notes or portions thereof so tendered;
     and
 
          (3) deliver or cause to be delivered to the trustee the notes so
     accepted together with an officers' certificate stating the aggregate
     principal amount of notes or portions thereof being purchased by the
     issuers.
 
     The paying agent will promptly mail to each holder of notes so tendered the
Change of Control payment for such notes, and the trustee will promptly
authenticate and mail, or cause to be transferred by book entry, to each holder
a new note equal in principal amount or principal amount at maturity, as
applicable, to any unpurchased portion of the notes surrendered, if any;
provided that each such new note will be in a principal amount or principal
amount at maturity, as applicable, of $1,000 or an integral multiple thereof.
 
     The provisions described above that require the issuers to make a Change of
Control offer following a Change of Control will be applicable regardless of
whether or not any other provisions of
                                       178

<PAGE>   182
 
the indentures are applicable. Except as described above with respect to a
Change of Control, the indentures do not contain provisions that permit the
holders of the notes to require that the issuers repurchase or redeem the notes
in the event of a takeover, recapitalization or similar transaction.
 
     The issuers will not be required to make a Change of Control offer upon a
Change of Control if a third party makes the Change of Control offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the indentures applicable to a Change of Control offer made by the issuers
and purchases all notes validly tendered and not withdrawn under such Change of
Control offer.
 
     The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of Charter Holdings and its Subsidiaries, taken as a whole, or of
a Parent and its Subsidiaries, taken as a whole. Although there is a limited
body of case law interpreting the phrase "substantially all," there is no
precise established definition of the phrase under applicable law. Accordingly,
the ability of a holder of notes to require the issuers to repurchase such notes
as a result of a sale, lease, transfer, conveyance or other disposition of less
than all of the assets of Charter Holdings and its Subsidiaries, taken as a
whole, or of a Parent and its Subsidiaries, taken as a whole, to another Person
or group may be uncertain.
 
ASSET SALES
 
     Charter Holdings will not, and will not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless:
 
          (1) Charter Holdings or a Restricted Subsidiary of Charter Holdings
     receives consideration at the time of such Asset Sale at least equal to the
     fair market value of the assets or Equity Interests issued or sold or
     otherwise disposed of;
 
          (2) such fair market value is determined by Charter Holdings' board of
     directors and evidenced by a resolution of such board of directors set
     forth in an officers' certificate delivered to the trustee; and
 
          (3) at least 75% of the consideration therefor received by Charter
     Holdings or such Restricted Subsidiary is in the form of cash, Cash
     Equivalents or readily marketable securities.
 
     For purposes of this provision, each of the following shall be deemed to be
cash:
 
          (a) any liabilities, as shown on Charter Holdings' or such Restricted
     Subsidiary's most recent balance sheet, other than contingent liabilities
     and liabilities that are by their terms subordinated to the notes, that are
     assumed by the transferee of any such assets pursuant to a customary
     novation agreement that releases Charter Holdings or such Restricted
     Subsidiary from further liability;
 
          (b) any securities, notes or other obligations received by Charter
     Holdings or any such Restricted Subsidiary from such transferee that are
     converted by Charter Holdings or such Restricted Subsidiary into cash, Cash
     Equivalents or readily marketable securities within 60 days after receipt
     thereof, to the extent of the cash, Cash Equivalents or readily marketable
     securities received in that conversion; and
 
          (c) Productive Assets.
 
     Within 365 days after the receipt of any Net Proceeds from an Asset Sale,
Charter Holdings or a Restricted Subsidiary of Charter Holdings may apply such
Net Proceeds at its option:
 
          (1) to repay debt under the Credit Facilities or any other
     Indebtedness of the Restricted Subsidiaries, other than Indebtedness
     represented by a guarantee of a Restricted Subsidiary of Charter Holdings;
     or
 
                                       179

<PAGE>   183
 
          (2) to invest in Productive Assets; provided that any Net Proceeds
     which Charter Holdings or a Restricted Subsidiary of Charter Holdings has
     committed to invest in Productive Assets within 365 days of the applicable
     Asset Sale may be invested in Productive Assets within two years of such
     Asset Sale.
 
     Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the preceding paragraph will constitute Excess Proceeds. When the
aggregate amount of Excess Proceeds exceeds $25 million, the issuers will make
an Asset Sale Offer to all holders of notes and all holders of other
Indebtedness that is of equal priority with the notes containing provisions
requiring offers to purchase or redeem with the proceeds of sales of assets to
purchase the maximum principal amount of notes and such other Indebtedness of
equal priority that may be purchased out of the Excess Proceeds, which amount
includes the entire amount of the Net Proceeds. The offer price in any Asset
Sale Offer will be payable in cash and equal to:
 
     (x) with respect to the 10.00% notes and the 10.25% notes, 100% of the
principal amount thereof plus accrued and unpaid interest, if any, to the date
of purchase; and
 
     (y) with respect to the 11.75% notes, 100% of the Accreted Value thereof
plus, after the Full Accretion Date, accrued and unpaid interest, if any, to the
date of purchase.
 
     If any Excess Proceeds remain after consummation of an Asset Sale Offer,
Charter Holdings may use such Excess Proceeds for any purpose not otherwise
prohibited by the indentures. If the aggregate principal amount of notes and
such other Indebtedness of equal priority tendered into such Asset Sale Offer
exceeds the amount of Excess Proceeds, the applicable trustee shall select the
Notes and such other Indebtedness of equal priority to be purchased on a pro
rata basis. Upon completion of each Asset Sale Offer, the amount of Excess
Proceeds shall be reset at zero.
 
SELECTION AND NOTICE
 
     If less than all of the notes are to be redeemed at any time, the trustee
will select notes for redemption as follows:
 
          (1) if the notes are listed, in compliance with the requirements of
     the principal national securities exchange on which the notes are listed;
     or
 
          (2) if the notes are not so listed, on a pro rata basis, by lot or by
     such method as the trustee shall deem fair and appropriate.
 
     No notes of $1,000 or less shall be redeemed in part. Notices of redemption
shall be mailed by first class mail at least 30 but not more than 60 days before
the redemption date to each holder of notes to be redeemed at its registered
address. Notices of redemption may not be conditional.
 
     If any note is to be redeemed in part only, the notice of redemption that
relates to that note shall state the portion of the principal amount thereof to
be redeemed. A new note in principal amount equal to the unredeemed portion of
the original note will be issued in the name of the holder thereof upon
cancellation of the original note. Notes called for redemption become due on the
date fixed for redemption. On and after the redemption date, interest ceases to
accrue on, or the Accreted Value ceases to increase on, as the case may be,
notes or portions of them called for redemption.
 
                                       180

<PAGE>   184
 
CERTAIN COVENANTS
 
     Set forth in this section are summaries of certain covenants contained in
the indentures. The covenants summarized are the following:
 
     - Limitations on restricted payments by Charter Holdings and its Restricted
       Subsidiaries. Restricted payments include
 
        - dividends and other distributions on equity interests,
 
        - purchases, redemptions on other acquisitions of equity interests, and
 
        - purchases, redemptions, defeasance or other acquisitions of
          subordinated debt.
 
     - Limitations on restricted investments by Charter Holdings or its
       Restricted Subsidiaries. Restricted investments include investments other
       than
 
        - investments in Restricted Subsidiaries, cash equivalents,
 
        - non-cash consideration from an asset sale made in compliance with the
          indenture,
 
        - investments with the net cash proceeds of the issuance and sale of
          equity interests,
 
        - investments in productive assets not to exceed in the $150 million,
 
        - other investments not exceeding $50 million in any person,
 
        - investments in customers and suppliers which either generate accounts
          receivable or are accepted in settlement of bona fide disputes, and
 
        - the investment in Marcus Cable Holdings, LLC.
 
        This covenant also limits Charter Holdings from allowing any Restricted
        Subsidiary from becoming an Unrestricted Subsidiary.
 
     - Limitations on the occurrence of Indebtedness and issuance of preferred
       stock generally unless the leverage ratio is not greater than 8.75 to 1.0
       on a pro forma basis. This does not prohibit the incurrence of permitted
       debt which includes:
 
        - borrowings up to $3.5 billion under the credit facilities,
 
        - existing indebtedness,
 
        - capital lease obligations, mortgage financings or purchase money
          obligations in an aggregate amount of up to $25 million at any one
          time outstanding for the purchase, construction or improvement of
          productive assets,
 
        - permitted refinancing indebtedness,
 
        - intercompany indebtedness,
 
        - hedging obligations,
 
        - up to $300 million of additional indebtedness,
 
        - additional indebtedness not exceeding 200% of the net cash proceeds
          from the sale of equity interests to the extent not used to make
          restricted payments or permitted investments, and
 
        - the accretion or amortization of original issue discount and the write
          up of indebtedness in accordance with purchase accounting.
 
     - Prohibitions against the creation of liens except permitted liens.
 
                                       181

<PAGE>   185
 
     - Prohibitions against restrictions on the ability of any Restricted
       Subsidiary to pay dividends or make other distributions on its capital
       stock to Charter Holdings or any Restricted Subsidiary, make loans or
       advances to Charter Holdings or its Restricted Subsidiaries or transfer
       properties or assets to Charter Holdings or any of its Restricted
       Subsidiaries. This covenant, however, does not prohibit restrictions
       under
 
        - existing indebtedness,
 
        - the notes and the indentures,
 
        - applicable law,
 
        - the terms of indebtedness or capital stock of a person acquired by
          Charter Holdings or any of its Restricted Subsidiaries,
 
        - customary non-assignment provisions in leases,
 
        - purchase money obligations,
 
        - agreements for the sale or other disposition of a Restricted
          Subsidiary restricting distributions pending its sale,
 
        - permitted refinancing indebtedness,
 
        - liens securing indebtedness permitted under the indentures,
 
        - joint venture agreements,
 
        - under ordinary course contracts with customers that restrict cash,
          other deposits or net worth,
 
        - indebtedness permitted under the indentures, and
 
        - restrictions that are not materially more restrictive than customary
          provisions in comparable financings which management determines will
          not materially impair Charter Holdings' ability to make payments
          required under the notes.
 
     - Prohibitions against mergers, consolidations or the sale of all or
       substantially all of an issuer's assets unless
 
        - the issuer is the surviving corporation or the person formed by the
          merger or consolidation or acquiring the assets is organized under the
          law of the United States, any state or the District of Columbia,
 
        - such person assumes all obligations under the notes and the
          indentures,
 
        - no default or event of default exists, and
 
        - Charter Holdings or the person formed by the merger or consolidation
          or acquiring all or substantially all the assets could incur at least
          $1.00 of additional indebtedness under the leverage ratio or have a
          leverage ratio after giving effect to the transaction no greater than
          the leverage ratio of the issuer immediately prior to the transaction.
 
     - Prohibitions against transactions with affiliates, unless Charter
       Holdings delivers to the trustee:
 
           - for transactions exceeding $15.0 million a resolution approved by a
             majority of the board of directors certifying that the transaction
             complies with the covenant; and
 
           - for transactions exceeding $50.0 million a fairness opinion of an
             accounting, appraisal or investment banking firm of national
             standing.
 
             Certain transactions are not subject to the covenant including:
 
                                       182

<PAGE>   186
 
           - existing employment agreements and new employment agreements
             entered into in the ordinary course of business and consistent with
             past practice; and
 
           - management fees under agreements existing as of March 17, 1999 or
             after March 17, 1999 if the percentage fees are not higher than
             those under agreements existing on March 17, 1999.
 
     - Limitations on sale and leaseback transactions exceeding three years.
 
     - Limitations on issuances of guarantees of indebtedness.
 
     - Prohibitions against consent payments to holders of notes unless paid to
       all consenting holders.
 
During any period of time that
 
     (a) either the 10.00% notes, the 10.25% notes or the 11.75% notes have
         Investment Grade Ratings from both Rating Agencies, and
 
     (b) no Default or Event of Default has occurred and is continuing under the
         applicable indenture,
 
Charter Holdings and its Restricted Subsidiaries will not be subject to the
provisions of the indenture described under
 
         - "-- Incurrence of Indebtedness and Issuance of preferred stock,"
 
         - "-- Restricted Payments,"
 
         - "-- Asset Sales,"
 
         - "-- Sale and Leaseback Transactions,"
 
         - "-- Dividend and Other Payment Restrictions Affecting Subsidiaries,"
 
         - "-- Transactions with Affiliates,"
 
         - "-- Investments" and
 
         - clause (4) of the first paragraph of "-- Merger, Consolidation and
           Sale of Assets."
 
     If Charter Holdings and its Restricted Subsidiaries are not subject to
these covenants for any period of time as a result of the previous sentence and,
subsequently, one, or both, of the Rating Agencies withdraws its ratings or
downgrades the ratings assigned to the applicable notes below the required
Investment Grade Ratings or a Default or Event of Default occurs and is
continuing, then Charter Holdings and its Restricted Subsidiaries will
thereafter again be subject to these covenants. Compliance with the covenant
with respect to Restricted Payments made after the time of such withdrawal,
downgrade, Default or Event of Default will be calculated as if such covenant
had been in effect during the entire period of time from the Issue Date.
 
     The new notes will not have Investment Grade Ratings from the Rating
Agencies when they are issued. Consequently, the covenants listed above remain
applicable to Charter Holdings and its Restricted Subsidiaries.
 
RESTRICTED PAYMENTS
 
     Charter Holdings will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly:
 
          (1) declare or pay any dividend or make any other payment or
     distribution on account of Charter Holdings' or any of its Restricted
     Subsidiaries' Equity Interests, including, without limitation, any payment
     in connection with any merger or consolidation involving Charter
 
                                       183

<PAGE>   187
 
     Holdings or any of its Restricted Subsidiaries, or to the direct or
     indirect holders of Charter Holdings' or any of its Restricted
     Subsidiaries' Equity Interests in their capacity as such, other than
     dividends or distributions payable in Equity Interests, other than
     Disqualified Stock, of Charter Holdings or, in the case of Charter Holdings
     and its Restricted Subsidiaries, to Charter Holdings or a Restricted
     Subsidiary of Charter Holdings;
 
          (2) purchase, redeem or otherwise acquire or retire for value,
     including, without limitation, in connection with any merger or
     consolidation involving Charter Holdings, any Equity Interests of Charter
     Holdings or any direct or indirect parent of Charter Holdings or any
     Restricted Subsidiary of Charter Holdings, other than, in the case of
     Charter Holdings and its Restricted Subsidiaries, any such Equity Interests
     owned by Charter Holdings or any Restricted Subsidiary of Charter Holdings;
     or
 
          (3) make any payment on or with respect to, or purchase, redeem,
     defease or otherwise acquire or retire for value, any Indebtedness that is
     subordinated to the notes, other than the notes, except a payment of
     interest or principal at the Stated Maturity thereof.
 
     All such payments and other actions set forth in clauses (1) through (3)
above are collectively referred to as "Restricted Payments," unless, at the time
of and after giving effect to such Restricted Payment:
 
          (1) no Default or Event of Default shall have occurred and be
     continuing or would occur as a consequence thereof; and
 
          (2) Charter Holdings would, at the time of such Restricted Payment and
     after giving pro forma effect thereto as if such Restricted Payment had
     been made at the beginning of the applicable quarter period, have been
     permitted to incur at least $1.00 of additional Indebtedness pursuant to
     the Leverage Ratio test set forth in the first paragraph of the covenant
     described below under the caption "-- Incurrence of Indebtedness and
     Issuance of preferred stock"; and
 
          (3) such Restricted Payment, together with the aggregate amount of all
     other Restricted Payments made by Charter Holdings and each of its
     Restricted Subsidiaries after the date of the indenture, excluding
     Restricted Payments permitted by clauses (2), (3), (4), (5), (6), (7) and
     (8) of the next succeeding paragraph, shall not exceed, at the date of
     determination, the sum of:
 
             (a) an amount equal to 100% of the Consolidated EBITDA of Charter
        Holdings since the date of the indenture to the end of Charter Holdings'
        most recently ended full fiscal quarter for which internal financial
        statements are available, taken as a single accounting period, less the
        product of 1.2 times the combined Consolidated Interest Expense of
        Charter Holdings since the date of the indenture to the end of Charter
        Holdings' most recently ended full fiscal quarter for which internal
        financial statements are available, taken as a single accounting period,
        plus
 
             (b) an amount equal to 100% of Capital Stock Sale Proceeds less any
        such Capital Stock Sale Proceeds used in connection with
 
                (i) an Investment made pursuant to clause (6) of the definition
           of "Permitted Investments" or
 
                (ii) the incurrence of Indebtedness pursuant to clause (10) of
           the covenant described under the caption "-- Incurrence of
           Indebtedness and Issuance of preferred stock," plus
 
             (c) $100 million.
 
                                       184

<PAGE>   188
 
     So long as no Default has occurred and is continuing or would be caused
thereby, the preceding provisions will not prohibit:
 
          (1) the payment of any dividend within 60 days after the date of
     declaration thereof, if at said date of declaration such payment would have
     complied with the provisions of the indentures;
 
          (2) the redemption, repurchase, retirement, defeasance or other
     acquisition of any subordinated Indebtedness of Charter Holdings in
     exchange for, or out of the net proceeds of, the substantially concurrent
     sale, other than to a Subsidiary of Charter Holdings, of Equity Interests
     of Charter Holdings, other than Disqualified Stock; provided that the
     amount of any such net cash proceeds that are utilized for any such
     redemption, repurchase, retirement, defeasance or other acquisition shall
     be excluded from clause (3)(b) of the preceding paragraph;
 
          (3) the defeasance, redemption, repurchase or other acquisition of
     subordinated Indebtedness of Charter Holdings or any of its Restricted
     Subsidiaries with the net cash proceeds from an incurrence of Permitted
     Refinancing Indebtedness;
 
          (4) regardless of whether a Default then exists, the payment of any
     dividend or distribution to the extent necessary to permit direct or
     indirect beneficial owners of shares of Capital Stock of Charter Holdings
     to pay federal, state or local income tax liabilities that would arise
     solely from income of Charter Holdings or any of its Restricted
     Subsidiaries, as the case may be, for the relevant taxable period and
     attributable to them solely as a result of Charter Holdings, and any
     intermediate entity through which the holder owns such shares or any of its
     Restricted Subsidiaries being a limited liability company, partnership or
     similar entity for federal income tax purposes;
 
          (5) regardless of whether a Default then exists, the payment of any
     dividend by a Restricted Subsidiary of Charter Holdings to the holders of
     its common Equity Interests on a pro rata basis;
 
          (6) the payment of any dividend on the Helicon Preferred Stock or the
     redemption, repurchase, retirement or other acquisition of the Helicon
     Preferred Stock in an amount not in excess of its aggregate liquidation
     value;
 
          (7) the repurchase, redemption or other acquisition or retirement for
     value of any Equity Interests of Charter Holdings held by any member of
     Charter Holdings' management pursuant to any management equity subscription
     agreement or stock option agreement in effect as of the date of the
     indenture; provided that the aggregate price paid for all such repurchased,
     redeemed, acquired or retired Equity Interests shall not exceed $10 million
     in any fiscal year of Charter Holdings; and
 
          (8) payment of fees in connection with any acquisition, merger or
     similar transaction in an amount that does not exceed an amount equal to
     1.25% of the transaction value of such acquisition, merger or similar
     transaction.
 
     The amount of all Restricted Payments, other than cash, shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by Charter Holdings or any of its
Restricted Subsidiaries pursuant to the Restricted Payment. The fair market
value of any assets or securities that are required to be valued by this
covenant shall be determined by the board of directors of Charter Holdings whose
resolution with respect thereto shall be delivered to the trustee. Such board of
directors' determination must be based upon an opinion or appraisal issued by an
accounting, appraisal or investment banking firm of national standing if the
fair market value exceeds $100 million.
 
     Not later than the date of making any Restricted Payment, Charter Holdings
shall deliver to the trustee an officers' certificate stating that such
Restricted Payment is permitted and setting forth the
                                       185

<PAGE>   189
 
basis upon which the calculations required by this "Restricted Payments"
covenant were computed, together with a copy of any fairness opinion or
appraisal required by the indentures.
 
INVESTMENTS
 
     Charter Holdings will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly:
 
          (1) make any Restricted Investment; or
 
          (2) allow any Restricted Subsidiary of Charter Holdings to become an
     Unrestricted Subsidiary, unless, in each case:
 
             (a) no Default or Event of Default shall have occurred and be
        continuing or would occur as a consequence thereof; and
 
             (b) Charter Holdings would, at the time of, and after giving effect
        to, such Restricted Investment or such designation of a Restricted
        Subsidiary as an unrestricted Subsidiary, have been permitted to incur
        at least $1.00 of additional Indebtedness pursuant to the Leverage Ratio
        test set forth in the first paragraph of the covenant described below
        under the caption "-- Incurrence of Indebtedness and Issuance of
        Preferred Stock."
 
     An Unrestricted Subsidiary may be redesignated as a Restricted Subsidiary
if such redesignation would not cause a Default.
 
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
 
     (a) Charter Holdings will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "incur") any Indebtedness, including Acquired
Debt, and Charter Holdings will not issue any Disqualified Stock and will not
permit any of its Restricted Subsidiaries to issue any shares of preferred stock
unless the Leverage Ratio would have been not greater than 8.75 to 1.0
determined on a pro forma basis, including a pro forma application of the net
proceeds therefrom, as if the additional Indebtedness had been incurred, or the
Disqualified Stock had been issued, as the case may be, at the beginning of the
most recently ended fiscal quarter.
 
     So long as no Default shall have occurred and be continuing or would be
caused thereby, the first paragraph of this covenant will not prohibit the
incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
 
          (1) the incurrence by Charter Holdings and its Restricted Subsidiaries
     of Indebtedness under Credit Facilities; provided that the aggregate
     principal amount of all Indebtedness of Charter Holdings and its Restricted
     Subsidiaries outstanding under all Credit Facilities, after giving effect
     to such incurrence, does not exceed an amount equal to $3.5 billion less
     the aggregate amount of all Net Proceeds of Asset Sales applied by Charter
     Holdings or any of its Subsidiaries in the case of an Asset Sale since the
     date of the indenture to repay Indebtedness under a Credit Facility
     pursuant to the covenant described above under the caption "-- Asset
     Sales";
 
          (2) the incurrence by Charter Holdings and its Restricted Subsidiaries
     of Existing Indebtedness, other than the Credit Facilities;
 
          (3) the incurrence on the January 12, 2000 by Charter Holdings and its
     Restricted Subsidiaries of Indebtedness represented by the notes;
 
                                       186

<PAGE>   190
 
          (4) the incurrence by Charter Holdings or any of its Restricted
     Subsidiaries of Indebtedness represented by Capital Lease Obligations,
     mortgage financings or purchase money obligations, in each case, incurred
     for the purpose of financing all or any part of the purchase price or cost
     of construction or improvement, including, without limitation, the cost of
     design, development, construction, acquisition, transportation,
     installation, improvement, and migration, of Productive Assets of Charter
     Holdings or any of its Restricted Subsidiaries in an aggregate principal
     amount not to exceed $75 million at any time outstanding;
 
          (5) the incurrence by Charter Holdings or any of its Restricted
     Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the
     net proceeds of which are used to refund, refinance or replace, in whole or
     in part, Indebtedness, other than intercompany Indebtedness, that was
     permitted by the indentures to be incurred under the first paragraph of
     this covenant or clauses (2) or (3) of this paragraph;
 
          (6) the incurrence by Charter Holdings or any of its Restricted
     Subsidiaries of intercompany Indebtedness between or among Charter Holdings
     and any of its Wholly Owned Restricted Subsidiaries; provided that this
     clause does not permit Indebtedness between Charter Holdings or any of its
     Restricted Subsidiaries, as creditor or debtor, as the case may be, unless
     otherwise permitted by the indentures; provided, further, that:
 
             (a) if Charter Holdings is the obligor on such Indebtedness, such
        Indebtedness must be expressly subordinated to the prior payment in full
        in cash of all obligations with respect to the notes; and
 
             (b) (i) any subsequent issuance or transfer of Equity Interests
        that results in any such Indebtedness being held by a Person other than
        Charter Holdings or a Wholly Owned Restricted Subsidiary thereof and
        (ii) any sale or other transfer of any such Indebtedness to a Person
        that is not either Charter Holdings or a Wholly Owned Restricted
        Subsidiary thereof, shall be deemed, in each case, to constitute an
        incurrence of such Indebtedness by Charter Holdings or any of its
        Restricted Subsidiaries that was not permitted by this clause (6);
 
          (7) the incurrence by Charter Holdings or any of its Restricted
     Subsidiaries of Hedging Obligations that are incurred for the purpose of
     fixing or hedging interest rate risk with respect to any floating rate
     Indebtedness that is permitted by the terms of the indentures to be
     outstanding;
 
          (8) the guarantee by Charter Holdings of Indebtedness of a Restricted
     Subsidiary of Charter Holdings that was permitted to be incurred by another
     provision of this covenant;
 
          (9) the incurrence by Charter Holdings or any of its Restricted
     Subsidiaries of additional Indebtedness in an aggregate principal amount at
     any time outstanding, not to exceed $300 million;
 
          (10) the incurrence by Charter Holdings or any of its Restricted
     Subsidiaries of additional Indebtedness in an aggregate principal amount at
     any time outstanding not to exceed 200% of the net cash proceeds received
     by Charter Holdings from the sale of its Equity Interests, other than
     Disqualified Stock, after the date of the indentures to the extent such net
     cash proceeds have not been applied to make Restricted Payments or to
     effect other transactions pursuant to the covenant described above under
     the subheading "-- Restricted Payments" or to make Permitted Investments
     pursuant to clause (6) of the definition thereof; and
 
          (11) the accretion or amortization of original issue discount and the
     write up of Indebtedness in accordance with purchase accounting.
 
     For purposes of determining compliance with this "Incurrence of
Indebtedness and Issuance of Preferred Stock" covenant, in the event that an
item of proposed Indebtedness
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<PAGE>   191
 
          (a) meets the criteria of more than one of the categories of Permitted
     Debt described in clauses (1) through (11) above, or
 
          (b) is entitled to be incurred pursuant to the first paragraph of this
     covenant,
 
Charter Holdings will be permitted to classify and from time to time to
reclassify such item of Indebtedness on the date of its incurrence in any manner
that complies with this covenant. For avoidance of doubt, Indebtedness incurred
pursuant to a single agreement, instrument, program, facility or line of credit
may be classified as Indebtedness arising in part under one of the clauses
listed above, and in part under any one or more of the clauses listed above, to
the extent that such Indebtedness satisfies the criteria for such clauses.
 
     (b) Notwithstanding the foregoing, in no event shall any Restricted
Subsidiary of Charter Holdings consummate a Subordinated Debt Financing or a
preferred stock Financing. A "Subordinated Debt Financing" or a "preferred stock
Financing", as the case may be, with respect to any Restricted Subsidiary of
Charter Holdings shall mean a public offering or private placement, whether
pursuant to Rule 144A under the Securities Act or otherwise, of Subordinated
Notes or preferred stock, whether or not such preferred stock constitutes
Disqualified Stock, as the case may be, of such Restricted Subsidiary to one or
more purchasers, other than to one or more Affiliates of Charter Holdings.
"Subordinated Notes" with respect to any Restricted Subsidiary of Charter
Holdings shall mean Indebtedness of such Restricted Subsidiary that is
contractually subordinated in right of payment to any other Indebtedness of such
Restricted Subsidiary, including, without limitation, Indebtedness under the
Credit Facilities. The foregoing limitation shall not apply to
 
          (i) any Indebtedness or preferred stock of any Person existing at the
     time such Person is merged with or into or became a Subsidiary of Charter
     Holdings; provided that such Indebtedness or preferred stock was not
     incurred or issued in connection with, or in contemplation of, such Person
     merging with or into, or becoming a Subsidiary of, Charter Holdings, and
 
          (ii) any Indebtedness or preferred stock of a Restricted Subsidiary
     issued in connection with, and as part of the consideration for, an
     acquisition, whether by stock purchase, asset sale, merger or otherwise, in
     each case involving such Restricted Subsidiary, which Indebtedness or
     preferred stock is issued to the seller or sellers of such stock or assets;
     provided that such Restricted Subsidiary is not obligated to register such
     Indebtedness or preferred stock under the Securities Act or obligated to
     provide information pursuant to Rule 144A under the Securities Act.
 
LIENS
 
     Charter Holdings will not, directly or indirectly, create, incur, assume or
suffer to exist any Lien of any kind securing Indebtedness, Attributable Debt or
trade payables on any asset now owned or hereafter acquired, except Permitted
Liens.
 
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
 
     Charter Holdings will not, directly or indirectly, create or permit to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary of Charter Holdings to:
 
          (1) pay dividends or make any other distributions on its Capital Stock
     to Charter Holdings or any of its Restricted Subsidiaries, or with respect
     to any other interest or participation in, or measured by, its profits, or
     pay any Indebtedness owed to Charter Holdings or any of its Restricted
     Subsidiaries;
 
          (2) make loans or advances to Charter Holdings or any of its
     Restricted Subsidiaries; or
 
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<PAGE>   192
 
          (3) transfer any of its properties or assets to Charter Holdings or
     any of its Restricted Subsidiaries.
 
     However, the preceding restrictions will not apply to encumbrances or
restrictions existing under or by reason of:
 
          (1) Existing Indebtedness as in effect on the date of the indentures,
     including, without limitation, the Credit Facilities, and any amendments,
     modifications, restatements, renewals, increases, supplements, refundings,
     replacements or refinancings thereof; provided that such amendments,
     modifications, restatements, renewals, increases, supplements, refundings,
     replacements or refinancings are no more restrictive, taken as a whole,
     with respect to such dividend and other payment restrictions than those
     contained in such Existing Indebtedness, as in effect on the date of the
     indentures;
 
          (2) the indentures and the notes;
 
          (3) applicable law;
 
          (4) any instrument governing Indebtedness or Capital Stock of a Person
     acquired by Charter Holdings or any of its Restricted Subsidiaries as in
     effect at the time of such acquisition, except to the extent such
     Indebtedness was incurred in connection with or in contemplation of such
     acquisition, which encumbrance or restriction is not applicable to any
     Person, or the properties or assets of any Person, other than the Person,
     or the property or assets of the Person, so acquired; provided that, in the
     case of Indebtedness, such Indebtedness was permitted by the terms of the
     indentures to be incurred;
 
          (5) customary non-assignment provisions in leases entered into in the
     ordinary course of business and consistent with past practices;
 
          (6) purchase money obligations for property acquired in the ordinary
     course of business that impose restrictions on the property so acquired of
     the nature described in clause (3) of the preceding paragraph;
 
          (7) any agreement for the sale or other disposition of a Restricted
     Subsidiary of Charter Holdings that restricts distributions by such
     Restricted Subsidiary pending its sale or other disposition;
 
          (8) Permitted Refinancing Indebtedness; provided that the restrictions
     contained in the agreements governing such Permitted Refinancing
     Indebtedness are no more restrictive, taken as a whole, than those
     contained in the agreements governing the Indebtedness being refinanced;
 
          (9) Liens securing Indebtedness otherwise permitted to be incurred
     pursuant to the provisions of the covenant described above under the
     caption "-- Liens" that limit the right of Charter Holdings or any of its
     Restricted Subsidiaries to dispose of the assets subject to such Lien;
 
          (10) provisions with respect to the disposition or distribution of
     assets or property in joint venture agreements and other similar agreements
     entered into in the ordinary course of business;
 
          (11) restrictions on cash or other deposits or net worth imposed by
     customers under contracts entered into in the ordinary course of business;
 
          (12) restrictions contained in the terms of Indebtedness permitted to
     be incurred under the covenant described under the caption "-- Incurrence
     of Indebtedness and Issuance of preferred stock"; provided that such
     restrictions are no more restrictive than the terms contained in the Credit
     Facilities as in effect on January 12, 2000; and
 
                                       189

<PAGE>   193
 
          (13) restrictions that are not materially more restrictive than
     customary provisions in comparable financings and the management of Charter
     Holdings determines that such restrictions will not materially impair
     Charter Holdings' ability to make payments as required under the notes.
 
MERGER, CONSOLIDATION, OR SALE OF ASSETS
 
     Neither of the issuers may, directly or indirectly:
 
          (1) consolidate or merge with or into another Person, whether or not
     such Issuer is the surviving corporation; or
 
          (2) sell, assign, transfer, convey or otherwise dispose of all or
     substantially all of its properties or assets, in one or more related
     transactions, to another Person; unless:
 
             (A) either:
 
             (1) such issuer is the surviving corporation; or
 
             (2) the Person formed by or surviving any such consolidation or
        merger, if other than such Issuer, or to which such sale, assignment,
        transfer, conveyance or other disposition shall have been made is a
        Person organized or existing under the laws of the United States, any
        state thereof or the District of Columbia, provided that if the Person
        formed by or surviving any such consolidation or merger with either
        Issuer is a limited liability company or other Person other than a
        corporation, a corporate co-issuer shall also be an obligor with respect
        to the notes;
 
             (B) the Person formed by or surviving any such consolidation or
        merger, if other than Charter Holdings, or the Person to which such
        sale, assignment, transfer, conveyance or other disposition shall have
        been made assumes all the obligations of Charter Holdings under the
        notes and the indentures pursuant to agreements reasonably satisfactory
        to the trustee;
 
             (C) immediately after such transaction no Default or Event of
        Default exists; and
 
             (D) Charter Holdings or the Person formed by or surviving any such
        consolidation or merger, if other than Charter Holdings, will, on the
        date of such transaction after giving pro forma effect thereto and any
        related financing transactions as if the same had occurred at the
        beginning of the applicable four-quarter period, either
 
                (1) be permitted to incur at least $1.00 of additional
           Indebtedness pursuant to the Leverage Ratio test set forth in the
           first paragraph of the covenant described above under the caption
           "-- Incurrence of Indebtedness and Issuance of preferred stock" or
 
                (2) have a Leverage Ratio immediately after giving effect to
           such consolidation or merger no greater than the Leverage Ratio
           immediately prior to such consolidation or merger.
 
     In addition, Charter Holdings may not, directly or indirectly, lease all or
substantially all of its properties or assets, in one or more related
transactions, to any other Person. This "Merger, Consolidation, or Sale of
Assets" covenant will not apply to a sale, assignment, transfer, conveyance or
other disposition of assets between or among Charter Holdings and any of its
Wholly Owned Subsidiaries.
 
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<PAGE>   194
 
TRANSACTIONS WITH AFFILIATES
 
     Charter Holdings will not, and will not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each, an "Affiliate Transaction"), unless:
 
          (1) such Affiliate Transaction is on terms that are no less favorable
     to Charter Holdings or the relevant Restricted Subsidiary than those that
     would have been obtained in a comparable transaction by Charter Holdings or
     such Restricted Subsidiary with an unrelated Person; and
 
          (2) Charter Holdings delivers to the trustee:
 
             (a) with respect to any Affiliate Transaction or series of related
        Affiliate Transactions involving aggregate consideration in excess of
        $15 million, a resolution of the board of directors of Charter Holdings
        set forth in an officers' certificate certifying that such Affiliate
        Transaction complies with this covenant and that such Affiliate
        Transaction has been approved by a majority of the members of the board
        of directors; and
 
             (b) with respect to any Affiliate Transaction or series of related
        Affiliate Transactions involving aggregate consideration in excess of
        $50 million, an opinion as to the fairness to the holders of such
        Affiliate Transaction from a financial point of view issued by an
        accounting, appraisal or investment banking firm of national standing.
 
     The following items shall not be deemed to be Affiliate Transactions and,
therefore, will not be subject to the provisions of the prior paragraph:
 
          (1) any existing employment agreement entered into by Charter Holdings
     or any of its Subsidiaries and any employment agreement entered into by
     Charter Holdings or any of its Restricted Subsidiaries in the ordinary
     course of business and consistent with the past practice of Charter
     Holdings or such Restricted Subsidiary;
 
          (2) transactions between or among Charter Holdings and/or its
     Restricted Subsidiaries;
 
          (3) payment of reasonable directors fees to Persons who are not
     otherwise Affiliates of Charter Holdings, and customary indemnification and
     insurance arrangements in favor of directors, regardless of affiliation
     with Charter Holdings or any of its Restricted Subsidiaries;
 
          (4) payment of management fees pursuant to management agreements
     either
 
             (A) existing on January 12, 2000 or
 
             (B) entered into after January 12, 2000,
 
        to the extent that such management agreements provide for percentage
        fees no higher than the percentage fees existing under the management
        agreements existing on January 12, 2000;
 
          (5) Restricted Payments that are permitted by the provisions of the
     covenant described above under the caption "-- Restricted Payments" and
     Restricted Investments that are permitted by the provisions of the
     indentures described above under the caption "Restricted Payments --
     Investments"; and
 
          (6) Permitted Investments.
 
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<PAGE>   195
 
SALE AND LEASEBACK TRANSACTIONS
 
     Charter Holdings will not, and will not permit any of its Restricted
Subsidiaries to, enter into any sale and leaseback transaction; provided that
Charter Holdings may enter into a sale and leaseback transaction if:
 
          (1) Charter Holdings could have
 
             (a) incurred Indebtedness in an amount equal to the Attributable
        Debt relating to such sale and leaseback transaction under the Leverage
        Ratio test in the first paragraph of the covenant described above under
        the caption "-- Incurrence of Additional Indebtedness and Issuance of
        preferred stock" and
 
             (b) incurred a Lien to secure such Indebtedness pursuant to the
        covenant described above under the caption "-- Liens"; and
 
          (2) the transfer of assets in that sale and leaseback transaction is
     permitted by, and Charter Holdings applies the proceeds of such transaction
     in compliance with, the covenant described above under the caption
     "-- Asset Sales."
 
     The foregoing restrictions do not apply to a sale and leaseback transaction
if the lease is for a period, including renewal rights, of not in excess of
three years.
 
LIMITATIONS ON ISSUANCES OF GUARANTEES OF INDEBTEDNESS
 
     Charter Holdings will not permit any of its Restricted Subsidiaries,
directly or indirectly, to Guarantee or pledge any assets to secure the payment
of any other Indebtedness of Charter Holdings, except in respect of the Credit
Facilities (the "Guaranteed Indebtedness") unless
 
     (1) such Restricted Subsidiary simultaneously executes and delivers a
supplemental indenture providing for the Guarantee (a "Subsidiary Guarantee") of
the payment of the notes by such Restricted Subsidiary, and
 
     (2) until one year after all the notes have been paid in full in cash, such
Restricted Subsidiary waives and will not in any manner whatsoever claim or take
the benefit or advantage of, any rights of reimbursement, indemnity or
subrogation or any other rights against Charter Holdings or any other Restricted
Subsidiary of Charter Holdings as a result of any payment by such Restricted
Subsidiary under its Subsidiary Guarantee; provided that this paragraph shall
not be applicable to any Guarantee or any Restricted Subsidiary that existed at
the time such Person became a Restricted Subsidiary and was not incurred in
connection with, or in contemplation of, such Person becoming a Restricted
Subsidiary.
 
     If the Guaranteed Indebtedness is subordinated to the notes, then the
Guarantee of such Guaranteed Indebtedness shall be subordinated to the
Subsidiary Guarantee at least to the extent that the Guaranteed Indebtedness is
subordinated to the notes.
 
PAYMENTS FOR CONSENT
 
     Charter Holdings will not, and will not permit any of its Subsidiaries to,
directly or indirectly, pay or cause to be paid any consideration to or for the
benefit of any holder of notes for or as an inducement to any consent, waiver or
amendment of any of the terms or provisions of the indentures or the notes
unless such consideration is offered to be paid and is paid to all holders of
the notes that consent, waive or agree to amend in the time frame set forth in
the solicitation documents relating to such consent, waiver or agreement.
 
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<PAGE>   196
 
REPORTS
 
     Whether or not required by the Securities and Exchange Commission, so long
as any notes are outstanding, Charter Holdings will furnish to the holders of
notes, within the time periods specified in the Securities and Exchange
Commission's rules and regulations:
 
          (1) all quarterly and annual financial information that would be
     required to be contained in a filing with the Securities and Exchange
     Commission on Forms 10-Q and 10-K if Charter Holdings were required to file
     such forms, including a "Management's Discussion and Analysis of Financial
     Condition and Results of Operations" section and, with respect to the
     annual information only, a report on the annual financial statements by
     Charter Holdings' independent public accountants; and
 
          (2) all current reports that would be required to be filed with the
     Securities and Exchange Commission on Form 8-K if Charter Holdings were
     required to file such reports.
 
     If Charter Holdings has designated any of its Subsidiaries as Unrestricted
Subsidiaries, then the quarterly and annual financial information required by
the preceding paragraph shall include a reasonably detailed presentation, either
on the face of the financial statements or in the footnotes thereto, and in
Management's Discussion and Analysis of Financial Condition and Results of
Operations, of the financial condition and results of operations of Charter
Holdings and its Restricted Subsidiaries separate from the financial condition
and results of operations of the Unrestricted Subsidiaries of Charter Holdings.
 
     In addition, whether or not required by the Securities and Exchange
Commission, Charter Holdings will file a copy of all of the information and
reports referred to in clauses (1) and (2) above with the Securities and
Exchange Commission for public availability within the time periods specified in
the Securities and Exchange Commission's rules and regulations, unless the
Securities and Exchange Commission will not accept such a filing, and make such
information available to securities analysts and prospective investors upon
request.
 
EVENTS OF DEFAULT AND REMEDIES
 
     Each of the following is an Event of Default with respect to the notes of
each series:
 
          (1) default for 30 days in the payment when due of interest on the
     notes;
 
          (2) default in payment when due of the principal of or premium, if
     any, on the notes;
 
          (3) failure by Charter Holdings or any of its Restricted Subsidiaries
     to comply with the provisions described under the captions "-- Change of
     Control" or "-- Merger, Consolidation, or Sale of Assets";
 
          (4) failure by Charter Holdings or any of its Restricted Subsidiaries
     for 30 days after written notice thereof has been given to Charter Holdings
     by the trustee or to Charter Holdings and the trustee by holders of at
     least 25% of the aggregate principal amount of the notes outstanding to
     comply with any of their other covenants or agreements in the indentures;
 
          (5) default under any mortgage, indenture or instrument under which
     there may be issued or by which there may be secured or evidenced any
     Indebtedness for money borrowed by Charter Holdings or any of its
     Restricted Subsidiaries, or the payment of which is guaranteed by Charter
     Holdings or any of its Restricted Subsidiaries, whether such Indebtedness
     or guarantee now exists, or is created after the date of the indentures, if
     that default:
 
             (a) is caused by a failure to pay at final stated maturity the
        principal amount on such Indebtedness prior to the expiration of the
        grace period provided in such Indebtedness on the date of such default
        (a "Payment Default"); or
 
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<PAGE>   197
 
             (b) results in the acceleration of such Indebtedness prior to its
        express maturity, and, in each case, the principal amount of any such
        Indebtedness, together with the principal amount of any other such
        Indebtedness under which there has been a Payment Default or the
        maturity of which has been so accelerated, aggregates $100 million or
        more;
 
          (6) failure by Charter Holdings or any of its Restricted Subsidiaries
     to pay final judgments which are non-appealable aggregating in excess of
     $100 million, net of applicable insurance which has not been denied in
     writing by the insurer, which judgments are not paid, discharged or stayed
     for a period of 60 days; and
 
          (7) Charter Holdings or any of its Significant Subsidiaries pursuant
     to or within the meaning of bankruptcy law:
 
             (a) commences a voluntary case,
 
             (b) consents to the entry of an order for relief against it in an
        involuntary case,
 
             (c) consents to the appointment of a custodian of it or for all or
        substantially all of its property, or
 
             (d) makes a general assignment for the benefit of its creditors; or
 
          (8) a court of competent jurisdiction enters an order or decree under
     any bankruptcy law that:
 
             (a) is for relief against Charter Holdings or any of its
        Significant Subsidiaries in an involuntary case;
 
             (b) appoints a custodian of Charter Holdings or any of its
        Significant Subsidiaries or for all or substantially all of the property
        of Charter Holdings or any of its Significant Subsidiaries; or
 
             (c) orders the liquidation of Charter Holdings or any of its
        Significant Subsidiaries;
 
     and the order or decree remains unstayed and in effect for 60 consecutive
days.
 
     In the case of an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to Charter Holdings, all outstanding
notes will become due and payable immediately without further action or notice.
If any other Event of Default occurs and is continuing, the trustee or the
holders of at least 25% in principal amount of the then outstanding notes of
each series may declare their respective notes to be due and payable
immediately.
 
     Holders of the notes may not enforce the indentures or the notes except as
provided in the indentures. Subject to certain limitations, holders of a
majority in principal amount of the then outstanding notes of each series may
direct the trustee in its exercise of any trust or power. The trustee may
withhold from holders of the notes notice of any continuing Default or Event of
Default, except a Default or Event of Default relating to the payment of
principal or interest, if it determines that withholding notice is in their
interest.
 
     The holders of a majority in aggregate principal amount of the notes of
each series then outstanding by notice to the trustee may on behalf of the
holders of all of the notes waive any existing Default or Event of Default and
its consequences under the indentures except a continuing Default or Event of
Default in the payment of interest on, or the principal of, the notes.
 
     Charter Holdings will be required to deliver to the trustee annually a
statement regarding compliance with the indentures. Upon becoming aware of any
Default or Event of Default, Charter Holdings will be required to deliver to the
trustee a statement specifying such Default or Event of Default.
 
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<PAGE>   198
 
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES, MEMBERS AND
STOCKHOLDERS
 
     No director, officer, employee, incorporator, member or stockholder of
Charter Holdings, as such, shall have any liability for any obligations of
Charter Holdings under the notes or the indentures, or for any claim based on,
in respect of, or by reason of, such obligations or their creation. Each holder
of notes by accepting a note waives and releases all such liability. The waiver
and release will be part of the consideration for issuance of the notes. The
waiver may not be effective to waive liabilities under the federal securities
laws.
 
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
 
     Charter Holdings may, at its option and at any time, elect to have all of
its obligations discharged with respect to the outstanding notes ("Legal
Defeasance") except for:
 
          (1) the rights of holders of outstanding Notes to receive payments in
     respect of the Accreted Value or principal of, premium, if any, and
     interest on such Notes when such payments are due from the trust referred
     to below;
 
          (2) Charter Holdings' obligations with respect to the notes concerning
     issuing temporary notes, registration of notes, mutilated, destroyed, lost
     or stolen notes and the maintenance of an office or agency for payment and
     money for security payments held in trust;
 
          (3) the rights, powers, trusts, duties and immunities of the trustee,
     and Charter Holdings' obligations in connection therewith; and
 
          (4) the Legal Defeasance provisions of the indentures.
 
     In addition, Charter Holdings may, at its option and at any time, elect to
have the obligations of Charter Holdings released with respect to certain
covenants that are described in the indentures ("Covenant Defeasance") and
thereafter any omission to comply with those covenants shall not constitute a
Default or Event of Default with respect to the notes. In the event Covenant
Defeasance occurs, certain events, not including non-payment, bankruptcy,
receivership, rehabilitation and insolvency events, described under "Events of
Default" will no longer constitute an Event of Default with respect to the
notes.
 
     In order to exercise either Legal Defeasance or Covenant Defeasance:
 
          (1) Charter Holdings must irrevocably deposit with the trustee, in
     trust, for the benefit of the holders of the notes, cash in U.S. dollars,
     non-callable Government Securities, or a combination thereof, in such
     amounts as will be sufficient, in the opinion of a nationally recognized
     firm of independent public accountants, to pay the principal of, premium,
     if any, and interest on the outstanding notes on the stated maturity or on
     the applicable redemption date, as the case may be, and Charter Holdings
     must specify whether the notes are being defeased to maturity or to a
     particular redemption date;
 
          (2) in the case of Legal Defeasance, Charter Holdings shall have
     delivered to the trustee an opinion of counsel reasonably acceptable to the
     trustee confirming that
 
             (a) Charter Holdings has received from, or there has been published
        by, the Internal Revenue Service a ruling or
 
             (b) since the date of the indentures, there has been a change in
        the applicable federal income tax law,
 
     in either case to the effect that, and based thereon such opinion of
     counsel shall confirm that, the holders of the outstanding notes will not
     recognize income, gain or loss for federal income tax purposes as a result
     of such Legal Defeasance and will be subject to federal income tax on
 
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<PAGE>   199
 
     the same amounts, in the same manner and at the same times as would have
     been the case if such Legal Defeasance had not occurred;
 
          (3) in the case of Covenant Defeasance, Charter Holdings shall have
     delivered to the trustee an opinion of counsel reasonably acceptable to the
     trustee confirming that the holders of the outstanding notes will not
     recognize income, gain or loss for federal income tax purposes as a result
     of such Covenant Defeasance and will be subject to federal income tax on
     the same amounts, in the same manner and at the same times as would have
     been the case if such Covenant Defeasance had not occurred;
 
          (4) no Default or Event of Default shall have occurred and be
     continuing either:
 
             (a) on the date of such deposit, other than a Default or Event of
        Default resulting from the borrowing of funds to be applied to such
        deposit; or
 
             (b) insofar as Events of Default from bankruptcy or insolvency
        events are concerned, at any time in the period ending on the 91st day
        after the date of deposit;
 
          (5) such Legal Defeasance or Covenant Defeasance will not result in a
     breach or violation of, or constitute a default under any material
     agreement or instrument, other than the indentures, to which Charter
     Holdings or any of its Restricted Subsidiaries is a party or by which
     Charter Holdings or any of its Restricted Subsidiaries is bound;
 
          (6) Charter Holdings must have delivered to the trustee an opinion of
     counsel to the effect that after the 91st day, assuming no intervening
     bankruptcy, that no holder is an insider of Charter Holdings following the
     deposit and that such deposit would not be deemed by a court of competent
     jurisdiction a transfer for the benefit of either issuer in its capacity as
     such, the trust funds will not be subject to the effect of any applicable
     bankruptcy, insolvency, reorganization or similar laws affecting creditors'
     rights generally;
 
          (7) Charter Holdings must deliver to the trustee an officers'
     certificate stating that the deposit was not made by Charter Holdings with
     the intent of preferring the holders of notes over the other creditors of
     Charter Holdings with the intent of defeating, hindering, delaying or
     defrauding creditors of Charter Holdings or others; and
 
          (8) Charter Holdings must deliver to the trustee an officers'
     certificate and an opinion of counsel, each stating that all conditions
     precedent relating to the Legal Defeasance or the Covenant Defeasance have
     been complied with.
 
     Notwithstanding the foregoing, the opinion of counsel required by clause
(2) above with respect to a Legal Defeasance need not be delivered if all notes
not theretofore delivered to the trustee for cancellation
 
     (a) have become due and payable or
 
     (b) will become due and payable on the maturity date within one year under
arrangements satisfactory to the trustee for the giving of notice of redemption
by the trustee in the name, and at the expense, of the issuers.
 
AMENDMENT, SUPPLEMENT AND WAIVER
 
     Except as provided below, the indentures or the notes of each series may be
amended or supplemented with the consent of the holders of at least a majority
in aggregate principal amount, in the case of the 10.00% notes and the 10.25%
notes, and aggregate principal amount at maturity, in the case of the 11.75%
notes, of the then outstanding notes of each series. This includes consents
obtained in connection with a purchase of notes, a tender offer for notes, or an
exchange offer for notes. Any existing Default or compliance with any provision
of the indentures or the notes may be
 
                                       196

<PAGE>   200
 
waived with the consent of the holders of a majority in aggregate principal
amount, in the case of the 10.00% notes and the 10.25% notes, and aggregate
principal amount at maturity, in the case of the 11.75% notes, of the then
outstanding notes of each series. This includes consents obtained in connection
with a purchase of notes, a tender offer for notes, or an exchange offer for
notes. Without the consent of each holder affected, an amendment or waiver may
not, with respect to any notes held by a non-consenting holder:
 
          (1) reduce the principal amount of notes whose holders must consent to
     an amendment, supplement or waiver;
 
          (2) reduce the principal of or change the fixed maturity of any note
     or alter the payment provisions with respect to the redemption of the
     notes, other than provisions relating to the covenants described above
     under the caption "-- Repurchase at the Option of Holders";
 
          (3) reduce the rate of or extend the time for payment of interest on
     any note;
 
          (4) waive a Default or Event of Default in the payment of principal of
     or premium, if any, or interest on the notes, except a rescission of
     acceleration of the notes by the holders of at least a majority in
     aggregate principal amount of the notes and a waiver of the payment default
     that resulted from such acceleration;
 
          (5) make any note payable in money other than that stated in the
     notes;
 
          (6) make any change in the provisions of the indentures relating to
     waivers of past Defaults or the rights of holders of notes to receive
     payments of Accreted Value or principal of, or premium, if any, or interest
     on the notes;
 
          (7) waive a redemption payment with respect to any note, other than a
     payment required by one of the covenants described above under the caption
     "-- Repurchase at the Option of Holders";
 
          (8) make any change in the preceding amendment and waiver provisions.
 
     Notwithstanding the preceding, without the consent of any holder of notes,
the issuers and the trustee may amend or supplement the indentures or the notes:
 
          (1) to cure any ambiguity, defect or inconsistency;
 
          (2) to provide for uncertificated notes in addition to or in place of
     certificated notes;
 
          (3) to provide for the assumption of either issuer's obligations to
     holders of notes in the case of a merger or consolidation or sale of all or
     substantially all of such issuer's assets;
 
          (4) to make any change that would provide any additional rights or
     benefits to the holders of notes or that does not adversely affect the
     legal rights under the indentures of any such holder; or
 
          (5) to comply with requirements of the Securities and Exchange
     Commission in order to effect or maintain the qualification of the
     indentures under the Trust Indenture Act or otherwise as necessary to
     comply with applicable law.
 
GOVERNING LAW
 
     The indentures and the notes will be governed by the laws of the State of
New York.
 
CONCERNING THE TRUSTEE
 
     If the trustee becomes a creditor of Charter Holdings, the indentures limit
its right to obtain payment of claims in certain cases, or to realize on certain
property received in respect of any such
 
                                       197

<PAGE>   201
 
claim as security or otherwise. The trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the Securities and Exchange Commission
for permission to continue or resign.
 
     The holders of a majority in principal amount of the then outstanding notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the trustee, subject to
certain exceptions. The indentures provide that in case an Event of Default
shall occur and be continuing, the trustee will be required, in the exercise of
its power, to use the degree of care of a prudent man in the conduct of his own
affairs. Subject to such provisions, the trustee will be under no obligation to
exercise any of its rights or powers under the indentures at the request of any
holder of notes, unless such holder shall have offered to the trustee security
and indemnity satisfactory to it against any loss, liability or expense.
 
ADDITIONAL INFORMATION
 
     Anyone who receives this prospectus may obtain a copy of the indentures
without charge by writing to Charter Communications Holdings, LLC, 12444
Powerscourt Drive, Suite 100, St. Louis, Missouri 63131, Attention: Corporate
Secretary.
 
BOOK-ENTRY, DELIVERY AND FORM
 
     The notes will initially be issued in the form of global securities held in
book-entry form. The notes will be deposited with the trustee as custodian for
the Depository Trust Company, and the Depository Trust Company or its nominee
will initially be the sole registered holder of the notes for all purposes under
the indentures. Unless it is exchanged in whole or in part for debt securities
in definitive form as described below, a global security may not be transferred.
However, transfers of the whole security between the Depository Trust Company
and its nominee or their respective successors are permitted.
 
     Upon the issuance of a global security, the Depository Trust Company or its
nominee will credit on its internal system the principal amount at maturity of
the individual beneficial interest represented by the global security acquired
by the persons in sale of the original notes. Ownership of beneficial interests
in a global security will be limited to persons that have accounts with the
Depository Trust Company or persons that hold interests through participants.
Ownership of beneficial interests will be shown on, and the transfer of that the
Depository Trust Company or its nominee relating to interests of participants
and the records of participants relating to interests of persons other than
participants. The laws of some jurisdictions require that some purchasers of
securities take physical delivery of the securities in definitive form. These
limits and laws may impair the ability to transfer beneficial interests in a
global security.
 
     Principal and interest payments on global securities registered in the name
of the Depository Trust Company's nominee will be made in immediate available
funds to the Depository Trust Company's nominee as the registered owner of the
global securities. The issuers and the trustee will treat the Depository Trust
Company's nominee as the owner of the global securities for all other purposes
as well. Accordingly, the issuers, the trustee, any paying agent and the initial
purchasers will have no direct responsibility or liability for any aspect of the
records relating to payments made on account of beneficial interests in the
global securities or for maintaining, supervising or reviewing any records
relating to these beneficial interests. It is the Depository Trust Company's
current practice, upon receipt of any payment of principal or interest, to
credit direct participants' accounts on the payment date according to their
respective holdings of beneficial interests in the global securities. These
payments will be the responsibility of the direct and indirect participants and
not of the Depository Trust Company, the issuers, the trustee or the initial
purchasers.
 
                                       198

<PAGE>   202
 
     So long as the Depository Trust Company or its nominee is the registered
owner or holder of the global security, the Depository Trust Company or its
nominee, as the case may be, will be considered the sole owner or holder of the
notes represented by the global security for the purposes of:
 
     (1) receiving payment on the notes;
 
     (2) receiving notices; and
 
     (3) for all other purposes under the indentures and the notes.
 
Beneficial interests in the notes will be evidenced only by, and transfers of
the notes will be effected only through, records maintained by the Depository
Trust Company and its participants.
 
     Except as described above, owners of beneficial interests in a global
security will not be entitled to receive physical delivery of certificated notes
in definitive form and will not be considered the holders of the global security
for any purposes under the indentures. Accordingly, each person owning a
beneficial interest in a global security must rely on the procedures of the
Depository Trust Company. And, if that person is not a participant, the person
must rely on the procedures of the participant through which that person owns
its interest, to exercise any rights of a holder under the indentures. Under
existing industry practices, if the issuers request any action of holders or an
owner of a beneficial interest in a global security desires to take any action
under the indentures, the Depository Trust Company would authorize the
participants holding the relevant beneficial interest to take that action. The
participants then would authorize beneficial owners owning through the
participants to take the action or would otherwise act upon the instructions of
beneficial owners owning through them.
 
     The Depository Trust Company has advised the issuers that it will take any
action permitted to be taken by a holder of notes only at the direction of one
or more participants to whose account with the Depository Trust Company
interests in the global security are credited. Further, the Depository Trust
Company will take action only as to the portion of the aggregate principal
amount at maturity of the notes as to which the participant or participants has
or have given the direction.
 
     Although the Depository Trust Company has agreed to the procedures
described above in order to facilitate transfers of interests in global
securities among participants of the Depository Trust Company, it is under no
obligation to perform these procedures, and the procedures may be discontinued
at any time. None of the issuers, the trustee, any agent of the issuers or the
initial purchasers will have any responsibility for the performance by the
Depository Trust Company or its participants or indirect participants of their
respective obligations under the rules and procedures governing their
operations.
 
     The Depository Trust Company has provided the following information to us.
The Depository Trust Company is a:
 
     (1) limited-purpose trust company organized under the New York Banking Law;
 
     (2) a banking organization within the meaning of the New York Banking Law;
 
     (3) a member of the United States Federal Reserve System;
 
     (4) a clearing corporation within the meaning of the New York Uniform
         Commercial Code; and
 
     (5) a clearing agency registered under the provisions of Section 17A of the
         Securities Exchange Act.
 
                                       199

<PAGE>   203
 
CERTIFICATED NOTES
 
     Notes represented by a global security are exchangeable for certificated
notes only if:
 
     (1) the Depository Trust Company notifies the issuers that it is unwilling
         or unable to continue as depository or if the Depository Trust Company
         ceases to be a registered clearing agency, and a successor depository
         is not appointed by the issuers within 90 days;
 
     (2) the issuers determine not to require all of the notes to be represented
         by a global security and notifies the trustee of its decision; or
 
     (3) an Event of Default or an event which, with the giving of notice or
         lapse of time, or both, would constitute an Event of Default relating
         to the notes represented by the global security has occurred and is
         continuing.
 
     Any global security that is exchangeable for certificated notes in
accordance with the preceding sentence will be transferred to, and registered
and exchanged for, certificated notes in authorized denominations and registered
in the names as the Depository Trust Company or its nominee may direct. However,
a global security is only exchangeable for a global security of like
denomination to be registered in the name of the Depository Trust Company or its
nominee. If a global security becomes exchangeable for certificated notes:
 
     (1) certificated notes will be issued only in fully registered form in
         denominations of $1,000 or integral multiples of $1,000;
 
     (2) payment of principal, premium, if any, and interest on the certificated
         notes will be payable, and the transfer of the certificated notes will
         be registrable, at the office or agency of the issuers maintained for
         these purposes; and
 
     (3) no service charge will be made for any issuance of the certificated
         notes, although the issuers may require payment of a sum sufficient to
         cover any tax or governmental charge imposed in connection with the
         issuance.
 
CERTAIN DEFINITIONS
 
     This section sets forth certain defined terms used in the indentures.
Reference is made to the indentures for a full disclosure of all such terms, as
well as any other capitalized terms used herein for which no definition is
provided.
 
                                       200

<PAGE>   204
 
     "ACCRETED VALUE" is defined to mean, for any Specific Date, the amount
calculated pursuant to (1), (2), (3) or (4) for each $1,000 of principal amount
at maturity of the 11.75% notes:
 
          (1) if the Specified Date occurs on one or more of the following dates
     (each a "Semi-Annual Accrual Date") the Accreted Value will equal the
     amount set forth below for such Semi-Annual Accrual Date:
 

<TABLE>
<CAPTION>
SEMI-ANNUAL
ACCRUAL DATE                                               ACCRETED VALUE
------------                                               --------------
<S>                                                        <C>
Issue Date...............................................    $  564.48
January 15, 2000.........................................       565.02
July 15, 2000............................................       598.21
January 15, 2001.........................................       633.36
July 15, 2001............................................       670.57
January 15, 2002.........................................       709.96
July 15, 2002............................................       751.67
January 15, 2003.........................................       795.84
July 15, 2003............................................       842.59
January 15, 2004.........................................       892.09
July 15, 2004............................................       944.51
January 15, 2005.........................................    $1,000.00
</TABLE>

 
          (2) if the Specified Date occurs before the first Semi-Annual Accrual
     Date, the Accreted Value will equal the sum of
 
             (a) $564.48 and
 
             (b) an amount equal to the product of
 
                (x) the Accreted Value for the first Semi-Annual Accrual Date
           less $564.48 multiplied by
 
                (y) a fraction, the numerator of which is the number of days
           from the Issue Date to the Specified Date, using a 360-day year of
           twelve 30-day months, and the denominator of which is the number of
           days elapsed from the Issue Date to the first Semi-Annual Accrual
           Date, using a 360-day year of twelve 30-day months;
 
          (3) if the Specified Date occurs between two Semi-Annual Accrual
     Dates, the Accreted Value will equal the sum of
 
             (a) the Accreted Value for the Semi-Annual Accrual Date immediately
        preceding such Specified Date and
 
             (b) an amount equal to the product of
 
                (1) the Accreted Value for the immediately following Semi-Annual
           Accrual Date less the Accreted Value for the immediately preceding
           Semi-Annual Accrual Date multiplied by
 
                (2) a fraction, the numerator of which is the number of days
           from the immediately preceding Semi-Annual Accrual Date to the
           Specified Date, using a 360-day year of twelve 30-day months, and the
           denominator of which is 180; or
 
                                       201

<PAGE>   205
 
          (4) if the Specified Date occurs after the last Semi-Annual Accrual
     Date, the Accreted Value will equal $1,000.
 
     "ACQUIRED DEBT" means, with respect to any specified Person:
 
          (1) Indebtedness of any other Person existing at the time such other
     Person is merged with or into or became a Subsidiary of such specified
     Person, whether or not such Indebtedness is incurred in connection with, or
     in contemplation of, such other Person merging with or into, or becoming a
     Subsidiary of, such specified Person; and
 
          (2) Indebtedness secured by a Lien encumbering any asset acquired by
     such specified Person.
 
     "AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control",
as used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise; provided that beneficial ownership of 10% or more of the
Voting Stock of a Person shall be deemed to be control. For purposes of this
definition, the terms "controlling," "controlled by" and "under common control
with" shall have correlative meanings.
 
     "ASSET ACQUISITION" means
 
     (a) an Investment by Charter Holdings or any of its Restricted Subsidiaries
in any other Person pursuant to which such Person shall become a Restricted
Subsidiary of Charter Holdings or any of its Restricted Subsidiaries or shall be
merged with or into Charter Holdings or any of its Restricted Subsidiaries, or
 
     (b) the acquisition by Charter Holdings or any of its Restricted
Subsidiaries of the assets of any Person which constitute all or substantially
all of the assets of such Person, any division or line of business of such
Person or any other properties or assets of such Person other than in the
ordinary course of business.
 
     "ASSET SALE" means:
 
          (1) the sale, lease, conveyance or other disposition of any assets or
     rights, other than sales of inventory in the ordinary course of business
     consistent with past practices; provided that the sale, conveyance or other
     disposition of all or substantially all of the assets of Charter Holdings
     and its Subsidiaries, taken as a whole, will be governed by the provisions
     of the indentures described above under the caption "-- Change of Control"
     and/or the provisions described above under the caption "-- Merger,
     Consolidation or Sale of Assets" and not by the provisions of the Asset
     Sale covenant; and
 
          (2) the issuance of Equity Interests by any of Charter Holdings'
     Restricted Subsidiaries or the sale of Equity Interests in any of Charter
     Holdings' Restricted Subsidiaries.
 
     Notwithstanding the preceding, the following items shall not be deemed to
be Asset Sales:
 
          (1) any single transaction or series of related transactions that:
 
             (a) involves assets having a fair market value of less than $100
        million; or
 
             (b) results in net proceeds to Charter Holdings and its Restricted
        Subsidiaries of less than $100 million;
 
          (2) a transfer of assets between or among Charter Holdings and its
     Restricted Subsidiaries;
 
                                       202

<PAGE>   206
 
          (3) an issuance of Equity Interests by a Wholly Owned Restricted
     Subsidiary of Charter Holdings to Charter Holdings or to another Wholly
     Owned Restricted Subsidiary of Charter Holdings;
 
          (4) a Restricted Payment that is permitted by the covenant described
     above under the caption "-- Certain Covenants -- Restricted Payments" and a
     Restricted Investment that is permitted by the covenant described above
     under the caption "-- Certain Covenants -- Investments"; and
 
          (5) the incurrence of Permitted Liens and the disposition of assets
     related to such Permitted Liens by the secured party pursuant to a
     foreclosure.
 
     "ASSET SALE OFFER" means a situation in which the issuers commence an offer
to all holders to purchase notes pursuant to Section 4.11 of the indentures.
 
     "ATTRIBUTABLE DEBT" in respect of a sale and leaseback transaction means,
at the time of determination, the present value of the obligation of the lessee
for net rental payments during the remaining term of the lease included in such
sale and leaseback transaction including any period for which such lease has
been extended or may, at the option of the lessee, be extended. Such present
value shall be calculated using a discount rate equal to the rate of interest
implicit in such transaction, determined in accordance with GAAP.
 
     "BENEFICIAL OWNER" has the meaning assigned to such term in Rule 13d-3 and
Rule 13d-5 under the Exchange Act, except that in calculating the beneficial
ownership of any particular "person," as such term is used in Section 13(d)(3)
of the Exchange Act, such "person" shall be deemed to have beneficial ownership
of all securities that such "person" has the right to acquire, whether such
right is currently exercisable or is exercisable only upon the occurrence of a
subsequent condition.
 
     "CABLE RELATED BUSINESS" means the business of owning cable television
systems and businesses ancillary, complementary and related thereto.
 
     "CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at that time be required to be capitalized on a balance sheet in accordance with
GAAP.
 
     "CAPITAL STOCK" means:
 
          (1) in the case of a corporation, corporate stock;
 
          (2) in the case of an association or business entity, any and all
     shares, interests, participations, rights or other equivalents, however
     designated, of corporate stock;
 
          (3) in the case of a partnership or limited liability company,
     partnership or membership interests, whether general or limited; and
 
          (4) any other interest, other than any debt obligation, or
     participation that confers on a Person the right to receive a share of the
     profits and losses of, or distributions of assets of, the issuing Person.
 
     "CAPITAL STOCK SALE PROCEEDS" means the aggregate net cash proceeds,
including the fair market value of the non-cash proceeds, as determined by an
independent appraisal firm, received by Charter Holdings since the date of the
indentures
 
          (x) as a contribution to the common equity capital or from the issue
     or sale of Equity Interests of Charter Holdings, other than Disqualified
     Stock or
 
          (y) from the issue or sale of convertible or exchangeable Disqualified
     Stock or convertible or exchangeable debt securities of Charter Holdings
     that have been converted into or exchanged
 
                                       203

<PAGE>   207
 
     for such Equity Interests other than Equity Interests, or Disqualified
     Stock or debt securities, sold to a Subsidiary of Charter Holdings.
 
     "CASH EQUIVALENTS" means:
 
          (1) United States dollars;
 
          (2) securities issued or directly and fully guaranteed or insured by
     the United States government or any agency or instrumentality thereof,
     provided that the full faith and credit of the United States is pledged in
     support thereof, having maturities of not more than twelve months from the
     date of acquisition;
 
          (3) certificates of deposit and eurodollar time deposits with
     maturities of twelve months or less from the date of acquisition, bankers'
     acceptances with maturities not exceeding six months and overnight bank
     deposits, in each case, with any domestic commercial bank having combined
     capital and surplus in excess of $500 million and a Thompson Bank Watch
     Rating at the time of acquisition of "B" or better;
 
          (4) repurchase obligations with a term of not more than seven days for
     underlying securities of the types described in clauses (2) and (3) above
     entered into with any financial institution meeting the qualifications
     specified in clause (3) above;
 
          (5) commercial paper having a rating of at least "P-1" from Moody's or
     at least "A-1" from S&P and in each case maturing within twelve months
     after the date of acquisition;
 
          (6) corporate debt obligations maturing within twelve months after the
     date of acquisition thereof, rated at the time of acquisition at least
     "Aaa" or "P-1" by Moody's or "AAA" or "A-1" by S&P;
 
          (7) auction-rate preferred stocks of any corporation maturing not
     later than 45 days after the date of acquisition thereof, rated at the time
     of acquisition at least "Aaa" by Moody's or "AAA" by S&P;
 
          (8) securities issued by any state, commonwealth or territory of the
     United States, or by any political subdivision or taxing authority thereof,
     maturing not later than six months after the date of acquisition thereof,
     rated at the time of acquisition at least "A" by Moody's or S&P; and
 
          (9) money market or mutual funds at least 90% of the assets of which
     constitute Cash Equivalents of the kinds described in clauses (1) through
     (8) of this definition.
 
     "CHANGE OF CONTROL" means the occurrence of any of the following:
 
          (1) the sale, transfer, conveyance or other disposition, other than by
     way of merger or consolidation, in one or a series of related transactions,
     of all or substantially all of the assets of Charter Holdings and its
     Subsidiaries, taken as a whole, or of a Parent and its Subsidiaries, taken
     as a whole, to any "person," as such term is used in Section 13(d)(3) of
     the Exchange Act, other than Paul G. Allen or a Related Party;
 
          (2) the adoption of a plan relating to the liquidation or dissolution
     of Charter Holdings or a Parent;
 
          (3) the consummation of any transaction, including, without
     limitation, any merger or consolidation, the result of which is that any
     "person," as defined above, other than Paul G. Allen and Related Parties,
     becomes the Beneficial Owner, directly or indirectly, of more than 35% of
     the Voting Stock of Charter Holdings or a Parent, measured by voting power
     rather than the number of shares, unless Paul G. Allen or a Related Party
     Beneficially Owns, directly or indirectly, a greater percentage of Voting
     Stock of Charter Holdings or such Parent, as the case may be, measured by
     voting power rather than the number of shares, than such person;
 
                                       204

<PAGE>   208
 
          (4) after the date of the indentures, the first day on which a
     majority of the members of the board of directors of Charter Holdings or a
     Parent are not Continuing Directors; or
 
          (5) Charter Holdings or a Parent consolidates with, or merges with or
     into, any Person, or any Person consolidates with, or merges with or into,
     Charter Holdings or a Parent, in any such event pursuant to a transaction
     in which any of the outstanding Voting Stock of Charter Holdings or such
     Parent is converted into or exchanged for cash, securities or other
     property, other than any such transaction where the Voting Stock of Charter
     Holdings or such Parent outstanding immediately prior to such transaction
     is converted into or exchanged for Voting Stock, other than Disqualified
     Stock, of the surviving or transferee Person constituting a majority of the
     outstanding shares of such Voting Stock of such surviving or transferee
     Person immediately after giving effect to such issuance.
 
     "CONSOLIDATED EBITDA" means with respect to any Person, for any period, the
net income of such Person and its Restricted Subsidiaries for such period plus,
to the extent such amount was deducted in calculating such net income:
 
          (1) Consolidated Interest Expense;
 
          (2) income taxes;
 
          (3) depreciation expense;
 
          (4) amortization expense;
 
          (5) all other non-cash items, extraordinary items, nonrecurring and
     unusual items and the cumulative effects of changes in accounting
     principles reducing such net income, less all non-cash items, extraordinary
     items, nonrecurring and unusual items and cumulative effects of changes in
     accounting principles increasing such net income, all as determined on a
     consolidated basis for such Person and its Restricted Subsidiaries in
     conformity with GAAP;
 
          (6) amounts actually paid during such period pursuant to a deferred
     compensation plan; and
 
          (7) for purposes of the covenant described under the caption
     "-- Certain Covenants -- Incurrence of Indebtedness and Issuance of
     Preferred Stock" only, Management Fees;
 
provided that Consolidated EBITDA shall not include:
 
             (x) the net income, or net loss, of any Person that is not a
        Restricted Subsidiary ("Other Person"), except
 
                (i) with respect to net income, to the extent of the amount of
           dividends or other distributions actually paid to such Person or any
           of its Restricted Subsidiaries by such Other Person during such
           period and
 
                (ii) with respect to net losses, to the extent of the amount of
           investments made by such Person or any Restricted Subsidiary of such
           Person in such Other Person during such period;
 
             (y) solely for the purposes of calculating the amount of Restricted
        Payments that may be made pursuant to clause (3) of the covenant
        described under the subheading "-- Certain Covenants -- Restricted
        Payments," and in such case, except to the extent includable pursuant to
        clause (x) above, the net income, or net loss, of any Other Person
        accrued prior to the date it becomes a Restricted Subsidiary or is
        merged into or consolidated with such Person or any Restricted
        Subsidiaries or all or substantially all of the property and assets of
        such Other Person are acquired by such Person or any of its Restricted
        Subsidiaries; and
 
                                       205

<PAGE>   209
 
             (z) the net income of any Restricted Subsidiary to the extent that
        the declaration or payment of dividends or similar distributions by such
        Restricted Subsidiary of such net income is not at the time permitted by
        the operation of the terms of its charter or any agreement, instrument,
        judgment, decree, order, statute, rule or governmental regulation
        applicable to such Restricted Subsidiary, other than any agreement or
        instrument evidencing Indebtedness or preferred stock outstanding on the
        date of the indentures or incurred or issued thereafter in compliance
        with the covenant described under the caption "-- Certain
        Covenants -- Incurrence of Indebtedness and Issuance of preferred
        stock," provided that
 
                (a) the terms of any such agreement restricting the declaration
           and payment of dividends or similar distributions apply only in the
           event of a default with respect to a financial covenant or a covenant
           relating to payment, beyond any applicable period of grace, contained
           in such agreement or instrument,
 
                (b) such terms are determined by such Person to be customary in
           comparable financings and
 
                (c) such restrictions are determined by the Charter Holdings not
           to materially affect the issuers' ability to make principal or
           interest payments on the notes when due.
 
     "CONSOLIDATED INDEBTEDNESS" means, with respect to any Person as of any
date of determination, the sum, without duplication, of:
 
          (1) the total amount of outstanding Indebtedness of such Person and
     its Restricted Subsidiaries, plus
 
          (2) the total amount of Indebtedness of any other Person, that has
     been Guaranteed by the referent Person or one or more of its Restricted
     Subsidiaries, plus
 
          (3) the aggregate liquidation value of all Disqualified Stock of such
     Person and all preferred stock of Restricted Subsidiaries of such Person,
     in each case, determined on a consolidated basis in accordance with GAAP.
 
     "CONSOLIDATED INTEREST EXPENSE" means, with respect to any Person for any
period, without duplication, the sum of:
 
          (1) the consolidated interest expense of such Person and its
     Restricted Subsidiaries for such period, whether paid or accrued,
     including, without limitation, amortization or original issue discount,
     non-cash interest payments, the interest component of any deferred payment
     obligations, the interest component of all payments associated with Capital
     Lease Obligations, commissions, discounts and other fees and charges
     incurred in respect of letter of credit or bankers' acceptance financings,
     and net payments, if any, pursuant to Hedging Obligations; and
 
          (2) the consolidated interest expense of such Person and its
     Restricted Subsidiaries that was capitalized during such period, and
 
          (3) any interest expense on Indebtedness of another Person that is
     guaranteed by such Person or one of its Restricted Subsidiaries or secured
     by a Lien on assets of such Person or one of its Restricted Subsidiaries,
     whether or not such Guarantee or Lien is called upon;
 
excluding, however, any amount of such interest of any Restricted Subsidiary if
the net income of such Restricted Subsidiary is excluded in the calculation of
Consolidated EBITDA pursuant to clause (z) of the definition thereof, but only
in the same proportion as the net income of such Restricted Subsidiary is
excluded from the calculation of Consolidated EBITDA pursuant to clause (z) of
the definition thereof, in each case, on a consolidated basis and in accordance
with GAAP.
 
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<PAGE>   210
 
     "CONTINUING DIRECTORS" means, as of any date of determination, any member
of the board of directors of Charter Holdings who:
 
          (1) was a member of such board of directors on the date of the
     indentures; or
 
          (2) was nominated for election or elected to such board of directors
     with the approval of a majority of the Continuing Directors who were
     members of such board of directors at the time of such nomination or
     election or whose election or appointment was previously so approved.
 
     "CREDIT FACILITIES" means, with respect to Charter Holdings and/or its
Restricted Subsidiaries, one or more debt facilities or commercial paper
facilities, in each case with banks or other institutional lenders providing for
revolving credit loans, term loans, receivables financing, including through the
sale of receivables to such lenders or to special purpose entities formed to
borrow from such lenders against such receivables, or letters of credit, in each
case, as amended, restated, modified, renewed, refunded, replaced or refinanced
in whole or in part from time to time.
 
     "DEFAULT" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.
 
     "DISPOSITION" means, with respect to any Person, any merger, consolidation
or other business combination involving such Person, whether or not such Person
is the Surviving Person, or the sale, assignment, or transfer, lease conveyance
or other disposition of all or substantially all of such Person's assets or
Capital Stock.
 
     "DISQUALIFIED STOCK" means any Capital Stock that, by its terms, or by the
terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder thereof, or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the holder
thereof, in whole or in part, on or prior to the date that is 91 days after the
date on which the notes mature. Notwithstanding the preceding sentence, any
Capital Stock that would constitute Disqualified Stock solely because the
holders thereof have the right to require Charter Holdings to repurchase such
Capital Stock upon the occurrence of a change of control or an asset sale shall
not constitute Disqualified Stock if the terms of such Capital Stock provide
that Charter Holdings may not repurchase or redeem any such Capital Stock
pursuant to such provisions unless such repurchase or redemption complies with
the covenant described above under the caption "-- Certain Covenants --
Restricted Payments."
 
     "EQUITY INTERESTS" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock, but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock.
 
     "EQUITY OFFERING" means any private or underwritten public offering of
Qualified Capital Stock of Charter Holdings of which the gross proceeds to
Charter Holdings are at least $25 million.
 
     "EXISTING INDEBTEDNESS" means Indebtedness of Charter Holdings and its
Restricted Subsidiaries in existence on the date of the indentures, until such
amounts are repaid.
 
     "FULL ACCRETION DATE" means January 15, 2005, the first date on which the
Accreted Value of the 11.75% notes has accreted to an amount equal to the
principal amount at maturity of the 11.75% notes.
 
     "GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on January 12, 2000.
 
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<PAGE>   211
 
     "GUARANTEE" or "GUARANTEE" means a guarantee other than by endorsement of
negotiable instruments for collection in the ordinary course of business, direct
or indirect, in any manner including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof, of all or any part of any Indebtedness, measured as the lesser of the
aggregate outstanding amount of the Indebtedness so guaranteed and the face
amount of the guarantee.
 
     "HEDGING OBLIGATIONS" means, with respect to any Person, the obligations of
such Person under:
 
          (1) interest rate swap agreements, interest rate cap agreements and
     interest rate collar agreements;
 
          (2) interest rate option agreements, foreign currency exchange
     agreements, foreign currency swap agreements; and
 
          (3) other agreements or arrangements designed to protect such Person
     against fluctuations in interest and currency exchange rates.
 
     "HELICON PREFERRED STOCK" means the preferred limited liability company
interest of Charter-Helicon LLC with an aggregate liquidation value of $25
million.
 
     "INDEBTEDNESS" means, with respect to any specified Person, any
indebtedness of such Person, whether or not contingent:
 
          (1) in respect of borrowed money;
 
          (2) evidenced by bonds, notes, debentures or similar instruments or
     letters of credit, or reimbursement agreements in respect thereof;
 
          (3) in respect of banker's acceptances;
 
          (4) representing Capital Lease Obligations;
 
          (5) in respect of the balance deferred and unpaid of the purchase
     price of any property, except any such balance that constitutes an accrued
     expense or trade payable; or
 
          (6) representing the notional amount of any Hedging Obligations,
 
if and to the extent any of the preceding items, other than letters of credit
and Hedging Obligations, would appear as a liability upon a balance sheet of the
specified Person prepared in accordance with GAAP. In addition, the term
"Indebtedness" includes all Indebtedness of others secured by a Lien on any
asset of the specified Person, whether or not such Indebtedness is assumed by
the specified Person, and, to the extent not otherwise included, the guarantee
by such Person of any indebtedness of any other Person.
 
     The amount of any Indebtedness outstanding as of any date shall be:
 
          (1) the accreted value thereof, in the case of any Indebtedness issued
     with original issue discount; and
 
          (2) the principal amount thereof, together with any interest thereon
     that is more than 30 days past due, in the case of any other Indebtedness.
 
     "INVESTMENT GRADE RATING" means a rating equal to or higher than Baa3 (or
the equivalent) by Moody's and BBB- (or the equivalent) by S&P.
 
     "INVESTMENTS" means, with respect to any Person, all investments by such
Person in other Persons, including Affiliates, in the forms of direct or
indirect loans, including guarantees of Indebtedness or other obligations,
advances or capital contributions, excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business, and
purchases or
 
                                       208

<PAGE>   212
 
other acquisitions for consideration of Indebtedness, Equity Interests or other
securities, together with all items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP.
 
     "LEVERAGE RATIO" means, as of any date, the ratio of:
 
          (1) the Consolidated Indebtedness of Charter Holdings on such date to
 
          (2) the aggregate amount of Consolidated EBITDA for Charter Holdings
     for the most recently ended fiscal quarter for which internal financial
     statements are available multiplied by four (the "Reference Period").
 
     In addition to the foregoing, for purposes of this definition,
"Consolidated EBITDA" shall be calculated on a pro forma basis after giving
effect to
 
          (1) the issuance of the notes;
 
          (2) the incurrence of the Indebtedness or the issuance of the
     Disqualified Stock or other preferred stock of a Restricted Subsidiary, and
     the application of the proceeds therefrom, giving rise to the need to make
     such calculation and any incurrence or issuance, and the application of the
     proceeds therefrom, or repayment of other Indebtedness or Disqualified
     Stock or other preferred stock of a Restricted Subsidiary, other than the
     incurrence or repayment of Indebtedness for ordinary working capital
     purposes, at any time subsequent to the beginning of the Reference Period
     and on or prior to the date of determination, as if such incurrence, and
     the application of the proceeds thereof, or the repayment, as the case may
     be, occurred on the first day of the Reference Period;
 
          (3) any Dispositions or Asset Acquisitions (including, without
     limitation, any Asset Acquisition giving rise to the need to make such
     calculation as a result of such Person or one of its Restricted
     Subsidiaries, including any person that becomes a Restricted Subsidiary as
     a result of such Asset Acquisition, incurring, assuming or otherwise
     becoming liable for or issuing Indebtedness, Disqualified Stock or
     preferred stock, made on or subsequent to the first day of the Reference
     Period and on or prior to the date of determination, as if such Disposition
     or Asset Acquisition, including the incurrence, assumption or liability for
     any such Indebtedness, Disqualified Stock or preferred stock and also
     including any Consolidated EBITDA associated with such Asset Acquisition,
     including any cost savings adjustments in compliance with Regulation S-X
     promulgated by the Securities and Exchange Commission, had occurred on the
     first day of the Reference Period.
 
     "LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law,
including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code, or equivalent statutes, of any jurisdiction.
 
     "MANAGEMENT FEES" means the fees payable to Charter Communications, Inc.
pursuant to the management agreements between Charter Communications, Inc. and
Charter Communications Operating, LLC and between Charter Communications, Inc.
and Restricted Subsidiaries of Charter Holdings, including any Person that
becomes a Restricted Subsidiary of Charter Holdings in connection with the
acquisition of Bresnan Communications Company Limited Partnership, as such
agreements exist on the January 12, 2000, or on the date of such acquisition in
the case of the aforementioned Bresnan acquisition, including any amendment or
replacement thereof, provided that any such amendment or replacement is not more
disadvantageous to the holders of the notes in any material respect from such
management agreements existing on the January 12, 2000.
 
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<PAGE>   213
 
     "MARCH 1999 NOTES ISSUE DATE" means March 17, 1999.
 
     "MOODY'S" means Moody's Investors Service, Inc. or any successor to the
rating agency business thereof.
 
     "NET PROCEEDS" means the aggregate cash proceeds received by Charter
Holdings or any of its Restricted Subsidiaries in respect of any Asset Sale,
including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale, net of the
direct costs relating to such Asset Sale, including, without limitation, legal,
accounting and investment banking fees, and sales commissions, and any
relocation expenses incurred as a result thereof or taxes paid or payable as a
result thereof, including amounts distributable in respect of owners', partners'
or members' tax liabilities resulting from such sale, in each case after taking
into account any available tax credits or deductions and any tax sharing
arrangements and amounts required to be applied to the repayment of
Indebtedness.
 
     "NON-RECOURSE DEBT" means Indebtedness:
 
          (1) as to which neither Charter Holdings nor any of its Restricted
     Subsidiaries
 
             (a) provides credit support of any kind, including any undertaking,
        agreement or instrument that would constitute Indebtedness,
 
             (b) is directly or indirectly liable as a guarantor or otherwise,
        or
 
             (c) constitutes the lender;
 
          (2) no default with respect to which, including any rights that the
     holders thereof may have to take enforcement action against an Unrestricted
     Subsidiary, would permit upon notice, lapse of time or both any holder of
     any other Indebtedness, other than the notes, of Charter Holdings or any of
     its Restricted Subsidiaries to declare a default on such other Indebtedness
     or cause the payment thereof to be accelerated or payable prior to its
     stated maturity; and
 
          (3) as to which the lenders have been notified in writing that they
     will not have any recourse to the stock or assets of Charter Holdings or
     any of its Restricted Subsidiaries.
 
     "PARENT" means Charter Communications, Inc. and/or Charter Communications
Holding Company, LLC, as applicable, and any successor Person or any Person
succeeding to the direct or indirect ownership of Charter Holdings.
 
     "PERMITTED INVESTMENTS" means:
 
          (1) any Investment by Charter Holdings in a Restricted Subsidiary of
     Charter Holdings or any Investment by a Restricted Subsidiary of Charter
     Holdings in Charter Holdings;
 
          (2) any Investment in Cash Equivalents;
 
          (3) any Investment by Charter Holdings or any Restricted Subsidiary of
     Charter Holdings in a Person, if as a result of such Investment:
 
             (a) such Person becomes a Restricted Subsidiary of Charter
        Holdings; or
 
             (b) such Person is merged, consolidated or amalgamated with or
        into, or transfers or conveys substantially all of its assets to, or is
        liquidated into, Charter Holdings or a Restricted Subsidiary of Charter
        Holdings;
 
          (4) any Investment made as a result of the receipt of non-cash
     consideration from an Asset Sale that was made pursuant to and in
     compliance with the covenant described above under the caption
     "-- Repurchase at the Option of Holders -- Asset Sales";
 
                                       210

<PAGE>   214
 
          (5) any Investment made out of the net cash proceeds of the issue and
     sale since the Existing Notes Issue Date, other than to a Subsidiary of
     Charter Holdings, of Equity Interests, other than Disqualified Stock, of
     Charter Holdings to the extent that
 
             (a) such net cash proceeds have not been applied to make a
        Restricted Payment or to effect other transactions pursuant to the
        covenant described above under the caption "--Restricted Payments," or
 
             (b) such net cash proceeds have not been used to incur Indebtedness
        pursuant to clause (10) of the covenant described above under the
        caption "--Incurrence of Indebtedness and Issuance of preferred stock";
 
          (6) Investments in Productive Assets having an aggregate fair market
     value, measured on the date each such Investment was made and without
     giving effect to subsequent changes in value, when taken together with all
     other Investments made pursuant to this clause (6) since the March 1999
     Charter Holdings notes issue date, not to exceed $150 million; provided
     that either Charter Holdings or any of its Restricted Subsidiaries, after
     giving effect to such Investments, will own at least 20% of the Voting
     Stock of such Person;
 
          (7) other Investments in any Person having an aggregate fair market
     value, measured on the date each such Investment was made and without
     giving effect to subsequent changes in value, when taken together with all
     other Investments made pursuant to this clause (7) since the March 1999
     Charter Holdings notes issue date, not to exceed $50 million; and
 
          (8) Investments in customers and suppliers in the ordinary course of
     business which either
 
             (A) generate accounts receivable, or
 
             (B) are accepted in settlement of bona fide disputes.
 
     "PERMITTED LIENS" means:
 
          (1) Liens on the assets of Charter Holdings securing Indebtedness and
     other Obligations under clause (1) of the covenant "--Incurrence of
     Indebtedness and Issuance of preferred stock";
 
          (2) Liens in favor of Charter Holdings;
 
          (3) Liens on property of a Person existing at the time such Person is
     merged with or into or consolidated with Charter Holdings; provided that
     such Liens were in existence prior to the contemplation of such merger or
     consolidation and do not extend to any assets other than those of the
     Person merged into or consolidated with Charter Holdings;
 
          (4) Liens on property existing at the time of acquisition thereof by
     Charter Holdings; provided that such Liens were in existence prior to the
     contemplation of such acquisition;
 
          (5) Liens to secure the performance of statutory obligations, surety
     or appeal bonds, performance bonds or other obligations of a like nature
     incurred in the ordinary course of business;
 
          (6) purchase money mortgages or other purchase money liens, including
     without limitation any Capitalized Lease Obligations, incurred by Charter
     Holdings upon any fixed or capital assets acquired after the Issue Date or
     purchase money mortgages, including without limitation Capitalized Lease
     Obligations, on any such assets, whether or not assumed, existing at the
     time of acquisition of such assets, whether or not assumed, so long as
 
             (a) such mortgage or lien does not extend to or cover any of the
        assets of Charter Holdings, except the asset so developed, constructed,
        or acquired, and directly related assets
 
                                       211

<PAGE>   215
 
        such as enhancements and modifications thereto, substitutions,
        replacements, proceeds, including insurance proceeds, products, rents
        and profits thereof, and
 
             (b) such mortgage or lien secures the obligation to pay the
        purchase price of such asset, interest thereon and other charges, costs
        and expenses, including, without limitation, the cost of design,
        development, construction, acquisition, transportation, installation,
        improvement, and migration, and incurred in connection therewith, or the
        obligation under such Capitalized Lease Obligation, only;
 
          (7) Liens existing on the date of the indentures, other than in
     connection with the Credit Facilities;
 
          (8) Liens for taxes, assessments or governmental charges or claims
     that are not yet delinquent or that are being contested in good faith by
     appropriate proceedings promptly instituted and diligently concluded;
     provided that any reserve or other appropriate provision as shall be
     required in conformity with GAAP shall have been made therefor;
 
          (9) statutory and common law Liens of landlords and carriers,
     warehousemen, mechanics, suppliers, materialmen, repairmen or other similar
     Liens arising in the ordinary course of business and with respect to
     amounts not yet delinquent or being contested in good faith by appropriate
     legal proceedings promptly instituted and diligently conducted and for
     which a reserve or other appropriate provision, if any, as shall be
     required in conformity with GAAP shall have been made;
 
          (10) Liens incurred or deposits made in the ordinary course of
     business in connection with workers' compensation, unemployment insurance
     and other types of social security;
 
          (11) Liens incurred or deposits made to secure the performance of
     tenders, bids, leases, statutory or regulatory obligation, bankers'
     acceptance, surety and appeal bonds, government contracts, performance and
     return-of-money bonds and other obligations of a similar nature incurred in
     the ordinary course of business, exclusive of obligations for the payment
     of borrowed money;
 
          (12) easements, rights-of-way, municipal and zoning ordinances and
     similar charges, encumbrances, title defects or other irregularities that
     do not materially interfere with the ordinary course of business of Charter
     Holdings or any of its Restricted Subsidiaries;
 
          (13) Liens of franchisors or other regulatory bodies arising in the
     ordinary course of business;
 
          (14) Liens arising from filing Uniform Commercial Code financing
     statements regarding leases or other Uniform Commercial Code financing
     statements for precautionary purposes relating to arrangements not
     constituting Indebtedness;
 
          (15) Liens arising from the rendering of a final judgment or order
     against Charter Holdings or any of its Restricted Subsidiaries that does
     not give rise to an Event of Default;
 
          (16) Liens securing reimbursement obligations with respect to letters
     of credit that encumber documents and other property relating to such
     letters of credit and the products and proceeds thereof;
 
          (17) Liens encumbering customary initial deposits and margin deposits,
     and other Liens that are within the general parameters customary in the
     industry and incurred in the ordinary course of business, in each case,
     securing Indebtedness under Hedging Obligations and forward contracts,
     options, future contracts, future options or similar agreements or
     arrangements designed solely to protect Charter Holdings or any of its
     Restricted Subsidiaries from fluctuations in interest rates, currencies or
     the price of commodities;
 
                                       212

<PAGE>   216
 
          (18) Liens consisting of any interest or title of licensor in the
     property subject to a license;
 
          (19) Liens on the Capital Stock of Unrestricted Subsidiaries;
 
          (20) Liens arising from sales or other transfers of accounts
     receivable which are past due or otherwise doubtful of collection in the
     ordinary course of business;
 
          (21) Liens incurred in the ordinary course of business of Charter
     Holdings, with respect to obligations which in the aggregate do not exceed
     $50 million at any one time outstanding;
 
          (22) Liens in favor of the trustee arising under the provisions in the
     indentures under the subheading "-- Compensation and Indemnity"; and
 
          (23) Liens in favor of the trustee for its benefit and the benefit of
     holders of the Notes, as their respective interests appear.
 
     "PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of Charter
Holdings or any of its Restricted Subsidiaries issued in exchange for, or the
net proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of Charter Holdings or any of its Restricted
Subsidiaries, other than intercompany Indebtedness; provided that unless
permitted otherwise by the indentures, no Indebtedness of Charter Holdings or
any of its Restricted Subsidiaries may be issued in exchange for, or the net
proceeds of are used to extend, refinance, renew, replace, defease or refund
Indebtedness of Charter Holdings or any of its Restricted Subsidiaries;
provided, further, that:
 
          (1) the principal amount, or accreted value, if applicable, of such
     Permitted Refinancing Indebtedness does not exceed the principal amount of,
     or accreted value, if applicable, plus accrued interest and premium, if
     any, on, the Indebtedness so extended, refinanced, renewed, replaced,
     defeased or refunded, plus the amount of reasonable expenses incurred in
     connection therewith;
 
          (2) such Permitted Refinancing Indebtedness has a final maturity date
     later than the final maturity date of, and has a Weighted Average Life to
     Maturity equal to or greater than the Weighted Average Life to Maturity of,
     the Indebtedness being extended, refinanced, renewed, replaced, defeased or
     refunded;
 
          (3) if the Indebtedness being extended, refinanced, renewed, replaced,
     defeased or refunded is subordinated in right of payment to the notes, such
     Permitted Refinancing Indebtedness has a final maturity date later than the
     final maturity date of, and is subordinated in right of payment to, the
     notes on terms at least as favorable to the holders of notes as those
     contained in the documentation governing the Indebtedness being extended,
     refinanced, renewed, replaced, defeased or refunded; and
 
          (4) such Indebtedness is incurred either by Charter Holdings or by any
     of its Restricted Subsidiaries who is the obligor on the Indebtedness being
     extended, refinanced, renewed, replaced, defeased or refunded.
 
     "PERSON" means any individual, corporation, partnership, joint venture,
association, limited liability company, joint stock company, trust,
unincorporated organization, government or agency or political subdivision
thereof or any other entity.
 
     "PRODUCTIVE ASSETS" means assets, including assets of a referent Person
owned directly or indirectly through ownership of Capital Stock, of a kind used
or useful in the Cable Related Business.
 
     "QUALIFIED CAPITAL STOCK" means any Capital Stock that is not Disqualified
Stock.
 
     "RATING AGENCIES" means Moody's and S&P.
 
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<PAGE>   217
 
     "RELATED PARTY" means:
 
          (1) the spouse or an immediate family member, estate or heir of Paul
     G. Allen; or
 
          (2) any trust, corporation, partnership or other entity, the
     beneficiaries, stockholders, partners, owners or Persons beneficially
     holding an 80% or more controlling interest of which consist of Paul G.
     Allen and/or such other Persons referred to in the immediately preceding
     clause (1).
 
     "RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
 
     "RESTRICTED PAYMENTS" are set forth above under the caption "Certain
Covenants- Restricted Payments."
 
     "RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
 
     "S&P" means Standard & Poor's Ratings Service, a division of the
McGraw-Hill Companies, Inc. or any successor to the rating agency business
thereof.
 
     "SIGNIFICANT SUBSIDIARY" means any Restricted Subsidiary of Charter
Holdings which is a "Significant Subsidiary" as defined in Rule 1-02(w) of
Regulation S-X under the Securities Act.
 
     "STATED MATURITY" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the documentation governing
such Indebtedness on the January 12, 2000, or, if none, the original
documentation governing such Indebtedness, and shall not include any contingent
obligations to repay, redeem or repurchase any such interest or principal prior
to the date originally scheduled for the payment thereof.
 
     "SUBSIDIARY" means, with respect to any Person:
 
          (1) any corporation, association or other business entity of which at
     least 50% of the total voting power of shares of Capital Stock entitled
     without regard to the occurrence of any contingency, to vote in the
     election of directors, managers or trustees thereof is at the time owned or
     controlled, directly or indirectly, by such Person or one or more of the
     other Subsidiaries of that Person or a combination thereof, and, in the
     case of any such entity of which 50% of the total voting power of shares of
     Capital Stock is so owned or controlled by such Person or one or more of
     the other Subsidiaries of such Person, such Person and its Subsidiaries
     also has the right to control the management of such entity pursuant to
     contract or otherwise; and
 
          (2) any partnership
 
             (a) the sole general partner or the managing general partner of
        which is such Person or a Subsidiary of such Person, or
 
             (b) the only general partners of which are such Person or of one or
        more Subsidiaries of such Person, or any combination thereof.
 
     "UNRESTRICTED SUBSIDIARY" means any Subsidiary of Charter Holdings that is
designated by the board of directors of Charter Holdings as an Unrestricted
Subsidiary pursuant to a board resolution, but only to the extent that such
Subsidiary:
 
          (1) has no Indebtedness other than Non-Recourse Debt;
 
          (2) is not party to any agreement, contract, arrangement or
     understanding with Charter Holdings or any Restricted Subsidiary of Charter
     Holdings unless the terms of any such agreement, contract, arrangement or
     understanding are no less favorable to Charter Holdings or any Restricted
     Subsidiary than those that might be obtained at the time from Persons who
     are not Affiliates of Charter Holdings unless such terms constitute
     Investments permitted by the covenant described above under the caption
     "-- Certain Covenants -- Investments";
 
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<PAGE>   218
 
          (3) is a Person with respect to which neither Charter Holdings nor any
     of its Restricted Subsidiaries has any direct or indirect obligation
 
             (a) to subscribe for additional Equity Interests or
 
             (b) to maintain or preserve such Person's financial condition or to
        cause such Person to achieve any specified levels of operating results;
 
          (4) has not guaranteed or otherwise directly or indirectly provided
     credit support for any Indebtedness of Charter Holdings or any of its
     Restricted Subsidiaries; and
 
          (5) has at least one director on its board of directors that is not a
     director or executive officer of Charter Holdings or any of its Restricted
     Subsidiaries or has at least one executive officer that is not a director
     or executive officer of Charter Holdings or any of its Restricted
     Subsidiaries.
 
     Any designation of a Subsidiary of Charter Holdings as an Unrestricted
Subsidiary shall be evidenced to the trustee by filing with the trustee a
certified copy of the board resolution giving effect to such designation and an
officers' certificate certifying that such designation complied with the
preceding conditions and was permitted by the covenant described above under the
caption "Certain Covenants -- Investments." If, at any time, any Unrestricted
Subsidiary would fail to meet the preceding requirements as an Unrestricted
Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for
purposes of the indentures and any Indebtedness of such Subsidiary shall be
deemed to be incurred by a Restricted Subsidiary of Charter Holdings as of such
date and, if such Indebtedness is not permitted to be incurred as of such date
under the covenant described under the caption "Certain Covenants -- Incurrence
of Indebtedness and Issuance of preferred stock", Charter Holdings shall be in
default of such covenant. The board of directors of Charter Holdings may at any
time designate any Unrestricted Subsidiary to be a Restricted Subsidiary;
provided that such designation shall be deemed to be an incurrence of
Indebtedness by a Restricted Subsidiary of Charter Holdings of any outstanding
Indebtedness of such Unrestricted Subsidiary and such designation shall only be
permitted if:
 
          (1) such Indebtedness is permitted under the covenant described under
     the caption "Certain Covenants -- Incurrence of Indebtedness and Issuance
     of preferred stock," calculated on a pro forma basis as if such designation
     had occurred at the beginning of the four-quarter reference period; and
 
          (2) no Default or Event of Default would be in existence following
     such designation.
 
     "VOTING STOCK" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the board of
directors of such Person.
 
     "WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing:
 
          (1) the sum of the products obtained by multiplying
 
             (a) the amount of each then remaining installment, sinking fund,
        serial maturity or other required payments of principal, including
        payment at final maturity, in respect thereof, by
 
             (b) the number of years, calculated to the nearest one-twelfth,
        that will elapse between such date and the making of such payment; by
 
          (2) the then outstanding principal amount of such Indebtedness.
 
     "WHOLLY OWNED RESTRICTED SUBSIDIARY" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which, other than directors' qualifying shares, shall at
the time be owned by such Person and/or by one or more Wholly Owned Restricted
Subsidiaries of such Person.
 
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<PAGE>   219
 
            MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
 
     The following sets forth the opinion of Paul, Hastings, Janofsky & Walker
LLP, our legal counsel, as to the material United States federal income tax
consequences of
 
     (1) the exchange offer relevant to U.S. holders, and
 
     (2) the ownership and disposition of the new notes relevant to U.S. holders
and, in certain circumstances, non-U.S. holders.
 
     The following deals only with notes held as capital assets within the
meaning of section 1221 of the Internal Revenue Code of 1986, as amended. The
following does not address special situations, such as those of broker-dealers,
tax-exempt organizations, individual retirement accounts and other tax deferred
accounts, financial institutions, insurance companies, or persons holding notes
as part of a hedging or conversion transaction, a straddle or a constructive
sale. Furthermore, the following is based upon the provisions of the Internal
Revenue Code and regulations, rulings and judicial decisions promulgated under
the Internal Revenue Code and judicial decisions as of the date hereof. Such
authorities may be repealed, revoked, or modified, possibly with retroactive
effect, so as to result in United States federal income tax consequences
different from those discussed below. In addition, except as otherwise
indicated, the following does not consider the effect of any applicable foreign,
state, local or other tax laws or estate or gift tax considerations.
 
     We have not sought, and will not seek, any rulings from the IRS with
respect to the positions discussed below. There can be no assurance that the IRS
will not take a different position concerning the tax consequences of the
exchange offer and ownership or disposition of the original notes or new notes,
or that any such position would not be sustained.
 
     As used herein, a "United States person" is
 
     (1) a citizen or resident of the U.S.,
 
     (2) a corporation, partnership or other entity created or organized in or
under the laws of the U.S. or any political subdivision thereof,
 
     (3) an estate the income of which is subject to U.S. federal income
taxation regardless of its source,
 
     (4) a trust if
 
          (A) a United States court is able to exercise primary supervision over
     the administration of the trust, and
 
          (B) one or more United States persons have the authority to control
     all substantial decisions of the trust,
 
     (5) a certain type of trust in existence on August 20, 1996, which was
treated as a United States person under the Internal Revenue Code in effect
immediately prior to such date and which has made a valid election to be treated
as a United States person under the Internal Revenue Code, and
 
     (6) any person otherwise subject to U.S. federal income tax on a net income
basis in respect of its worldwide taxable income.
 
     A U.S. holder is a beneficial owner of a note who is a United States
person. A non-U.S. holder is a beneficial owner of a note that is not a U.S.
holder.
 
THE EXCHANGE OFFER
 
     Pursuant to the exchange offer, holders are entitled to exchange the
original notes for new notes that will be substantially identical in all
material respects to the original notes, except that the new
 
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<PAGE>   220
 
notes will be registered with the Securities and Exchange Commission and
therefore will not be subject to transfer restrictions. The exchange pursuant to
the exchange offer as described above will not result in a taxable event.
Accordingly,
 
     (1) no gain or loss will be realized by a U.S. holder upon receipt of a new
note,
 
     (2) the holding period of the new note will include the holding period of
the original note exchanged therefor and
 
     (3) the adjusted tax basis of the new notes will be the same as the
adjusted tax basis of the original notes exchanged at the time of such exchange.
 
UNITED STATES FEDERAL INCOME TAXATION OF U.S. HOLDERS
 
PAYMENTS OF INTEREST ON THE 10.00% NOTES AND THE 10.25% NOTES
 
     Interest on a 10.00% note or a 10.25% note, as the case may be, will be
taxable to a U.S. Holder as ordinary income from domestic sources at the time it
is paid or accrued in accordance with the U.S. Holder's regular method of
accounting for tax purposes.
 
ORIGINAL ISSUE DISCOUNT ON THE 11.75% NOTES
 
     The 11.75% notes will be issued with original issue discount. Such notes
will be issued with original issue discount because they will be issued at an
issue price which is substantially less than their stated principal amount at
maturity, and because interest on such notes will not be payable until July 15,
2005. Each U.S. Holder will be required to include in income in each year, in
advance of receipt of cash payments on such Senior Discount Notes to which such
income is attributable, original issue discount income as described below.
 
     The amount of original issue discount with respect to the 11.75% notes will
be equal to the excess of
 
     (1) note's "stated redemption price at maturity" over
 
     (2) its "issue price."
 
     The issue price of the 11.75% notes will be equal to the price to the
public, at which a substantial amount of such notes is initially sold for money
excluding any sales to a bond house, broker or similar person or organization
acting in the capacity of an underwriter, placement agent or wholesaler. The
stated redemption price at maturity of such a note is the total of all payments
provided by the 11.75% note, including stated interest payments.
 
     A U.S. holder of such a note is required to include in gross income for
U.S. federal income tax purposes an amount equal to the sum of the "daily
portions" of such original issue discount for all days during the taxable year
on which the holder holds such note. The daily portions of original issue
discount required to be included in such holder's gross income in a taxable year
will be determined on a constant yield basis. A pro rata portion of the original
issue discount on such note which is attributable to the "accrual period" in
which such day is included will be allocated to each day during the taxable year
in which the holder holds the 11.75% notes. Accrual periods with respect to such
a note may be of any length and may vary in length over the term of the 11.75%
notes as long as
 
     (1) no accrual period is longer than one year, and
 
     (2) each scheduled payment of interest or principal on such note occurs on
either the first or final day of an accrual period.
 
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<PAGE>   221
 
     The amount of original issue discount attributable to each accrual period
will be equal to the product of
 
     (1) the "adjusted issue price" at the beginning of such accrual period, and
 
     (2) the "yield to maturity" of the instrument, stated in a manner
appropriately taking into account the length of the accrual period.
 
     The yield to maturity is the discount rate that, when used in computing the
present value of all payments to be made under the 11.75% notes, produces an
amount equal to the issue price of such notes. The adjusted issue price of such
a note at the beginning of an accrual period is generally defined as the issue
price of such note plus the aggregate amount of original issue discount that
accrued in all prior accrual periods, less any cash payments made on the 11.75%
notes. Accordingly, a U.S. holder of such a note will be required to include
original issue discount in gross income for United States federal income tax
purposes in advance of the receipt of cash attributable to such income. The
amount of original issue discount allocable to an initial short accrual period
may be computed using any reasonable method if all other accrual periods, other
than a final short accrual period, are of equal length. The amount of original
issue discount allocable to the final accrual period at maturity of a 11.75%
note is the difference between
 
     (A) the amount payable at the maturity of such note, and
 
     (B) such note's adjusted issue price as of the beginning of the final
accrual period.
 
     Payments on the 11.75% notes, including principal and stated interest
payments, are not separately included in a U.S. holder's income. Such payments
are treated first as payments of accrued original issue discount to the extent
of such accrued original issue discount and the excess as payments of principal,
which reduce the U.S. holder's adjusted tax basis in such notes.
 
EFFECT OF MANDATORY AND OPTIONAL REDEMPTION ON ORIGINAL ISSUE DISCOUNT
 
     In the event of a change of control, we will be required to offer to redeem
all of the notes, at redemption prices specified elsewhere in this prospectus.
If we receive net proceeds from one or more equity offerings, we may, at our
option, use all or a portion of such net proceeds to redeem in the aggregate up
to 35% of the aggregate principal amount at maturity of the 10.25% notes and up
to 35% of the aggregate principal amount at maturity of the 11.75% notes at
redemption prices specified elsewhere herein, provided that at least 65% of the
aggregate principal amount at maturity of the 10.25% notes and the 11.75% notes,
respectively, remains outstanding after each such redemption. Computation of the
yield and maturity of the notes is not affected by such redemption rights and
obligations if, based on all the facts and circumstances as of January 12, 2000,
the stated payment schedule of the notes, that does not reflect the change of
control event or equity offering event, is significantly more likely than not to
occur. We have determined that, based on all of the facts and circumstances as
of the issue date, it is significantly more likely than not that the notes will
be paid according to their stated schedule.
 
     We may redeem the 10.25% notes and the 11.75% notes, in whole or in part,
at any time on or after February 1, 2005, at redemption prices specified
elsewhere herein plus accrued and unpaid stated interest, if any, on the notes
so redeemed but excluding the date of redemption. The United States Treasury
Regulations contain rules for determining the "maturity date" and the stated
redemption price at maturity of an instrument that may be redeemed prior to its
stated maturity date at the option of the issuer. Under United States Treasury
Regulations, solely for the purposes of the accrual of original issue discount,
it is assumed that an issuer will exercise any option to redeem a debt
instrument if such exercise would lower the yield to maturity of the debt
instrument. We will not be presumed to redeem the notes prior to their stated
maturity under these rules because the exercise of such options would not lower
the yield to maturity of the notes.
 
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<PAGE>   222
 
     U.S. Holders may wish to consult their own tax advisors regarding the
treatment of such contingencies.
 
APPLICABLE HIGH YIELD DISCOUNT OBLIGATIONS
 
     Because the 11.75% notes constitute "applicable high yield discount
obligations", referred to as "AHYDOs", the portion of each 11.75% note that is
allocable to beneficial owners of Charter Holdings that are C corporations, such
as Charter Communications, Inc., will be treated as an AHYDO for U.S. federal
income tax purposes. The 11.75% notes constitute AHYDOs because they have a
yield to maturity that is at least five percentage points above the applicable
federal rate at the time of issuance of the 11.75% notes and the 11.75% notes
are issued with "significant original issue discount." An 11.75% note is treated
as having significant original issue discount because the aggregate amount that
will be includable in gross income with respect to such 11.75% note for periods
before the close of any accrual period ending after the date that is five years
after the date of issue exceeds the sum of (1) the aggregate amount of interest
to be paid in cash under the 11.75% note before the close of such accrual period
and (2) the product of the initial issue price of such 11.75% note and its yield
to maturity.
 
     Because the 11.75% notes constitute AHYDOs, to the extent that the 11.75%
notes are allocable to beneficial owners of Charter Holdings that are C
corporations, such as Charter Communications, Inc.,
 
     (1) the "disqualified portion" of the original issue discount that accrues
on the 11.75% notes allocable to beneficial owners of Charter Holdings that are
C corporations, such as Charter Communications, Inc., may be treated as a
dividend generally eligible for the dividends received deduction in the case of
corporate U.S. Holders,
 
     (2) beneficial owners of Charter Holdings that are C corporations, such as
Charter Communications, Inc., will not be entitled to deduct their distributive
share of the disqualified portion of original issue discount that accrues on the
11.75% notes, and
 
     (3) beneficial owners of Charter Holdings that are C corporations, such as
Charter Communications, Inc., will be allowed to deduct the remainder of their
distributive share of original issue discount only when Charter Holdings pays
amounts attributable to such original issue discount in cash.
 
     The disqualified portion of original issue discount is equal to the lesser
of the amount of original issue discount or the portion of the "total return"
with respect to the 11.75% notes in excess of the applicable federal rate plus
six percentage points. The total return is the excess of all payments to be made
with respect to a 11.75% note over its issue price.
 
SALE, EXCHANGE OR RETIREMENT OF THE NOTES
 
     Upon the sale, exchange, retirement or other taxable disposition of a note,
the holder will recognize gain or loss in an amount equal to the difference
between
 
     (1) the amount of cash and the fair market value of other property received
in the exchange and
 
     (2) the holder's adjusted tax basis in such note.
 
     Amounts attributable to accrued but unpaid interest on the 10.00% notes and
the 10.25% notes will be treated as ordinary interest income. A holder's
adjusted tax basis in a note will equal the purchase price paid by such holder
for the note increased by the amount of any market discount, and in the case of
a 11.75% note by any original issue discount previously included in income by
such holder with respect to such note and decreased by the amount of any
amortizable bond premium
 
                                       219

<PAGE>   223
 
applied to reduce interest on the notes and, in the case of a 11.75% note, by
any payments received thereon.
 
     Gain or loss realized on the sale, exchange, retirement or other taxable
disposition of a note will be capital gain or loss and will be long-term capital
gain or loss if at the time of sale, exchange, retirement, or other taxable
disposition, the note has been held for more than 12 months. The maximum rate of
tax on long-term capital gains with respect to notes held by an individual is
20%. The deductibility of capital losses is subject to certain limitations.
 
MARKET DISCOUNT
 
     A holder receives a "market discount" when he/she
 
     (1) purchases a 10.00% note or a 10.25% note for an amount below the issue
price, or
 
     (2) purchases a 11.75% note for an amount below the adjusted issue price on
the date of purchase, as determined in accordance with the original issue
discount rules above.
 
     Under the market discount rules, a U.S. holder will be required to treat
any partial principal payment on, or any gain on the sale, exchange, retirement
or other disposition of, a note as ordinary income to the extent of the market
discount which has not previously been included in income and is treated as
having accrued on such note at the time of such payment or disposition. In
addition, the U.S. holder may be required to defer, until the maturity of the
note or its earlier disposition in a taxable transaction, the deduction of a
portion of the interest expense on any indebtedness incurred or continued to
purchase or carry such notes.
 
     Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the note, unless the U.S.
holder elects to accrue such discount on a constant interest rate method. A U.S.
holder may elect to include market discount in income currently as it accrues,
on either a ratable or constant interest rate method. If this election is made,
the holder's basis in the note will be increased to reflect the amount of income
recognized and the rules described above regarding deferral of interest
deductions will not apply. This election to include market discount in income
currently, once made, applies to all market discount obligations acquired on or
after the first taxable year to which the election applies and may not be
revoked without the consent of the Internal Revenue Service.
 
AMORTIZABLE BOND PREMIUM; ACQUISITION PREMIUM
 
     A U.S. holder that
 
     (1) purchases a 10.00% note or a 10.25% note for an amount in excess of the
principal amount, or
 
     (2) purchases a 11.75% note for an amount in excess of the stated
redemption price will be considered to have purchased such note with
"amortizable bond premium." A U.S. holder generally may elect to amortize the
premium over the remaining term of the note on a constant yield method as
applied with respect to each accrual period of the note, and allocated ratably
to each day within an accrual period in a manner substantially similar to the
method of calculating daily portions of original issue discount, as described
above. However, because the notes may be optionally redeemed for an amount that
is in excess of their principal amount, special rules apply that could result in
a deferral of the amortization of bond premium until later in the term of the
note. The amount amortized in any year will be treated as a reduction of the
U.S. holder's interest income, including original issue discount income, from
the note. Bond premium on a note held by a U.S. holder that does not make such
an election will decrease the gain or increase the loss otherwise recognized
upon disposition of the note. The election to amortize premium on a constant
yield method, once made, applies to all
 
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<PAGE>   224
 
debt obligations held or subsequently acquired by the electing U.S. holder on or
after the first day of the first taxable year to which the election applies and
may not be revoked without the consent of the Internal Revenue Service.
 
     A U.S. Holder that purchases a 11.75% note for an amount that is greater
than the adjusted issue price of the 11.75% note on the date of purchase, as
determined in accordance with the original issue discount rules, above, will be
considered to have purchased such 11.75% note at an "acquisition premium." A
holder of a 11.75% note that is purchased at an acquisition premium may reduce
the amount of the original issue discount otherwise includible in income with
respect to the 11.75% note by the "acquisition premium fraction." The
acquisition premium fraction is that fraction the numerator of which is the
excess of the holder's adjusted tax basis in the 11.75% note immediately after
its acquisition over the adjusted issue price of the 11.75% note and the
denominator of which is the excess of the sum of all amounts payable on the
11.75% note after the purchase date over the adjusted issue price of the 11.75%
note. Alternatively, a holder of a 11.75% note that is purchased at an
acquisition premium may elect to compute the original issue discount accrual on
the 11.75% note by treating the purchase as a purchase of the 11.75% note at
original issuance, treating the purchase price as the issue price, and applying
the original issue discount rules thereto using a constant yield method.
 
UNITED STATES FEDERAL INCOME TAXATION OF NON-U.S. HOLDERS
 
     The payment to a non-U.S. holder of interest on a note, will not be subject
to U.S. federal withholding tax pursuant to the "portfolio interest exception,"
provided that
 
     (1) the non-U.S. holder does not actually or constructively own 10% or more
of the capital or profits interest in the issuers and is not a controlled
foreign corporation that is related to the issuers within the meaning of the
Code and
 
     (2) either
 
     (A) the beneficial owner of the notes certifies to the issuers or their
agent, under penalties of perjury, that it is not a U.S. holder and provides its
name and address on U.S. Treasury Form W-8, or a suitable substitute form, or
 
     (B) a securities clearing organization, bank or other financial institution
that holds the notes on behalf of such non-U.S. holder in the ordinary course of
its trade or business certifies under penalties of perjury that such Form W-8,
or suitable substitute form, has been received from the beneficial owner by it
or by a financial institution between it and the beneficial owner and furnishes
the payor with a copy thereof.
 
     Recently adopted Treasury Regulations that will be effective January 1,
2001, provide alternative methods for satisfying the certification requirement
described in (2) above. These regulations will generally require, in the case of
notes held by a foreign partnership, that the certificate described in (2) above
be provided by the partners rather than by the foreign partnership, and that the
partnership provide certain information including a U.S. tax identification
number. For purposes of the United States federal withholding tax, payment of
interest includes the amount of any payment that is attributable to original
issue discount that accrued while such non-U.S. holder held the note.
 
     If a non-U.S. holder cannot satisfy the requirements of the portfolio
interest exception described above, payments of interest, including the amount
of any payment that is attributable to original issue discount that accrued
while such non-U.S. holder held the note, made to such non-U.S. holder will be
subject to a 30% withholding tax, unless the beneficial owner of the note
provides us or our paying agent, as the case may be, with a properly executed
 
                                       221

<PAGE>   225
 
     (1) Internal Revenue Service Form 1001, or successor form, claiming an
exemption from or reduction in the rate of withholding under the benefit of a
tax treaty or
 
     (2) Internal Revenue Service Form 4224, or successor form, stating that
interest paid on the note is not subject to withholding tax because it is
effectively connected with the beneficial owner's conduct of a trade or business
in the United States.
 
     If a non-U.S. holder of a note is engaged in a trade or business in the
United States and interest on the note is effectively connected with the conduct
of such trade or business, such non-U.S. holder, will be subject to U.S. federal
income tax on such interest, including original issue discount, in the same
manner as if it were a U.S. holder. In addition, if such non-U.S. holder is a
foreign corporation, it may be subject to a branch profits tax equal to 30% of
its effectively connected earnings and profits, subject to adjustment, for that
taxable year unless it qualifies for a lower rate under an applicable income tax
treaty.
 
     Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a note by a person other than a U.S. holder generally
will not be subject to U.S. federal income tax provided
 
     (1) such gain is not effectively connected with the conduct by such holder
of a trade or business in the United States,
 
     (2) in the case of gains derived by an individual, such individual is not
present in the United States for 183 days or more in the taxable year of the
disposition and certain other conditions are met and
 
     (3) the non-U.S. holder is not subject to tax pursuant to the provisions of
U.S. federal income tax law applicable to certain expatriates.
 
FEDERAL ESTATE TAX
 
     Subject to applicable estate tax treaty provisions, notes held by an
individual who is not a citizen or resident of the United States for federal
estate tax purposes at the time of his or her death will not be subject to U.S.
federal estate tax if the interest on the notes qualifies for the portfolio
interest exemption from U.S. federal income tax under the rules described above.
 
INFORMATION REPORTING AND BACKUP WITHHOLDING
 
     Backup withholding and information reporting requirements may apply to
certain payments of principal, premium, if any, and interest, and accruals of
original issue discount, on a note, and to the proceeds of the sale or
redemption of a note before maturity. We, our agent, a broker, the trustee or
the paying agent, as the case may be, will be required to withhold from any
payment that is subject to backup withholding a tax equal to 31% of such payment
if a U.S. holder fails to furnish his taxpayer identification number, certify
that such number is correct, certify that such holder is not subject to backup
withholding or otherwise comply with the applicable backup withholding rules.
Certain U.S. holders, including all corporations, are not subject to backup
withholding and information reporting requirements.
 
     Non-U.S. holders other than corporations may be subject to backup
withholding and information reporting requirements. However, backup withholding
and information reporting requirements do not apply to payments of portfolio
interest, including original issue discount, made by us or a paying agent to
non-U.S. holders if the appropriate certification is received, provided that the
payor does not have actual knowledge that the holder is a U.S. holder. If any
payments of principal and interest are made to the beneficial owner of a note by
or through the foreign office of a foreign custodian, foreign nominee or other
foreign agent of such beneficial owner, or if the foreign office of a foreign
"broker",
 
                                       222

<PAGE>   226
 
as defined in the applicable Treasury Regulations, pays the proceeds of the
sale, redemption or other disposition of note or a coupon to the seller thereof,
backup withholding and information reporting requirements will not apply.
Information reporting requirements, but not backup withholding, will apply,
however, to a payment by a foreign office of a broker that is a United States
person or is a foreign person that derives 50% of more of its gross income for
certain period from the conduct of a trade or business in the United States, or
that is a "controlled foreign corporation", that is, a foreign corporation
controlled by certain U.S. shareholders, with respect to the United States
unless the broker has documentary evidence in its records that the holder is a
non-U.S. holder and certain other conditions are met or the holder otherwise
establishes an exemption. Payment by a U.S. office of a broker is subject to
both backup withholding at a rate of 31% and information reporting unless the
holder certifies under penalties of perjury that it is a non-U.S. holder or
otherwise establishes an exemption.
 
     In October 1997, Treasury regulations were issued which alter the foregoing
rules in certain respects and which generally will apply to any payments in
respect of a note or proceeds from the sale of a note that are made after
December 31, 2000. Among other things, such regulations expand the number of
foreign intermediaries that are potentially subject to information reporting and
address certain documentary evidence requirements relating to exemption from the
backup withholding requirements. Holders of the notes should consult their tax
advisers concerning the possible application of such regulations to any payments
made on or with respect to the notes.
 
     Any amounts withheld under the backup withholding rules from a payment to a
holder of the notes will be allowed as a refund or a credit against such
holder's United States federal income tax liability, provided that the required
information is furnished to the IRS.
 
     We must report annually to the IRS and to each non-U.S. holder any interest
that is subject to withholding, or that is exempt from United States withholding
tax pursuant to a tax treaty, or interest that is exempt from United States
federal withholding tax under the portfolio interest exception. Copies of these
information returns may also be made available under the provisions of a
specific treaty or agreement to the tax authorities of the country in which the
non-U.S. holder resides.
 
                                       223

<PAGE>   227
 
                              PLAN OF DISTRIBUTION
 
     A broker-dealer that is the holder of original notes that were acquired for
the account of such broker-dealer as a result of market-making or other trading
activities, other than original notes acquired directly from us or any of our
affiliates may exchange such original notes for new notes pursuant to the
exchange offer. This is true so long as each broker-dealer that receives new
notes for its own account in exchange for original notes, where such original
notes were acquired by such broker-dealer as a result of market-making or other
trading activities acknowledges that it will deliver a prospectus in connection
with any resale of such new notes. This prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of new notes received in exchange for original notes where such
original notes were acquired as a result of market-making activities or other
trading activities. We have agreed that for a period of 180 days after
consummation of the exchange offer or such time as any broker-dealer no longer
owns any registrable securities, we will make this prospectus, as it may be
amended or supplemented from time to time, available to any broker-dealer for
use in connection with any such resale. All dealers effecting transactions in
the new notes will be required to deliver a prospectus.
 
     We will not receive any proceeds from any sale of new notes by
broker-dealers or any other holder of new notes. New notes received by
broker-dealers for their own account in the exchange offer may be sold from time
to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the new notes or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer and/or the purchasers of any such new
notes. Any broker-dealer that resells new notes that were received by it for its
own account pursuant to the exchange offer and any broker or dealer that
participates in a distribution of such new notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of new notes and any commissions or concessions received by any such
persons may be deemed to be underwriting compensation under the Securities Act.
The letter of transmittal states that by acknowledging that it will deliver and
by delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
 
     For a period of 180 days after consummation of the exchange offer or such
time as any broker-dealer no longer owns any registrable securities, we will
promptly send additional copies of this prospectus and any amendment or
supplement to this prospectus to any broker-dealer that requests such documents
in the letter of transmittal. We have agreed to pay all expenses incident to the
exchange offer and to our performance of, or compliance with, the registration
rights agreements (other than commissions or concessions of any brokers or
dealers) and will indemnify the holders of the notes (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
 
                                 LEGAL MATTERS
 
     The legality of the notes offered in this prospectus and other matters will
be passed upon for us by Paul, Hastings, Janofsky & Walker LLP, New York, New
York.
 
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<PAGE>   228
 
                                    EXPERTS
 
     The consolidated financial statements of Charter Communications Holdings,
LLC and subsidiaries, the combined financial statements of CCA Group, the
consolidated financial statements of CharterComm Holdings, L.P. and
subsidiaries, the combined financial statements of Greater Media Cablevision
Systems, the financial statements of Sonic Communications Cable Television
Systems and Long Beach Acquisition Corp., included in this prospectus, to the
extent and for the periods indicated in their reports, have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are included in this prospectus in reliance
upon the authority of said firm as experts in giving said reports.
 
     The combined financial statements of TCI Falcon Systems as of September 30,
1998 and December 31, 1997 and for the nine-month period ended September 30,
1998, and for each of the years in the two-year period ended December 31, 1997,
the combined financial statements of Bresnan Communications Group Systems as of
December 31, 1997 and 1998, and for each of the years in the three-year period
ended December 31, 1998, the consolidated financial statements of Marcus Cable
Holdings, LLC as of December 31, 1998 and 1997, and for each of the years in the
three-year period ended December 31, 1998, and the combined financial statements
of Helicon Partners I, L.P. and affiliates as of December 31, 1997 and 1998 and
for each of the years in the three-year period ended December 31, 1998, have
been included herein in reliance upon the reports of KPMG LLP, independent
certified public accountants, appearing elsewhere herein, and upon the authority
of said firm as experts in accounting and auditing.
 
     The consolidated financial statements of Renaissance Media Group LLC, the
combined financial statements of the Picayune, MS, LaFourche, LA, St. Tammany,
LA, St. Landry, LA, Pointe Coupee, LA, and Jackson, TN cable television systems,
the financial statements of Indiana Cable Associates, LTD., the consolidated
financial statements of R/N South Florida Cable Management Limited Partnership,
the combined financial statements of Fanch Cable Systems (comprised of
components of TW Fanch-one Co. and TW Fanch-two Co.) and the consolidated
financial statements of Falcon Communications, L.P. appearing in this prospectus
and registration statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their reports thereon appearing elsewhere herein, and
are included in reliance upon such reports given on the authority of such firm
as experts in accounting and auditing.
 
     The audited combined financial statements of InterMedia Cable Systems
(comprised of components of InterMedia Partners and InterMedia Capital Partners
IV, L.P.), the audited financial statements of Rifkin Cable Income Partners
L.P., the audited consolidated financial statements of Rifkin Acquisition
Partners, L.L.L.P., the audited consolidated financial statements of Avalon
Cable of Michigan Holdings, Inc. and subsidiaries, the audited consolidated
financial statements of Cable Michigan Inc. and subsidiaries, the audited
consolidated financial statements of Avalon Cable LLC and subsidiaries, the
audited financial statements of Amrac Clear View, a Limited Partnership, the
audited combined financial statements of The Combined Operations of Pegasus
Cable Television of Connecticut, Inc. and the Massachusetts Operations of
Pegasus Cable Television, Inc., included in this registration statement, have
been audited by PricewaterhouseCoopers LLP, independent accountants. The
entities and periods covered by these audits are indicated in their reports. The
financial statements have been so included in reliance on the reports of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
 
     The financial statements of Amrac Clear View, a Limited Partnership as of
December 31, 1996 and 1997 and for each of the three years in the period ended
December 31, 1997, included in this prospectus, have been so included in
reliance on the report of Greenfield, Altman, Brown, Berger & Katz, P.C.,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
 
                                       225

<PAGE>   229
 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
 
                                 $1,532,000,000
 
                               OFFER TO PURCHASE
 
                         10.00% SENIOR NOTES DUE 2009,
                       10.25% SENIOR NOTES DUE 2010, AND
                     11.75% SENIOR DISCOUNT NOTES DUE 2010,
 
                          FOR ANY AND ALL OUTSTANDING
                         10.00% SENIOR NOTES DUE 2009,
                       10.25% SENIOR NOTES DUE 2010, AND
                     11.75% SENIOR DISCOUNT NOTES DUE 2010,
 
                                RESPECTIVELY, OF
 
                             CHARTER COMMUNICATIONS
 
                                 HOLDINGS, LLC
 
                                      AND
 
                             CHARTER COMMUNICATIONS
 
                          HOLDINGS CAPITAL CORPORATION
 
     NO DEALER, SALESPERSON OR OTHER PERSON IS AUTHORIZED TO GIVE ANY
INFORMATION OR TO REPRESENT ANYTHING NOT CONTAINED IN THIS PROSPECTUS. YOU MUST
NOT RELY ON ANY UNAUTHORIZED INFORMATION OR REPRESENTATIONS. THIS PROSPECTUS IS
AN OFFER TO ISSUE ONLY THE NEW NOTES OFFERED HEREBY, BUT ONLY UNDER
CIRCUMSTANCES AND IN JURISDICTIONS WHERE IT IS LAWFUL TO DO SO. THE INFORMATION
CONTAINED IN THIS PROSPECTUS IS CURRENT ONLY AS OF ITS DATE.
 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

<PAGE>   230
 
                  INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
 

<TABLE>
<CAPTION>
                                                              PAGE
                                                              -----
<S>                                                           <C>
CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
Report of Independent Public Accountants....................  F-7
Consolidated Balance Sheet as of December 31, 1998..........  F-8
Consolidated Statement of Operations for the period from
  December 24, 1998 through December 31, 1998...............  F-9
Consolidated Statement of Cash Flows for the period from
  December 24, 1998 through December 31, 1998...............  F-10
Notes to Consolidated Financial Statements..................  F-11
Report of Independent Public Accountants....................  F-25
Consolidated Balance Sheet as of December 31, 1997..........  F-26
Consolidated Statement of Operations for the period from
  January 1, 1998 through December 23, 1998 and for the
  years ended December 31, 1997 and 1996....................  F-27
Consolidated Statements of Shareholder's Investment for the
  period from January 1, 1998 through December 23, 1998 and
  for the years ended December 31, 1997 and 1996............  F-28
Consolidated Statements of Cash Flows for the period from
  January 1, 1998 through December 23, 1998 and for the
  years ended December 31, 1997 and 1996....................  F-29
Notes to Consolidated Financial Statements..................  F-30
MARCUS CABLE HOLDINGS, LLC AND SUBSIDIARIES:
  Independent Auditors' Report..............................  F-40
  Consolidated Balance Sheets as of December 31, 1998 and
    1997....................................................  F-41
  Consolidated Statements of Operations for Each of the
    Years in the Three-Year Period Ended December 31,
    1998....................................................  F-42
  Consolidated Statements of Members' Equity/Partners'
    Capital for Each of the Years in the Three-Year Period
    Ended December 31, 1998.................................  F-43
  Consolidated Statements of Cash Flows for Each of the
    Years in the Three-Year Period Ended December 31,
    1998....................................................  F-44
  Notes to Consolidated Financial Statements................  F-45
CCA GROUP:
  Report of Independent Public Accountants..................  F-56
  Combined Balance Sheet as of December 31, 1997............  F-57
  Combined Statements of Operations for the Period From
    January 1, 1998, Through December 23, 1998 and for the
    Years Ended December 31, 1997 and 1996..................  F-58
  Combined Statements of Shareholders' Deficit for the
    Period From January 1, 1998, Through December 23, 1998
    and for the Years Ended December 31, 1997 and 1996......  F-59
  Combined Statements of Cash Flows for the Period From
    January 1, 1998, Through December 23, 1998 and for the
    Years Ended December 31, 1997 and 1996..................  F-60
  Notes to Combined Financial Statements....................  F-61
CHARTERCOMM HOLDINGS, L.P. AND SUBSIDIARIES:
  Report of Independent Public Accountants..................  F-75
  Consolidated Balance Sheet as of December 31, 1997........  F-76
  Consolidated Statements of Operations for the Period From
    January 1, 1998 Through December 23, 1998 and for the
    Years Ended December 31, 1997 and 1996..................  F-77
  Consolidated Statements of Partners' Capital for the
    Period From January 1, 1998 Through December 23, 1998
    and for the Years Ended December 31, 1997 and 1996......  F-78
  Consolidated Statements of Cash Flows for the Period From
    January 1, 1998 Through December 23, 1998 and for the
    Years Ended December 31, 1997 and 1996..................  F-79
  Notes to Consolidated Financial Statements................  F-80
GREATER MEDIA CABLEVISION SYSTEMS:
  Report of Independent Public Accountants..................  F-93
  Combined Balance Sheets as of September 30, 1998 and
    1997....................................................  F-94
  Combined Statements of Income for the Nine Months Ended
    June 30, 1999 and 1998 (unaudited) and for the Years
    Ended September 30, 1998, 1997 and 1996.................  F-95
  Combined Statements of Changes in Net Assets for the Years
    Ended September 30, 1996, 1997 and 1998.................  F-96
  Combined Statements of Cash Flows for the Nine Months
    Ended June 30, 1999 and 1998 (unaudited) and for the
    Years Ended September 30, 1998, 1997 and 1996...........  F-97
  Notes to Combined Financial Statements....................  F-98
</TABLE>

 
                                       F-1

<PAGE>   231
 

<TABLE>
<CAPTION>
                                                              PAGE
                                                              -----
<S>                                                           <C>
RENAISSANCE MEDIA GROUP LLC:
  Report of Independent Auditors............................  F-104
  Consolidated Balance Sheet as of December 31, 1998........  F-105
  Consolidated Statement of Operations for the Year Ended
    December 31, 1998.......................................  F-106
  Consolidated Statement of Changes in Members' Equity for
    the Year Ended December 31, 1998........................  F-107
  Consolidated Statement of Cash Flows for the Year Ended
    December 31, 1998.......................................  F-108
  Notes to Consolidated Financial Statements for the Year
    Ended December 31, 1998.................................  F-109
PICAYUNE MS, LAFOURCHE, LA, ST. TAMMANY, LA, ST. LANDRY, LA,
  POINTE COUPEE, LA AND JACKSON, TN CABLE TELEVISION
  SYSTEMS:
  Report of Independent Auditors............................  F-119
  Combined Balance Sheet as of April 8, 1998................  F-120
  Combined Statement of Operations for the Period from
    January 1, 1998 through April 8, 1998...................  F-121
  Combined Statement of Changes in Net Assets for the Period
    from January 1, 1998 through April 8, 1998..............  F-122
  Combined Statement of Cash Flows for the Period from
    January 1, 1998 through April 8, 1998...................  F-123
  Notes to Combined Financial Statements....................  F-124
  Report of Independent Auditors............................  F-131
  Combined Balance Sheets as of December 31, 1996 and
    1997....................................................  F-132
  Combined Statements of Operations for the Years Ended
    December 31, 1995, 1996 and 1997........................  F-133
  Combined Statements of Changes in Net Assets for the Years
    Ended December 31, 1996 and 1997........................  F-134
  Combined Statements of Cash Flows for the Years Ended
    1995, 1996 and 1997.....................................  F-135
  Notes to Combined Financial Statements....................  F-136
HELICON PARTNERS I, L.P. AND AFFILIATES:
  Independent Auditors' Report..............................  F-143
  Combined Balance Sheets as of December 31, 1997 and
    1998....................................................  F-144
  Combined Statements of Operations for Each of the Years in
    the Three-Year Period Ended December 31, 1998...........  F-145
  Combined Statements of Changes in Partners' Deficit for
    Each of the Years in the Three-Year Period Ended
    December 31, 1998.......................................  F-146
  Combined Statements of Cash Flows for Each of the Years in
    the Three-Year Period Ended December 31, 1998...........  F-147
  Notes to Combined Financial Statements....................  F-148
INTERMEDIA CABLE SYSTEMS (COMPRISED OF COMPONENTS OF
  INTERMEDIA PARTNERS AND INTERMEDIA CAPITAL PARTNERS IV,
  L.P.):
  Report of Independent Accountants.........................  F-161
  Combined Balance Sheets at December 31, 1998 and 1997.....  F-162
  Combined Statements of Operations for the Years Ended
    December 31, 1998 and 1997..............................  F-163
  Combined Statement of Changes in Equity for the Years
    Ended December 31, 1998 and 1997........................  F-164
  Combined Statements of Cash Flows for the Years Ended
    December 31, 1998 and 1997..............................  F-165
  Notes to Combined Financial Statements....................  F-166
RIFKIN CABLE INCOME PARTNERS L.P.:
  Report of Independent Accountants.........................  F-178
  Balance Sheet at December 31, 1997 and 1998...............  F-179
  Statement of Operations for Each of the Three Years in the
    Period Ended December 31, 1998..........................  F-180
  Statement of Partners' Equity (Deficit) for Each of the
    Three Years in the Period Ended December 31, 1998.......  F-181
  Statement of Cash Flows for Each of the Three Years in the
    Period Ended December 31, 1998..........................  F-182
  Notes to Financial Statements.............................  F-183
RIFKIN ACQUISITION PARTNERS, L.L.L.P.:
  Report of Independent Accountants.........................  F-187
  Consolidated Balance Sheet at December 31, 1998 and
    1997....................................................  F-188
  Consolidated Statement of Operations for Each of the Three
    Years in the Period Ended December 31, 1998.............  F-189
  Consolidated Statement of Cash Flows for Each of the Three
    Years in the Period Ended December 31, 1998.............  F-190
  Consolidated Statement of Partners' Capital (Deficit) for
    Each of the Three Years in the Period Ended December 31,
    1998....................................................  F-191
  Notes to Consolidated Financial Statements................  F-192
</TABLE>

 
                                       F-2

<PAGE>   232
 

<TABLE>
<CAPTION>
                                                              PAGE
                                                              -----
<S>                                                           <C>
INDIANA CABLE ASSOCIATES, LTD.:
  Report of Independent Auditors............................  F-206
  Balance Sheet as December 31, 1997 and 1998...............  F-207
  Statement of Operations for the Years Ended December 31,
    1996, 1997 and 1998.....................................  F-208
  Statement of Partners' Deficit for the Years Ended
    December 31, 1996, 1997 and 1998........................  F-209
  Statement of Cash Flows for the Years Ended December 31,
    1996, 1997 and 1998.....................................  F-210
  Notes to Financial Statements.............................  F-211
R/N SOUTH FLORIDA CABLE MANAGEMENT LIMITED PARTNERSHIP:
  Report of Independent Auditors............................  F-215
  Consolidated Balance Sheet as of December 31, 1997 and
    1998....................................................  F-216
  Consolidated Statement of Operations for the Years Ended
    December 31, 1996, 1997 and 1998........................  F-217
  Consolidated Statement of Partners' Equity (Deficit) for
    the Years Ended December 31, 1996, 1997 and 1998........  F-218
  Consolidated Statement of Cash Flows for the Years Ended
    December 31, 1996, 1997 and 1998........................  F-219
  Notes to Consolidated Financial Statements................  F-220
SONIC COMMUNICATIONS CABLE TELEVISION SYSTEMS:
  Report of Independent Public Accountants..................  F-224
  Statement of Operations and Changes in Net Assets for the
    Period from April 1, 1998, through May 20, 1998.........  F-225
  Statement of Cash Flows for the Period from April 1, 1998,
    through May 20, 1998....................................  F-226
  Notes to Financial Statements.............................  F-227
LONG BEACH ACQUISITION CORP.:
  Report of Independent Public Accountants..................  F-230
  Statement of Operations for the Period from April 1, 1997,
    through May 23, 1997....................................  F-231
  Statement of Stockholder's Equity for the Period from
    April 1, 1997, through May 23, 1997.....................  F-232
  Statement of Cash Flows for the Period from April 1, 1997,
    through May 23, 1997....................................  F-233
  Notes to Financial Statements.............................  F-234
CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
Consolidated Balance Sheets as of September 30, 1999
  (unaudited) and December 31, 1998.........................  F-238
Consolidated Statements of Operations for the nine months
  ended September 30, 1999 and 1998 (unaudited).............  F-239
Consolidated Statements of Cash Flows for the nine months
  ended September 30, 1999 and 1998 (unaudited).............  F-240
Notes to Consolidated Financial Statements..................  F-241

MARCUS CABLE HOLDINGS, LLC AND SUBSIDIARIES
Consolidated Statements of Operations for the Three Months
  Ended March 31, 1999......................................  F-250
Consolidated Statements of Cash Flows for the Three Months
  Ended March 31, 1999......................................  F-251
Notes to Condensed Consolidated Financial Statements
  (unaudited)...............................................  F-252
RENAISSANCE MEDIA GROUP LLC:
  Condensed Consolidated Statement of Operations for the
    Four Months Ended April 30, 1999 and Nine Months Ended
    September 30, 1998 (unaudited)..........................  F-255
  Condensed Consolidated Statement of Cash Flows for the
    Four Months Ended April 30, 1999 and Nine Months Ended
    September 30, 1998 (unaudited)..........................  F-256
  Notes to Condensed Consolidated Financial Statements
    (unaudited).............................................  F-257
HELICON PARTNERS I, L.P. AND AFFILIATES:
  Unaudited Condensed Combined Statements of Operations for
    the Period Ended July 30, 1999 and Nine Months Ended
    September 30, 1998......................................  F-260
  Unaudited Condensed Combined Statements of Changes in
    Partners' Deficit for the Period Ended July 30, 1999....  F-261
  Unaudited Condensed Combined Statements of Cash Flows for
    the Period Ended July 30, 1999 and Nine Months Ended
    September 30, 1998......................................  F-262
  Notes to Unaudited Condensed Combined Financial
    Statements..............................................  F-263
INTERMEDIA CABLE SYSTEMS (COMPRISED OF COMPONENTS OF
  INTERMEDIA PARTNERS AND INTERMEDIA CAPITAL PARTNERS IV,
  L.P.):
  Combined Balance Sheets as of September 30, 1999
    (unaudited) and December 31, 1998.......................  F-265
  Combined Statements of Operations for the Nine Months
    Ended September 30, 1999 and 1998 (unaudited)...........  F-266
  Combined Statement of Changes in Equity for the Nine
    Months Ended September 30, 1999 (unaudited) and for the
    Year Ended December 31, 1998............................  F-267
  Combined Statements of Cash Flows for the Nine Months
    Ended September 30, 1999 and 1998 (unaudited)...........  F-268
  Notes to Condensed Combined Financial Statements
    (unaudited).............................................  F-269
</TABLE>

 
                                       F-3

<PAGE>   233
 

<TABLE>
<CAPTION>
                                                              PAGE
                                                              -----
<S>                                                           <C>
RIFKIN CABLE INCOME PARTNERS L.P.:
  Balance Sheet as of September 13, 1999 and December 31,
    1998 (unaudited)........................................  F-275
  Statement of Operations for the Period Ended September 13,
    1999 and Nine Months Ended September 30, 1998
    (unaudited).............................................  F-276
  Statement of Partners' Equity for the Period Ended
    September 13, 1999 and Nine Months Ended September 30,
    1998 (unaudited)........................................  F-277
  Statement of Cash Flows for the Period (unaudited) Ended
    September 13, 1999 and September 30, 1998 (unaudited)...  F-278
  Notes to Financial Statements (unaudited).................  F-279
RIFKIN ACQUISITION PARTNERS, L.L.L.P.:
  Consolidated Balance Sheet as of September 13, 1999
    (unaudited) and December 31, 1998.......................  F-280
  Consolidated Statement of Operations for the Period Ended
    September 13, 1999 and the Period Ended September 30,
    1998 (unaudited)........................................  F-281
  Consolidated Statement of Partners' Capital (Deficit) for
    the Period Ended September 13, 1999 and the Period Ended
    September 30, 1998 (unaudited)..........................  F-282
  Consolidated Statement of Cash Flows for the Period Ended
    September 13, 1999 and the Period Ended September 30,
    1998 (unaudited)........................................  F-283
  Notes to Consolidated Financial Statements (unaudited)....  F-284
INDIANA CABLE ASSOCIATES, LTD.:
  Balance Sheet as of September 13, 1999 and December 31,
    1998 (unaudited)........................................  F-286
  Statement of Operations for the Period Ended September 13,
    1999 and Nine Months Ended September 30, 1998
    (unaudited).............................................  F-287
  Statement of Partners' Equity (Deficit) for the Period
    Ended September 13, 1999 and Nine Months Ended September
    30, 1998 (unaudited)....................................  F-288
  Statement of Cash Flows for the Period Ended September 13,
    1999 and Nine Months Ended September 30, 1998
    (unaudited).............................................  F-289
  Notes to Financial Statement (unaudited)..................  F-290
R/N SOUTH FLORIDA CABLE MANAGEMENT LIMITED PARTNERSHIP:
  Consolidated Balance Sheet as of September 13, 1999 and
    December 31, 1998 (unaudited)...........................  F-291
  Consolidated Statement of Operations for the Period Ended
    September 13, 1999 and Nine Months Ended September 30,
    1998 (unaudited)........................................  F-292
  Consolidated Statement of Equity (Deficit) for the Period
    Ended September 13, 1999 and Nine Months Ended September
    30, 1998 (unaudited)....................................  F-293
  Consolidated Statement of Cash Flows for the Period Ended
    September 13, 1999 and Nine Months Ended September 30,
    1998 (unaudited)........................................  F-294
  Notes to Consolidated Financial Statements (unaudited)....  F-295
AVALON CABLE LLC AND SUBSIDIARIES:
 
 Report of Independent Accountants.........................  F-296
  Consolidated Balance Sheet as of December 31, 1998 and
    1997....................................................  F-297
  Consolidated Statement of Operations for the year ended
    December 31, 1998 and for the period from September 4,
    1997 (inception) through December 31, 1997..............  F-298
  Consolidated Statement of Changes in Members' interest
    from September 4, 1997 (inception) through December 31,
    1998....................................................  F-299
  Consolidated Statement of Cash Flows for the year ended
    December 31, 1998 and for the period from September 4,
    1997 (inception) through December 31, 1997..............  F-300
  Notes to Consolidated Financial Statements................  F-301
  Consolidated Balance Sheet as of September 30, 1999
    (unaudited) and December 31, 1998.......................  F-315
  Consolidated Statement of Operations for the nine months
    ended September 30, 1999 and 1998 (unaudited)...........  F-316
  Consolidated Statement of Changes in Members' interest for
    the nine months ended September 30, 1999 (unaudited)....  F-317
  Consolidated Statement of Cash Flows for the nine months
    ended September 30, 1999 and 1998 (unaudited)...........  F-318
  Notes to Consolidated Financial Statements (unaudited)....  F-319
</TABLE>

 
                                       F-4

<PAGE>   234
 

<TABLE>
<CAPTION>
                                                              PAGE
                                                              -----
<S>                                                           <C>
AVALON CABLE OF MICHIGAN HOLDINGS, INC. AND SUBSIDIARIES
  Report of Independent Accountants.........................  F-324
  Consolidated Balance Sheet as of December 31, 1998 and
    1997....................................................  F-325
  Consolidated Statements of Operations for the year ended
    December 31, 1998 and for the period from September 4,
    1997 (inception) through December 31, 1997..............  F-326
  Consolidated Statement of Changes in Shareholders' Equity
    for the period from September 4, 1997 (inception)
    through December 31, 1998...............................  F-327
  Consolidated Statement of Cash Flows for the year ended
    December 31, 1998 and for the period from September 4,
    1997 (inception) through December 31, 1997..............  F-328
  Notes to Consolidated Financial Statements................  F-329
  Consolidated Balance Sheet as of September 30, 1999 and
    December 31, 1998 (unaudited)...........................  F-343
  Consolidated Statement of Operations for the nine months
    ended September 30, 1999 and 1998 (unaudited)...........  F-344
  Consolidated Statement of Changes in Shareholders' Equity
    for the nine months ended September 30, 1999
    (unaudited).............................................  F-345
  Consolidated Statement of Cash Flows for the nine months
    ended September 30, 1999 and 1998 (unaudited)...........  F-346
  Notes to Consolidated Financial Statements................  F-347
CABLE MICHIGAN, INC. AND SUBSIDIARIES
  Report of Independent Accountants.........................  F-352
  Consolidated Balance Sheets as of December 31, 1997 and
    November 5, 1998........................................  F-353
  Consolidated Statements of Operations for the years ended
    December 31, 1996, 1997 and for the period from January
    1, 1998 through November 5, 1998........................  F-354
  Consolidated Statements of Changes in Shareholders'
    Deficit for the years ended December 31, 1996, 1997 and
    for the period from January 1, 1998 through November 5,
    1998....................................................  F-355
  Consolidated Statement of Cash Flows for the years ended
    December 31, 1996, 1997 and for the period from January
    1, 1998 through November 5, 1998........................  F-356
  Notes to Consolidated Financial Statements................  F-357
AMRAC CLEAR VIEW, A LIMITED PARTNERSHIP
  Report of Independent Accountants.........................  F-372
  Balance Sheet as of May 28, 1998..........................  F-373
  Statement of Operations for the period from January 1,
    1998 through May 28, 1998...............................  F-374
  Statement of Changes in Partners' Equity (Deficit) for the
    period from January 1, 1998 through May 28, 1998........  F-375
  Statement of Cash Flows for the period from January 1,
    1998 through May 28, 1998...............................  F-376
  Notes to Financial Statements.............................  F-377
AMRAC CLEAR VIEW, A LIMITED PARTNERSHIP
  Independent Auditors' Report..............................  F-381
  Balance Sheets at December 31, 1996 and 1997..............  F-382
  Statements of Net Earnings for the years ended December
    31, 1995, 1996 and 1997.................................  F-383
  Statements of Changes in Partners' Equity (Deficit) for
    the years ended December 31, 1995, 1996 and 1997........  F-384
  Statements of Cash Flows for the years ended December 31,
    1995, 1996 and 1997.....................................  F-385
  Notes to Financial Statements.............................  F-386
PEGASUS CABLE TELEVISION, INC.
  Report of Independent Accountants.........................  F-390
  Combined Balance Sheets at December 31, 1996 and 1997 and
    June 30, 1998...........................................  F-391
  Combined Statements of Operations for the years ended
    December 31, 1995, 1996 and 1997 and the six months
    ended June 30, 1998.....................................  F-392
  Combined Statements of Changes in Stockholder's Deficit
    for the three years ended December 31, 1997 and the six
    months ended June 30, 1998..............................  F-393
  Combined Statements of Cash Flows for the years ended
    December 31, 1995, 1996 and 1997 and for the six months
    ended June 30, 1998.....................................  F-394
  Notes to Combined Financial Statements....................  F-395
</TABLE>

 
                                       F-5

<PAGE>   235
 

<TABLE>
<CAPTION>
                                                              PAGE
                                                              -----
<S>                                                           <C>
FALCON COMMUNICATIONS, L.P.
Report of Independent Auditors..............................  F-401
Consolidated Balance Sheets at December 31, 1997 and 1998...  F-402
Consolidated Statements of Operations for each of the three
  years in the period ended December 31, 1998...............  F-403
Consolidated Statements of Partners' Deficit for each of the
  three years in the period ended December 31, 1998.........  F-404
Consolidated Statements of Cash Flows for each of the three
  years in the period ended December 31, 1998...............  F-405
Notes to Consolidated Financial Statements..................  F-406
Condensed Consolidated Balance Sheets at December 31, 1998
  and September 30, 1999 (unaudited)........................  F-428
Condensed Consolidated Statements of Operations for the nine
  months ended September 30, 1998 and 1999 (unaudited)......  F-429
Condensed Consolidated Statements of Cash Flows for the nine
  months ended September 30, 1998 and 1999 (unaudited)......  F-430
Notes to Unaudited Condensed Consolidated Financial
  Statements................................................  F-431
TCI FALCON SYSTEMS
Independent Auditors' Report................................  F-433
Combined Balance Sheets at September 30, 1998 and December
  31, 1997..................................................  F-434
Combined Statements of Operations and Parent's Investment
  for the period from January 1, 1998 through September 30,
  1998 and for the years ended December 31, 1997 and 1996...  F-435
Combined Statements of Cash Flows for the period from
  January 1, 1998 through September 30, 1998 and for the
  years ended December 31, 1997 and 1996....................  F-436
Notes to Combined Financial Statements for the period from
  January 1, 1998 through September 30, 1998 and for the
  years ended December 31, 1997 and 1996....................  F-437
FANCH CABLE SYSTEM (comprised of components of TWFanch-one
  Co. and TWFanch-two Co.)
Report of Independent Auditors..............................  F-444
Combined Balance Sheets at December 31, 1998 and 1997.......  F-445
Combined Statements of Operations for the years ended
  December 31, 1998 and 1997................................  F-446
Combined Statements of Net Assets for the years ended
  December 31, 1998 and 1997................................  F-447
Combined Statements of Cash Flows for the years ended
  December 31, 1998 and 1997................................  F-448
Notes to Combined Financial Statements......................  F-449
Combined Balance Sheets as of September 30, 1999 (unaudited)
  and December 31, 1998.....................................  F-454
Combined Statements of Operations for the nine months ended
  September 30, 1999 and 1998
  (unaudited)...............................................  F-455
Combined Statements of Net Assets for the nine months ended
  September 30, 1999 and 1998
  (unaudited)...............................................  F-456
Combined Statements of Cash Flows for the nine months ended
  September 30, 1999 and 1998
  (unaudited)...............................................  F-457
Notes to Combined Financial Statements at June 30, 1999
  (unaudited)...............................................  F-458
BRESNAN COMMUNICATIONS GROUP LLC
Consolidated Balance Sheets at December 31, 1998 and
  September 30, 1999 (unaudited)............................  F-461
Consolidated Statements of Operations and Member's Equity
  (Deficit) for the nine months ended September 30, 1998 and
  1999 (unaudited)..........................................  F-462
Consolidated Statements of Cash Flows for the nine months
  ended September 30, 1998 and 1999 (unaudited).............  F-463
Notes to Consolidated Financial Statements at September 30,
  1999 (unaudited)..........................................  F-464
BRESNAN COMMUNICATIONS GROUP SYSTEMS
Independent Auditors' Report................................  F-470
Combined Balance Sheets at December 31, 1997 and 1998.......  F-471
Combined Statements of Operations and Parents' Investment
  for the years ended December 31, 1996, 1997 and 1998......  F-472
Combined Statements of Cash Flows for the years ended
  December 31, 1996, 1997 and 1998..........................  F-473
Notes to Combined Financial Statements at December 31, 1996,

  1997 and 1998.............................................  F-474
</TABLE>

 
                                       F-6

<PAGE>   236
 

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
 
To Charter Communications Holdings, LLC:
 
     We have audited the accompanying consolidated balance sheet of Charter
Communications Holdings, LLC and subsidiaries as of December 31, 1998, and the
related consolidated statements of operations and cash flows for the period from
December 24, 1998, through December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
 
     We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
 
     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Charter Communications
Holdings, LLC and subsidiaries as of December 31, 1998, and the results of their
operations and their cash flows for the period from December 24, 1998, through
December 31, 1998, in conformity with generally accepted accounting principles.
 
/s/ ARTHUR ANDERSEN LLP
 
St. Louis, Missouri,
  February 5, 1999 (except with respect to the

  matters discussed in Notes 1 and 13,
  as to which the date is April 19, 1999)
 
                                       F-7

<PAGE>   237
 
             CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
 
                           CONSOLIDATED BALANCE SHEET
                             (DOLLARS IN THOUSANDS)
 

<TABLE>
<CAPTION>
                                                              DECEMBER 31, 1998
                                                              -----------------
<S>                                                           <C>
ASSETS
CURRENT ASSETS:
  Cash and cash equivalents.................................     $    9,573
  Accounts receivable, net of allowance for doubtful
     accounts of $1,728.....................................         15,108
  Prepaid expenses and other................................          2,519
                                                                 ----------
     Total current assets...................................         27,200
                                                                 ----------
INVESTMENT IN CABLE TELEVISION PROPERTIES:
  Property, plant and equipment.............................        716,242
  Franchises, net of accumulated amortization of $5,253.....      3,590,054
                                                                 ----------
                                                                  4,306,296
                                                                 ----------
OTHER ASSETS................................................          2,031
                                                                 ----------
                                                                 $4,335,527
                                                                 ==========
LIABILITIES AND MEMBERS' EQUITY
CURRENT LIABILITIES:
  Current maturities of long-term debt......................     $   10,450
  Accounts payable and accrued expenses.....................        127,586
  Payables to manager of cable television systems -- related
     party..................................................          4,334
                                                                 ----------
     Total current liabilities..............................        142,370
                                                                 ----------
LONG-TERM DEBT..............................................      1,991,756
                                                                 ----------
DEFERRED MANAGEMENT FEES -- RELATED PARTY...................         15,561
                                                                 ----------
OTHER LONG-TERM LIABILITIES.................................         38,461
                                                                 ----------
MEMBERS' EQUITY -- 100 UNITS ISSUED AND OUTSTANDING.........      2,147,379
                                                                 ----------
                                                                 $4,335,527
                                                                 ==========
</TABLE>

 
The accompanying notes are an integral part of this consolidated statement.
                                       F-8

<PAGE>   238
 
             CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
 
                      CONSOLIDATED STATEMENT OF OPERATIONS
                             (DOLLARS IN THOUSANDS)
 

<TABLE>
<CAPTION>
                                                               PERIOD FROM
                                                              DECEMBER 24,
                                                              1998, THROUGH
                                                              DECEMBER 31,
                                                                  1998
                                                              -------------
<S>                                                           <C>
REVENUES....................................................     $13,713
                                                                 -------
OPERATING EXPENSES:
  Operating costs...........................................       6,168
  General and administrative................................         966
  Depreciation and amortization.............................       8,318
  Stock option compensation expense.........................         845
  Corporate expense charges -- related party................         473
                                                                 -------
                                                                  16,770
                                                                 -------
     Loss from operations...................................      (3,057)
                                                                 -------
OTHER INCOME (EXPENSE):
  Interest income...........................................         133
  Interest expense..........................................      (2,353)
                                                                 -------
                                                                  (2,220)
                                                                 -------
     Net loss...............................................     $(5,277)
                                                                 =======
</TABLE>

 
The accompanying notes are an integral part of this consolidated statement.
                                       F-9

<PAGE>   239
 
             CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
 
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                             (DOLLARS IN THOUSANDS)
 

<TABLE>
<CAPTION>
                                                               PERIOD FROM
                                                               DECEMBER 24,
                                                              1998, THROUGH
                                                               DECEMBER 31,
                                                                   1998
                                                              --------------
<S>                                                           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss....................................................    $   (5,277)
  Adjustments to reconcile net loss to net cash provided by
     operating activities --
     Depreciation and amortization..........................         8,318
     Stock option compensation expense......................           845
     Changes in assets and liabilities --
       Receivables, net.....................................        (8,753)
       Prepaid expenses and other...........................          (211)
       Accounts payable and accrued expenses................        10,227
       Payables to manager of cable television systems......           473
       Other operating activities...........................         2,022
                                                                ----------
          Net cash provided by operating activities.........         7,644
                                                                ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of property, plant and equipment................       (13,672)
                                                                ----------
          Net cash used in investing activities.............       (13,672)
                                                                ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Borrowings of long-term debt..............................        14,200
                                                                ----------
          Net cash provided by financing activities.........        14,200
                                                                ----------
NET INCREASE IN CASH AND CASH EQUIVALENTS...................         8,172
CASH AND CASH EQUIVALENTS, beginning of period..............         1,401
                                                                ----------
CASH AND CASH EQUIVALENTS, end of period....................    $    9,573
                                                                ==========
CASH PAID FOR INTEREST......................................    $    5,538
                                                                ==========
NONCASH TRANSACTION -- Transfer of cable television
  operating subsidiaries from the parent company (see Note
  1)........................................................    $2,151,811
                                                                ==========
</TABLE>

 
The accompanying notes are an integral part of this consolidated statement.
                                      F-10

<PAGE>   240
 
             CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             (DOLLARS IN THOUSANDS)
 
1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
ORGANIZATION AND BASIS OF PRESENTATION
 
     Charter Communications Holdings, LLC (Charter Holdings), a Delaware limited
liability company, was formed in February 1999 as a wholly owned subsidiary of
Charter Investment, Inc. (Charter), formerly Charter Communications, Inc.
Charter, through its wholly owned cable television operating subsidiary, Charter
Communications Properties, LLC (CCP), commenced operations with the acquisition
of a cable television system on September 30, 1995.
 
     Effective December 23, 1998, through a series of transactions, Paul G.
Allen acquired approximately 94% of Charter for an aggregate purchase price of
$211 million, excluding $214 million in debt assumed (the "Paul Allen
Transaction"). In conjunction with the Paul Allen Transaction, Charter acquired
100% of the interests it did not already own in CharterComm Holdings, LLC
(CharterComm Holdings) and CCA Group (comprised of CCA Holdings Corp., CCT
Holdings Corp. and Charter Communications Long Beach, Inc.), all cable
television operating companies, for $2.0 billion, excluding $1.8 billion in debt
assumed from unrelated third parties for fair value. Charter previously managed
and owned minority interests in these companies. These acquisitions were
accounted for using the purchase method of accounting, and accordingly, results
of operations of CharterComm Holdings and CCA Group are included in the
financial statements from the date of acquisition. In February 1999, Charter
transferred all of its cable television operating subsidiaries to a wholly owned
subsidiary of Charter Holdings, Charter Communications Operating, LLC (Charter
Operating). Charter Holdings is a wholly owned subsidiary of Charter
Communications Holding Company (Charter Holdco). This transfer was accounted for
as a reorganization of entities under common control similar to a pooling of
interests.
 
     As a result of the change in ownership of CCP, CharterComm Holdings and CCA
Group, Charter Holdings has applied push-down accounting in the preparation of
the consolidated financial statements. Accordingly, Charter Holdings increased
its members' equity by $2.2 billion to reflect the amounts paid by Paul G. Allen
and Charter. The purchase price was allocated to assets acquired and liabilities
assumed based on their relative fair values, including amounts assigned to
franchises of $3.6 billion. The allocation of the purchase price is based, in
part, on preliminary information which is subject to adjustment upon obtaining
complete valuation information of intangible assets. The valuation information
is expected to be finalized in the fourth quarter of 1999. Management believes
that finalization of the purchase price will not have a material impact on the
results of operations or financial position of Charter Holdings.
 
     On April 23, 1998, Paul G. Allen and a company controlled by Paul G. Allen,
(the "Paul G. Allen Companies") purchased substantially all of the outstanding
partnership interests in Marcus Cable Company L.L.C. (Marcus Cable) for $1.4
billion, excluding $1.8 billion in assumed liabilities. The owner of the
remaining partnership interest retained voting control of Marcus Cable. In
February 1999, Marcus Cable Holdings, LLC (Marcus Holdings) was formed and Mr.
Allen's interests in Marcus Cable were transferred to Marcus Holdings on March
15, 1999. On March 31, 1999, Paul G. Allen purchased the remaining partnership
interests in Marcus Cable, including voting control. On April 7, 1999, Marcus
Holdings was merged into Charter Holdings and Marcus Cable was transferred to
Charter Holdings. For financial reporting purposes, the merger was accounted for
as an acquisition of Marcus Cable effective March 31, 1999, the date Paul G.
Allen obtained voting control of Marcus Cable. Accordingly, the results of
operations of Marcus Cable have not been included in the financial statements
for the period ended December 31, 1998.
 
                                      F-11

<PAGE>   241
             CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The consolidated financial statements of Charter Holdings include the
accounts of Charter Operating and CCP and the accounts of CharterComm Holdings
and CCA Group and their subsidiaries since December 23, 1998 (date acquired by
Charter) and are collectively referred to as the "Company" herein. All
subsidiaries are wholly owned. All material intercompany transactions and
balances have been eliminated. The Company derives its primary source of
revenues by providing various levels of cable television programming and
services to residential and business customers. As of December 31, 1998, the
Company provided cable television services to customers in 20 states in the U.S.
 
     The consolidated financial statements of Charter Holdings for periods prior
to December 24, 1998, are not presented herein since, as a result of the Paul
Allen Transaction and the application of push down accounting, the financial
information as of December 31, 1998, and for the period from December 24, 1998,
through December 31, 1998, is presented on a different cost basis than the
financial information as of December 31, 1997, and for the periods prior to
December 24, 1998. Such information is not comparable.
 
CASH EQUIVALENTS
 
     The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents. At December 31, 1998,
cash equivalents consist primarily of repurchase agreements. These investments
are carried at cost that approximates market value.
 
PROPERTY, PLANT AND EQUIPMENT
 
     Property, plant and equipment is recorded at cost, including all direct and
certain indirect costs associated with the construction of cable television
transmission and distribution facilities, and the cost of new customer
installations. The costs of disconnecting a customer are charged to expense in
the period incurred. Expenditures for repairs and maintenance are charged to
expense as incurred, and equipment replacement and betterments are capitalized.
 
     Depreciation is provided on the straight-line basis over the estimated
useful lives of the related assets as follows:
 

<TABLE>
<S>                                                             <C>
Cable distribution systems..................................    3-15 years
Buildings and leasehold improvements........................    5-15 years
Vehicles and equipment......................................     3-5 years
</TABLE>

 
FRANCHISES
 
     Costs incurred in obtaining and renewing cable franchises are deferred and
amortized over the lives of the franchises. Costs relating to unsuccessful
franchise applications are charged to expense when it is determined that the
efforts to obtain the franchise will not be successful. Franchise rights
acquired through the purchase of cable television systems represent management's
estimate of fair value and are generally amortized using the straight-line
method over a period of 15 years. The period of 15 years is management's best
estimate of the useful lives of the franchises and assumes substantially all of
those franchises that expire during the period will be renewed by the Company.
 
IMPAIRMENT OF ASSETS
 
     If facts and circumstances suggest that a long-lived asset may be impaired,
the carrying value is reviewed. If a review indicates that the carrying value of
such asset is not recoverable
 
                                      F-12

<PAGE>   242
             CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
based on projected undiscounted cash flows related to the asset over its
remaining life, the carrying value of such asset is reduced to its estimated
fair value.
 
REVENUES
 
     Cable television revenues from basic and premium services are recognized
when the related services are provided.
 
     Installation revenues are recognized to the extent of direct selling costs
incurred. The remainder, if any, is deferred and amortized to income over the
estimated average period that customers are expected to remain connected to the
cable television system. As of December 31, 1998, no installation revenue has
been deferred, as direct selling costs have exceeded installation revenue.
 
     Fees collected from programmers to guarantee carriage are deferred and
amortized to income over the life of the contracts. Local governmental
authorities impose franchise fees on the Company ranging up to a federally
mandated maximum of 5.0% of gross revenues. On a monthly basis, such fees are
collected from the Company's customers and are periodically remitted to local
franchises. Franchise fees collected and paid are reported as revenues.
 
INTEREST RATE HEDGE AGREEMENTS
 
     The Company manages fluctuations in interest rates by using interest rate
hedge agreements, as required by certain debt agreements. Interest rate swaps,
caps and collars are accounted for as hedges of debt obligations, and
accordingly, the net settlement amounts are recorded as adjustments to interest
expense in the period incurred. Premiums paid for interest rate caps are
deferred, included in other assets, and are amortized over the original term of
the interest rate agreement as an adjustment to interest expense.
 
     The Company's interest rate swap agreements require the Company to pay a
fixed rate and receive a floating rate thereby creating fixed rate debt.
Interest rate caps and collars are entered into by the Company to reduce the
impact of rising interest rates on floating rate debt.
 
     The Company's participation in interest rate hedging transactions involves
instruments that have a close correlation with its debt, thereby managing its
risk. Interest rate hedge agreements have been designed for hedging purposes and
are not held or issued for speculative purposes.
 
INCOME TAXES
 
     Income taxes are the responsibility of the individual members or partners
and are not provided for in the accompanying consolidated financial statements.
In addition, certain subsidiaries are corporations subject to income taxes but
have no operations and, therefore, no material income tax liabilities or assets.
 
SEGMENTS
 
     In 1998, the Company adopted SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information." Segments have been identified based upon
management responsibility. The Company operates in one segment, cable services.
 
USE OF ESTIMATES
 
     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported
                                      F-13

<PAGE>   243
             CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
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 those estimates.
 
2.  PRO FORMA FINANCIAL INFORMATION (UNAUDITED):
 
     In addition to the acquisitions by Charter of CharterComm Holdings and CCA
Group, the Company acquired cable television systems for an aggregate purchase
price, net of cash acquired, of $291,800 and $342,100 in 1998 and 1997,
respectively, all prior to December 24, 1998. The Company also refinanced
substantially all of its long-term debt in March 1999 (see Note 13).
 
     Unaudited pro forma operating results as though the acquisitions and
refinancing discussed above, including the Paul Allen Transaction, had occurred
on January 1, 1997, with adjustments to give effect to amortization of
franchises, interest expense and certain other adjustments are as follows:
 

<TABLE>
<CAPTION>
                                                                   YEAR ENDED
                                                                  DECEMBER 31
                                                             ----------------------
                                                               1998         1997
                                                             ---------    ---------
<S>                                                          <C>          <C>
Revenues...................................................  $ 601,953    $ 550,259
Loss from operations.......................................    (90,346)    (129,009)
Net loss...................................................   (294,598)    (329,323)
</TABLE>

 
     The unaudited pro forma financial information has been presented for
comparative purposes and does not purport to be indicative of the results of
operations or financial position of the Company had these transactions been
completed as of the assumed date or which may be obtained in the future.
 
3.  MEMBERS' EQUITY:
 
     For the period from December 24, 1998, through December 31, 1998, members'
equity consisted of the following:
 

<TABLE>
<S>                                                           <C>
Balance, December 24, 1998..................................  $2,151,811
Net loss....................................................      (5,277)
Stock option compensation...................................         845
                                                              ----------
Balance, December 31, 1998..................................  $2,147,379
                                                              ==========
</TABLE>

 
                                      F-14

<PAGE>   244
             CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
4.  PROPERTY, PLANT AND EQUIPMENT:
 
     Property, plant and equipment consists of the following at December 31,
1998:
 

<TABLE>
<S>                                                           <C>
Cable distribution systems..................................  $661,749
Land, buildings and leasehold improvements..................    26,670
Vehicles and equipment......................................    30,590
                                                              --------
                                                               719,009
Less -- Accumulated depreciation............................    (2,767)
                                                              --------
                                                              $716,242
                                                              ========
</TABLE>

 
     For the period from December 24, 1998, through December 31, 1998,
depreciation expense was $2,767.
 
5.  ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
 
     Accounts payable and accrued expenses consist of the following at December
31, 1998:
 

<TABLE>
<S>                                                           <C>
Accrued interest............................................  $ 30,809
Franchise fees..............................................    12,534
Programming costs...........................................    11,856
Capital expenditures........................................    15,560
Accrued income taxes........................................    15,205
Accounts payable............................................     7,439
Other accrued liabilities...................................    34,183
                                                              --------
                                                              $127,586
                                                              ========
</TABLE>

 
6.  LONG-TERM DEBT:
 
     Long-term debt consists of the following at December 31, 1998:
 

<TABLE>
<S>                                                           <C>
Credit Agreements (including CCP, CCA Group and CharterComm
Holdings)...................................................  $1,726,500
Senior Secured Discount Debentures..........................     109,152
11 1/4% Senior Notes........................................     125,000
Current maturities..........................................     (10,450)
Unamortized net premium.....................................      41,554
                                                              ----------
                                                              $1,991,756
                                                              ==========
</TABLE>

 
CCP CREDIT AGREEMENT
 
     CCP maintains a credit agreement (the "CCP Credit Agreement"), which
provides for two term loan facilities, one with the principal amount of $60,000
that matures on June 30, 2006, and the other with the principal amount of
$80,000 that matures on June 30, 2007. The CCP Credit Agreement also provides
for a $90,000 revolving credit facility with a maturity date of June 30, 2006.
Amounts under the CCP Credit Agreement bear interest at the LIBOR Rate or Base
Rate,
 
                                      F-15

<PAGE>   245
             CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
as defined, plus a margin up to 2.88%. The variable interest rates ranged from
7.44% to 8.19% at December 31, 1998.
 
CC-I, CC-II COMBINED CREDIT AGREEMENT
 
     Charter Communications, LLC and Charter Communications II, LLC,
subsidiaries of CharterComm Holdings, maintains a combined credit agreement (the
"Combined Credit Agreement"), which provides for two term loan facilities, one
with the principal amount of $200,000 that matures on June 30, 2007, and the
other with the principal amount of $150,000 that matures on December 31, 2007.
The Combined Credit Agreement also provides for a $290,000 revolving credit
facility, with a maturity date of June 30, 2007. Amounts under the Combined
Credit Agreement bear interest at the LIBOR Rate or Base Rate, as defined, plus
a margin up to 2.0%. The variable interest rates ranged from 6.69% to 7.31% at
December 31, 1998. A quarterly commitment fee of between 0.25% and 0.375% per
annum is payable on the unborrowed balance of the revolving credit facility.
 
CHARTERCOMM HOLDINGS -- SENIOR SECURED DISCOUNT DEBENTURES
 
     CharterComm Holdings issued $146,820 of Senior Secured Discount Debentures
(the "Debentures") for proceeds of $75,000. The Debentures are effectively
subordinated to the claims and creditors of CharterComm Holdings' subsidiaries,
including the lenders under the Combined Credit Agreement. The Debentures are
redeemable at the Company's option at amounts decreasing from 107% to 100% of
principal, plus accrued and unpaid interest to the redemption date, beginning on
March 15, 2001. The issuer is required to make an offer to purchase all of the
Debentures, at a purchase price equal to 101% of the principal amount, together
with accrued and unpaid interest, upon a Change in Control, as defined in the
Debentures Indenture. No interest is payable on the Debentures prior to March
15, 2001. Thereafter, interest on the Debentures is payable semiannually in
arrears beginning September 15, 2001, until maturity on March 15, 2007.
 
CHARTERCOMM HOLDINGS -- 11 1/4% SENIOR NOTES
 
     CharterComm Holdings issued $125,000 aggregate principal amount of 11 1/4%
Senior Notes (the "11 1/4% Notes"). The Notes are effectively subordinated to
the claims of creditors of CharterComm Holdings' subsidiaries, including the
lenders under the Combined Credit Agreements. The 11 1/4% Notes are redeemable
at the Company's option at amounts decreasing from 106% to 100% of principal,
plus accrued and unpaid interest to the date of redemption, beginning on March
15, 2001. The issuer is required to make an offer to purchase all of the 11 1/4%
Notes, at a purchase price equal to 101% of the principal amount, together with
accrued and unpaid interest, upon a Change in Control, as defined in the 11 1/4%
Notes indenture. Interest is payable semiannually on March 15 and September 15
until maturity on March 15, 2006.
 
     As of December 24, 1998, the Debentures and 11 1/4% Notes were recorded at
their estimated fair values resulting in an increase in the carrying values of
the debt and an unamortized net premium as of December 31, 1998. The premium
will be amortized to interest expense over the estimated remaining lives of the
debt using the interest method. As of December 31, 1998, the effective interest
rates on the Debentures and 11 1/4% Notes were 10.7% and 9.6%, respectively.
 
CCE-I CREDIT AGREEMENT
 
     Charter Communications Entertainment I LLC, a subsidiary of CCA Group,
maintains a credit agreement (the "CCE-I Credit Agreement"), which provides for
a $280,000 term loan that
                                      F-16

<PAGE>   246
             CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
matures on September 30, 2006, and $85,000 fund loan that matures on March 31,
2007, and a $175,000 revolving credit facility with a maturity date of September
30, 2006. Amounts under the CCE-I Credit Agreement bear interest at either the
LIBOR Rate or Base Rate, as defined, plus a margin up to 2.75%. The variable
interest rates ranged from 6.88% to 8.06% at December 31, 1998. A quarterly
commitment fee of between 0.375% and 0.5% per annum is payable on the unborrowed
balance of the revolving credit facility.
 
CCE-II COMBINED CREDIT AGREEMENT
 
     Charter Communications Entertainment II, LLC and Long Beach LLC,
subsidiaries of CCA Group, maintain a credit agreement (the "CCE-II Combined
Credit Agreement"), which provides for two term loan facilities, one with the
principal amount of $100,000 that matures on March 31, 2005, and the other with
the principal amount of $90,000 that matures on March 31, 2006. The CCE-II
Combined Credit Agreement also provides for a $185,000 revolving credit
facility, with a maturity date of March 31, 2005. Amounts under the CCE-II
Combined Credit Agreement bear interest at either the LIBOR Rate or Base Rate,
as defined, plus a margin up to 2.5%. The variable rates ranged from 6.56% to
7.59% at December 31, 1998. A quarterly commitment fee of between 0.25% and
0.375% per annum is payable on the unborrowed balance of the revolving credit
facility.
 
CCE CREDIT AGREEMENT
 
     Charter Communications Entertainment, LLC, a subsidiary of CCA Group,
maintains a credit agreement (the "CCE Credit Agreement") which provides for a
term loan facility with the principal amount of $130,000 that matures on
September 30, 2007. Amounts under the CCE Credit Agreement bear interest at the
LIBOR Rate or Base Rate, as defined, plus a margin up to 3.25%. The variable
interest rate at December 31, 1998, was 8.62%.
 
CCE-II HOLDINGS CREDIT AGREEMENT
 
     CCE-II Holdings, LLC, a subsidiary of CCA Group, entered into a credit
agreement (the "CCE-II Holdings Credit Agreement"), which provides for a term
loan facility with the principal amount of $95,000 that matures on September 30,
2006. Amounts under the CCE-II Holdings Credit Agreement bear interest at either
the LIBOR Rate or Base Rate, as defined, plus a margin up to 3.25%. The variable
rate at December 31, 1998, was 8.56%.
 
     Based upon outstanding indebtedness at December 31, 1998, and the
amortization of term and fund loans, and scheduled reductions in available
borrowings of the revolving credit facilities, aggregate future principal
payments on the total borrowings under all debt agreements at December 31, 1998,
are as follows:
 

<TABLE>
<CAPTION>
YEAR                                                            AMOUNT
----                                                          ----------
<S>                                                           <C>
1999........................................................  $   10,450
2000........................................................      21,495
2001........................................................      42,700
2002........................................................     113,588
2003........................................................     157,250
Thereafter..................................................   1,652,837
                                                              ----------
                                                              $1,998,320
                                                              ==========
</TABLE>

 
                                      F-17

<PAGE>   247
             CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
7.  FAIR VALUE OF FINANCIAL INSTRUMENTS:
 
     A summary of debt and the related interest rate hedge agreements at
December 31, 1998, is as follows:
 

<TABLE>
<CAPTION>
                                                      CARRYING      NOTIONAL        FAIR
DEBT                                                   VALUE         AMOUNT        VALUE
----                                                 ----------    ----------    ----------
<S>                                                  <C>           <C>           <C>
Credit Agreements (including CCP, CCA Group and
CharterComm Holdings)..............................  $1,726,500    $       --    $1,726,500
Senior Secured Discount Debentures.................     138,102            --       138,102
11 1/4% Senior Notes...............................     137,604            --       137,604
INTEREST RATE HEDGE AGREEMENTS
Swaps..............................................     (23,216)    1,105,000       (23,216)
Caps...............................................          --        15,000            --
Collars............................................      (4,174)      310,000        (4,174)
</TABLE>

 
     As the long-term debt under the credit agreements bears interest at current
market rates, their carrying amount approximates market value at December 31,
1998. The fair values of the 11 1/4% Notes and the Debentures are based on
quoted market prices.
 
     The weighted average interest pay rate for the Company's interest rate swap
agreements was 7.66% at December 31, 1998. The weighted average interest rate
for the Company's interest rate cap agreements was 8.55% at December 31, 1998.
The weighted average interest rates for the Company's interest rate collar
agreements were 8.61% and 7.31% for the cap and floor components, respectively,
at December 31, 1998.
 
     The notional amounts of interest rate hedge agreements do not represent
amounts exchanged by the parties and, thus, are not a measure of the Company's
exposure through its use of interest rate hedge agreements. The amounts
exchanged are determined by reference to the notional amount and the other terms
of the contracts.
 
     The fair value of interest rate hedge agreements generally reflects the
estimated amounts that the Company would receive or pay (excluding accrued
interest) to terminate the contracts on the reporting date, thereby taking into
account the current unrealized gains or losses of open contracts. Dealer
quotations are available for the Company's interest rate hedge agreements.
 
     Management believes that the sellers of the interest rate hedge agreements
will be able to meet their obligations under the agreements. In addition, some
of the interest rate hedge agreements are with certain of the participating
banks under the Company's credit facilities, thereby reducing the exposure to
credit loss. The Company has policies regarding the financial stability and
credit standing of major counterparties. Nonperformance by the counterparties is
not anticipated nor would it have a material adverse effect on the Company's
consolidated financial position or results of operations.
 
8.  RELATED-PARTY TRANSACTIONS:
 
     Charter provides management services to the Company including centralized
customer billing services, data processing and related support, benefits
administration and coordination of insurance coverage and self-insurance
programs for medical, dental and workers' compensation claims. Certain costs for
services are billed and charged directly to the Company's operating subsidiaries
and are included in operating costs. These billings are determined based on the
number of basic customers. Such costs totaled $128 for the period from December
24, 1998,
 
                                      F-18

<PAGE>   248
             CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
through December 31, 1998. All other costs incurred by Charter on behalf of the
Company are recorded as expenses in the accompanying consolidated financial
statements and are included in corporate expense charges -- related party.
Management believes that costs incurred by Charter on the Company's behalf and
included in the accompanying financial statements are not materially different
than costs the Company would have incurred as a stand alone entity.
 
     Charter utilizes a combination of excess insurance coverage and
self-insurance programs for its medical, dental and workers' compensation
claims. Charges are made to the Company as determined by independent actuaries
at the present value of the actuarially computed present and future liabilities
for such benefits. Medical coverage provides for $2,435 aggregate stop loss
protection and a loss limitation of $100 per person per year. Workers'
compensation coverage provides for $800 aggregate stop loss protection and a
loss limitation of $150 per person per year.
 
     The Company is charged a management fee based on percentages of revenues or
a flat fee plus additional fees based on percentages of operating cash flows, as
stipulated in the management agreements between Charter and the operating
subsidiaries. To the extent management fees charged to the Company are greater
(less) than the corporate expenses incurred by Charter, the Company will record
distributions to (capital contributions from) Charter. For the period from
December 24, 1998, through December 31, 1998, the management fee charged to the
Company approximated the corporate expenses incurred by Charter on behalf of the
Company. As of December 31, 1998, management fees currently payable of $473 are
included in payables to manager of cable television systems-related party.
Beginning in 1999, the management fee will be based on 3.5% of revenues as
permitted by the new debt agreements of the Company (see Note 13).
 
     Charter, Paul G. Allen and certain affiliates of Mr. Allen own equity
interests or warrants to purchase equity interests in various entities which
provide services or programming to the Company, including High Speed Access
Corp. (High Speed Access), WorldGate Communications, Inc. (WorldGate), Wink
Communications, Inc. (Wink), ZDTV, USA Networks, Inc. (USA Networks) and Oxygen
Media Inc. (Oxygen Media). In addition, certain officers or directors of the
Company also serve as directors of High Speed Access and USA Networks. The
Company and its affiliates do not hold controlling interests in any of these
companies.
 
     Certain of the Company's cable television subscribers receive cable
modem-based internet access through High Speed Access and TV-based internet
access through WorldGate. For the period from December 24, 1998, through
December 31, 1998, revenues attributable to these services were less than 1% of
total revenues.
 
     The Company receives or will receive programming and certain interactive
features embedded into the programming for broadcast via its cable television
systems from Wink, ZDTV, USA Networks and Oxygen Media. The Company pays a fee
for the programming service generally based on the number of subscribers
receiving the service. Such fees for the period from December 24, 1998, through
December 31, 1998, were less than 1% of total operating costs. In addition, the
Company receives commissions from USA Networks for home shopping sales generated
by its customers. Such revenues for the period from December 24, 1998, through
December 31, 1998, were less than 1% of total revenues.
 
                                      F-19

<PAGE>   249
             CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
9.  COMMITMENTS AND CONTINGENCIES:
 
LEASES
 
     The Company leases certain facilities and equipment under noncancelable
operating leases. Leases and rental costs charged to expense for the period from
December 24, 1998, through December 31, 1998, were $70. Future minimum lease
payments are as follows:
 

<TABLE>
<S>                                                           <C>
1999........................................................  $2,843
2000........................................................   2,034
2001........................................................   1,601
2002........................................................     626
2003........................................................     366
Thereafter..................................................   1,698
</TABLE>

 
     The Company also rents utility poles in its operations. Generally, pole
rentals are cancelable on short notice, but the Company anticipates that such
rentals will recur. Rent expense incurred for pole rental attachments for the
period from December 24, 1998, through December 31, 1998, was $137.
 
LITIGATION
 
     The Company is a party to lawsuits that arose in the ordinary course of
conducting its business. In the opinion of management, after consulting with
legal counsel, the outcome of these lawsuits will not have a material adverse
effect on the Company's consolidated financial position or results of
operations.
 
REGULATION IN THE CABLE TELEVISION INDUSTRY
 
     The cable television industry is subject to extensive regulation at the
federal, local and, in some instances, state levels. 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 together with
the 1984 Cable Act, the "Cable Acts"), and the Telecommunications Act of 1996
(the "1996 Telecom Act"), establish a national policy to guide the development
and regulation of cable television systems. The Federal Communications
Commission (FCC) has principal responsibility for implementing the policies of
the Cable Acts. Many aspects of such regulation are currently the subject of
judicial proceedings and administrative or legislative proposals. Legislation
and regulations continue to change, and the Company cannot predict the impact of
future developments on the cable television industry.
 
     The 1992 Cable Act and the FCC's rules implementing that act generally have
increased the administrative and operational expenses of cable television
systems and have resulted in additional regulatory oversight by the FCC and
local or state franchise authorities. The Cable Acts and the corresponding FCC
regulations have established rate regulations.
 
     The 1992 Cable Act permits certified local franchising authorities to order
refunds of basic service tier rates paid in the previous twelve-month period
determined to be in excess of the maximum permitted rates. As of December 31,
1998, the amount refunded by the Company has been insignificant. The Company may
be required to refund additional amounts in the future.
 
     The Company believes that it has complied in all material respects with the
provisions of the 1992 Cable Act, including the rate setting provisions
promulgated by the FCC. However, in
 
                                      F-20

<PAGE>   250
             CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
jurisdictions that have chosen not to certify, refunds covering the previous
twelve-month period may be ordered upon certification if the Company is unable
to justify its basic rates. The Company is unable to estimate at this time the
amount of refunds, if any, that may be payable by the Company in the event
certain of its rates are successfully challenged by franchising authorities or
found to be unreasonable by the FCC. The Company does not believe that the
amount of any such refunds would have a material adverse effect on the
consolidated financial position or results of operations of the Company.
 
     The 1996 Telecom Act, among other things, immediately deregulated the rates
for certain small cable operators and in certain limited circumstances rates on
the basic service tier, and as of March 31, 1999, deregulates rates on the cable
programming service tier (CPST). The FCC is currently developing permanent
regulations to implement the rate deregulation provisions of the 1996 Telecom
Act. The Company cannot predict the ultimate effect of the 1996 Telecom Act on
the Company's consolidated financial position or results of operations.
 
     The FCC may further restrict the ability of cable television operators to
implement rate increases or the United States Congress may enact legislation
that could delay or suspend the scheduled March 1999 termination of CPST rate
regulation. This continued rate regulation, if adopted, could limit the rates
charged by the Company.
 
     A number of states subject cable television systems to the jurisdiction of
centralized state governmental agencies, some of which impose regulation of a
character similar to that of a public utility. State governmental agencies are
required to follow FCC rules when prescribing rate regulation, and thus, state
regulation of cable television rates is not allowed to be more restrictive than
the federal or local regulation. The Company is subject to state regulation in
Connecticut.
 
10.  EMPLOYEE BENEFIT PLANS:
 
     The Company's employees may participate in 401(k) plans (the "401(k)
Plans"). Employees that qualify for participation can contribute up to 15% of
their salary, on a before tax basis, subject to a maximum contribution limit as
determined by the Internal Revenue Service. The Company made contributions to
the 401(k) Plans totaling $20 for the period from December 24, 1998, through
December 31, 1998.
 
11.  ACCOUNTING STANDARD NOT YET IMPLEMENTED:
 
     In June 1998, the Financial Accounting Standards Board adopted SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No.
133 establishes accounting and reporting standards requiring that every
derivative instrument (including certain derivative instruments embedded in
other contracts) be recorded in the balance sheet as either an asset or
liability measured at its fair value and that changes in the derivative's fair
value be recognized currently in earnings unless specific hedge accounting
criteria are met. Special accounting for qualifying hedges allows a derivative's
gains and losses to offset related results on the hedged item in the income
statement, and requires that a company must formally document, designate and
assess the effectiveness of transactions that receive hedge accounting. SFAS No.
133 is effective for fiscal years beginning after June 15, 1999. The Company has
not yet quantified the impacts of adopting SFAS No. 133 on its consolidated
financial statements nor has it determined the timing or method of its adoption
of SFAS No. 133. However, SFAS No. 133 could increase volatility in earnings
(loss).
 
                                      F-21

<PAGE>   251
             CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
12.  PARENT COMPANY ONLY FINANCIAL STATEMENTS
 
     As a result of the limitations on and prohibitions of distributions,
substantially all of the net assets of the consolidated subsidiaries are
restricted for distribution to Charter Holdings, the parent company. Charter
Holdings (parent company only) financial statements are presented below.
 
           CHARTER COMMUNICATIONS HOLDINGS, LLC (PARENT COMPANY ONLY)
 
                                 BALANCE SHEET
                             (DOLLARS IN THOUSANDS)
 

<TABLE>
<CAPTION>
                                                              DECEMBER 31, 1998
                                                              -----------------
<S>                                                           <C>
ASSETS
INVESTMENT IN CHARTER OPERATING.............................     $2,147,379
                                                                 ==========
MEMBERS' EQUITY
MEMBERS' EQUITY.............................................     $2,147,379
                                                                 ==========
</TABLE>

 
           CHARTER COMMUNICATIONS HOLDINGS, LLC (PARENT COMPANY ONLY)
 
                            STATEMENT OF OPERATIONS
                             (DOLLARS IN THOUSANDS)
 

<TABLE>
<CAPTION>
                                                                 PERIOD FROM
                                                              DECEMBER 24, 1998,
                                                                   THROUGH
                                                              DECEMBER 31, 1998
                                                              ------------------
<S>                                                           <C>
EQUITY IN LOSS OF CHARTER OPERATING.........................      $   (5,277)
                                                                  ==========
Net loss....................................................      $   (5,277)
                                                                  ==========
</TABLE>

 
           CHARTER COMMUNICATIONS HOLDINGS, LLC (PARENT COMPANY ONLY)
 
                          STATEMENT OF MEMBERS' EQUITY
                             (DOLLARS IN THOUSANDS)
 

<TABLE>
<S>                                                           <C>
Balance, December 24, 1998..................................     $2,151,811
Net loss....................................................         (5,277)
Stock option compensation...................................            845
                                                                 ----------
Balance, December 31, 1998..................................     $2,147,379
                                                                 ==========
</TABLE>

 
     The investment in Charter Operating is accounted for on the equity method.
No statement of cash flows has been presented as Charter Holdings (parent
company only) had no cash flow activity.
 
13.  SUBSEQUENT EVENTS:
 
     Through April 19, 1999, the Company has entered into definitive agreements
to purchase eight cable television companies, including a swap of cable
television systems, for approximately $4.6 billion. The swap of cable television
systems will be recorded at the fair value of the systems exchanged. The
acquisitions are expected to close no later than March 31, 2000. The
acquisitions will be accounted for using the purchase method of accounting, and
accordingly,
 
                                      F-22

<PAGE>   252
             CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
results of operations of the acquired businesses will be included in the
financial statements from the dates of acquisitions.
 
     In March 1999, concurrent with the issuance of $600.0 million 8.250% Senior
Notes due 2007, $1.5 billion 8.625% Senior Notes due 2009 and $1.475 billion
9.920% Senior Discount Notes due 2011 (collectively, the "CCH Notes"), the
Company extinguished substantially all long-term debt, excluding borrowings of
the Company under its credit agreements, and refinanced substantially all
existing credit agreements at various subsidiaries with a new credit agreement
(the "CCO Credit Agreement") entered into by Charter Operating. The Company
expects to record an extraordinary loss of approximately $8 million in
conjunction with the extinguishment of substantially all long-term debt and the
refinancing of its credit agreements.
 
     The CCO Credit Agreement provides for two term facilities, one with a
principal amount of $1.0 billion that matures September 2008 (Term A), and the
other with the principal amount of $1.85 billion that matures on March 2009
(Term B). The CCO Credit Agreement also provides for a $1.25 billion revolving
credit facility with a maturity date of September 2008. Amounts under the CCO
Credit Agreement bear interest at the Base Rate or the Eurodollar rate, as
defined, plus a margin up to 2.75%. A quarterly commitment fee of between 0.25%
and 0.375% per annum is payable on the unborrowed balance of Term A and the
revolving credit facility. On March 17, 1999, the Company borrowed $1.75 billion
under Term B and invested the excess cash of $1.0 billion in short-term
investments.
 
     Charter Communications Holdings Capital Corporation is a co-issuer of the
CCH Notes and is a wholly owned finance subsidiary of Charter Holdings with no
independent assets or operations.
 
     In accordance with an employment agreement between Charter and the
President and Chief Executive Officer of Charter and a related option agreement
between Charter Holdco and the President and Chief Executive Officer of Charter,
7,044,127 options to purchase 3% of the net equity value of CCHC were issued to
the President and Chief Executive Officer of Charter. The options vest over a
four year period from the date of grant and expire ten years from the date of
grant.
 
     In February 1999, the Company adopted an option plan providing for the
grant of options to purchase up to an 10% of the aggregate equity value of the
subsidiaries of Charter Holdco as of February 1999. The option plan provides for
grants of options to employees, and consultants of Charter Holdco and its
affiliates and consultants who provide services to Charter Holdco. Options
granted vest over five years from the date of grant. However, if there has not
been a public offering of the equity interests of Charter Holdco or an
affiliate, vesting will occur only upon termination of employment for any
reason, other than for cause or disability. Options not exercised accumulate and
are exercisable, in whole or in part, in any subsequent period, but not later
than ten years from the date of grant.
 
     Following the completion of an initial public offering by Charter
Communications, Inc. membership units received upon exercise of the options will
be automatically exchanged for shares of Class A common stock of CCI on a
one-for-one basis. Options outstanding as of March 31, 1999, are as follows:
 

<TABLE>
<CAPTION>
                                     OPTIONS OUTSTANDING                 OPTIONS EXERCISABLE
                        ----------------------------------------------  ----------------------
       EXERCISE               NUMBER OF           REMAINING CONTRACT          NUMBER OF
        PRICE                  OPTIONS             LIFE (IN YEARS)             OPTIONS
----------------------  ----------------------  ----------------------  ----------------------
<S>                     <C>                     <C>                     <C>
        $20.00                16,095,008                 9.8                  1,761,032
</TABLE>

 
                                      F-23

<PAGE>   253
             CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The Company follows Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" to account for the option plans. Stock option
compensation expense of $845 has been recorded in the financial statements since