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S-1
CHARTER COMMUNICATIONS, INC. /MO/ filed this Form S-1 on 07/28/1999
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<PAGE>   1
 
     AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 28, 1999
 
                                                 REGISTRATION NO. 333-
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
 
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------
 
                                    FORM S-1
                             REGISTRATION STATEMENT
                                     UNDER
                           THE SECURITIES ACT OF 1933
                            ------------------------
 
                          CHARTER COMMUNICATIONS, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 

<TABLE>
<S>                                <C>                                <C>
             DELAWARE                             4841                            43-1857213
 (STATE OR OTHER JURISDICTION OF      (PRIMARY STANDARD INDUSTRIAL            (FEDERAL EMPLOYER
  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
                    REGISTRANT'S PRINCIPAL EXECUTIVE OFFICE)
                            ------------------------
 
                              CURTIS S. SHAW, ESQ.
              SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
                          CHARTER COMMUNICATIONS, INC.
                            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>                               <C>
    DANIEL G. BERGSTEIN, ESQ.           ALVIN G. SEGEL, ESQ.              RICHARD D. BOHM, ESQ.
     THOMAS R. POLLOCK, ESQ.             IRELL & MANELLA LLP             PETER J. LOUGHRAN, ESQ.
    PATRICIA M. CARROLL, ESQ.      1800 AVENUE OF THE STARS, SUITE        DEBEVOISE & PLIMPTON
         PAUL, HASTINGS,                         900                        875 THIRD AVENUE
      JANOFSKY & WALKER LLP            LOS ANGELES, CALIFORNIA          NEW YORK, NEW YORK 10022
         399 PARK AVENUE                     90067-4276                      (212) 909-6000
    NEW YORK, NEW YORK 10022               (310) 277-1010
         (212) 318-6000
</TABLE>

 
                            ------------------------
 
    APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:  As soon as
practicable after this Registration Statement becomes effective.
 
    If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, 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(c)
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. [ ]
 
    If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
                            ------------------------
 

                        CALCULATION OF REGISTRATION FEE
 

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
                 TITLE OF EACH CLASS OF                           PROPOSED MAXIMUM                     AMOUNT OF
               SECURITIES TO BE REGISTERED                 AGGREGATE OFFERING PRICE(1)(2)          REGISTRATION FEE
---------------------------------------------------------------------------------------------------------------------------
<S>                                                        <C>                              <C>
Class A common stock, par value $.001 per share..........          $3,450,000,000                      $959,100
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

 
(1) Estimated solely for the purpose of calculating the registration fee
    pursuant to Rule 457(o) under the Securities Act.
 
(2) Includes shares that the underwriters may purchase to cover over-allotments,
    if any. Also includes shares that are to be offered and sold to persons
    outside the United States but that may be resold by persons from time to
    time in the United States during the distribution; such shares are not being
    registered hereby for purposes of sales outside the United States.
                            ------------------------
 
    THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT 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 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

<PAGE>   2
 
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY
PROSPECTUS IS NOT AN OFFER TO SELL NOR DOES IT SEEK AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
 
                  SUBJECT TO COMPLETION. DATED JULY 28, 1999.
[CHARTER COMMUNICATIONS LOGO]
                                            Shares
 
                          CHARTER COMMUNICATIONS, INC.
 
                              Class A Common Stock
 
                             ----------------------
 
     This is an initial public offering of shares of Class A common stock of
Charter Communications, Inc. This prospectus relates to an offering of
               shares in the United States and Canada. In addition,
shares are being offered outside the United States and Canada. All of the shares
of Class A common stock are being sold by Charter Communications, Inc.
 
     Paul G. Allen, our principal owner, has agreed to make, through a company
he controls, a $750 million contribution to our subsidiary Charter
Communications Holding Company, LLC. He will pay a purchase price per membership
unit in that company equal to the net initial public offering price per share of
the Class A common stock. We expect this investment to be completed concurrently
with the closing of the offering.
 
     Prior to the offering, there has been no public market for the Class A
common stock. It is currently estimated that the initial public offering price
per share will be between $          and $          . We intend to apply to have
the Class A common stock included for quotation on the Nasdaq National Market
under the symbol "  ".
 
     See "Risk Factors" beginning on page 12 to read about factors you should
consider before buying shares of the Class A common stock.
 
                             ----------------------
 
     NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY
OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
 
                             ----------------------
 

<TABLE>
<CAPTION>
                                                                Per Share       Total
                                                                ---------       -----
<S>                                                             <C>          <C>
Initial public offering price...............................     $           $
Underwriting discount.......................................     $           $
Proceeds, before expenses, to us............................     $           $
</TABLE>

 
     To the extent that the underwriters sell more than           shares of
Class A common stock, the underwriters have the option to purchase up to an
additional           shares from Charter Communications, Inc. at the initial
public offering price less the underwriting discount.
 
                             ----------------------
 
     The underwriters expect to deliver the shares against payment in New York,
New York on             , 1999.
 
GOLDMAN, SACHS & CO.     BEAR, STEARNS & CO. INC.     MORGAN STANLEY DEAN WITTER
 
DONALDSON, LUFKIN & JENRETTE       MERRILL LYNCH & CO.      SALOMON SMITH BARNEY
 
            A. G. EDWARDS & SONS, INC.            M.R. BEAL & COMPANY
 
                             ----------------------
 
                    Prospectus dated                , 1999.

<PAGE>   3
 
[DESCRIPTION OF INSIDE FRONT COVER: MAP OF UNITED STATES SHOWING LOCATIONS OF
CHARTER CABLE SYSTEMS]
 
[DESCRIPTION OF GATEFOLD: PICTORIAL REPRESENTATION OF PRODUCTS AND SERVICES
OFFERED BY CHARTER -- ENTERTAINMENT, BROADBAND, INTERNET TV, INTERACTIVE TV]

<PAGE>   4
 

                               PROSPECTUS SUMMARY
 
     This summary highlights information contained elsewhere in this prospectus.
This summary does not contain all of the information that you should consider
before investing in the Class A common stock. For the definition of technical
terms used in this prospectus, please refer to the glossary at the end of this
prospectus. Unless otherwise stated, the information in this prospectus assumes
that the underwriters do not exercise their option to purchase additional shares
in the offering.
 
     Charter Communications, Inc. is a holding company whose sole asset after
completion of the offering will be an approximate   % equity interest and a more
than 50% voting interest in Charter Communications Holding Company, LLC. The
only business of Charter Communications, Inc. will be to act as the sole manager
of Charter Communications Holding Company, LLC. References to "our", "us" and
"we" include Charter Communications, Inc., Charter Communications Holding
Company, LLC and the direct and indirect subsidiaries of Charter Communications
Holding Company, LLC, unless we indicate otherwise or the context otherwise
requires.
 
                                  OUR BUSINESS
 
     We are the 4th largest operator of cable television systems in the United
States, serving approximately 6.2 million customers, after giving effect to our
pending acquisitions. We currently serve approximately 2.7 million customers. 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. We
have also started to introduce a number of other new services, including
interactive video programming and high-speed Internet access, and are exploring
opportunities in telephony.
 
     The introduction of these new services represents an important step toward
the realization of our "wired world" vision. Paul G. Allen, our principal owner
and one of the computer industry's visionaries, has long believed in a "wired
world" in which cable's broadband capabilities will facilitate the convergence
of television, computers, the Internet and telecommunications. We believe
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 23 acquisitions, including three
acquisitions closed in 1999. In addition, we have entered into nine agreements
to acquire additional cable systems with approximately 3.5 million customers. We
have also expanded our customer base through significant internal growth. 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%. In 1997, our internal customer growth, on the same basis, was
3.5%, significantly higher than the national industry average of 2.0%.
 
     Pro forma for our completed and pending acquisitions, our 1998 revenues
were $2.7 billion, our earnings before interest, taxes, depreciation and
amortization (EBITDA) were $1.2 billion and our cash flows from operating
activities were $351 million. On the same pro forma basis, for the three months
ended March 31, 1999, our revenues were $711 million, our EBITDA was $318
million and our cash flows from operating activities were $133 million. Without
giving effect to the cable systems we acquired in 1998, we increased revenues,
as compared to 1997, by 9.5% and EBITDA by 11%.
 
     Our principal executive offices are located at 12444 Powerscourt Drive, St.
Louis, Missouri 63131. Our telephone number is (314) 965-0555 and our Internet
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 will use 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 of our systems to 550 megahertz or greater to
       enable greater channel capacity, and add two-way capability to facilitate
       interactive communications;
 
     - 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 sales;
 
     - 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.
 
                                  ORGANIZATION
 
     The chart on the following page sets forth our corporate structure as of
the date of the completion of the offering and assumes that:
 
     - before September 1, 1999, Mr. Allen, through Vulcan Cable III Inc., has
       made a $1.325 billion equity contribution to Charter Communications
       Holding Company, LLC for membership units;
 
     - Mr. Allen, through Vulcan Cable III Inc., has purchased a total of
                 membership units from Charter Communications Holding Company,
       LLC for $750 million at a price per membership unit equal to the net
       initial public offering price per share;
 
     - we have raised an additional $1.1 billion in equity to fund a portion of
       the purchase price in the Bresnan acquisition;
 
     - all of our pending acquisitions have been completed;
 
     - specified sellers in our pending acquisitions, who hold rights to receive
       a portion of their purchase price in Charter Communications Holding
       Company, LLC membership units, have exercised these rights in full and
       exchanged these membership units for shares of Class A common stock;
 
     - the underwriters have not exercised their over-allotment option; and
 
     - none of the options to purchase a total of           membership units
       granted under the Charter Communications Holding Company, LLC option plan
       or to our chief executive officer has been exercised.
 
                                        2

<PAGE>   6
 
                     [STRUCTURAL CONSIDERATIONS FLOW CHART]
 
     CHARTER COMMUNICATIONS, INC.  Charter Communications, Inc., which we refer
to as CCI, will be the issuer of the Class A common stock offered in this
prospectus and of the high vote Class B common stock. CCI will be a holding
company whose sole asset will be an approximate   % equity interest and a more
than 50% voting interest in Charter Holdco. CCI's only business will be acting
as the sole manager of Charter Holdco. As sole manager of Charter Holdco, CCI
will control the affairs of Charter Holdco. Immediately following the offering,
holders of the Class A common stock will own more than      % of CCI's
outstanding capital stock. However, Mr. Allen, through his ownership of CCI's
high vote Class B common stock and his indirect ownership of Charter Holdco
membership units, will control      % of the voting power of all of CCI's
capital stock immediately following the offering. Accordingly, Mr. Allen will be
able to elect all of CCI's directors.
 
                                        3

<PAGE>   7
 
     VULCAN CABLE III INC. We refer to this company as Vulcan III. Mr. Allen,
through Vulcan III, has agreed to make an equity contribution of $1.325 billion
to Charter Holdco before September 1, 1999 for $          per membership unit.
In addition, Mr. Allen, through Vulcan III, has agreed to make a $750 million
contribution to Charter Holdco at the closing of the offering. He will pay a
purchase price per membership unit equal to the net initial public offering
price per share. Mr. Allen owns 100% of the equity of Vulcan III.
 
     CHARTER INVESTMENT, INC. We refer to this company as Charter Investment.
Mr. Allen owns approximately 97% of the outstanding stock of Charter Investment.
The remaining equity is owned by our founders, Jerald L. Kent, Barry L. Babcock
and Howard L. Wood.
 
     ACQUISITION-RELATED EQUITY HOLDERS. Under the terms of the pending Rifkin,
Falcon and Bresnan acquisitions, some of the sellers will receive or have the
right to receive a portion of their purchase price in Charter Holdco membership
units rather than in cash. If they receive membership units, they will be able
to exchange these membership units for shares of Class A common stock. Assuming
that:
 
     (1) the initial public offering price per share of Class A common stock is
$       , which is the mid-point of the price range set forth on the cover page
of this prospectus,
 
     (2) all these sellers receive concurrently with the closing of the offering
the maximum number of Charter Holdco membership units they are entitled to
receive, and
 
     (3) all membership units are exchanged for Class A common stock,
 
     these sellers will own   % of CCI's outstanding Class A common stock. We
refer to the issuances of Charter Holdco membership units in these acquisitions
and the exchange of these units for Class A common stock as equity rollovers.
 
     CHARTER COMMUNICATIONS HOLDING COMPANY, LLC. We refer to this company as
Charter Holdco. Charter Holdco is the direct or indirect owner of all of our
cable systems. It is the direct parent of Charter Communications Holdings, LLC
and will be the owner of the cable systems to be acquired through four pending
acquisitions: Avalon, Fanch, Falcon and Bresnan. Charter Holdco has an option
plan permitting the issuance to employees and consultants of Charter Holdco and
its affiliates of options exercisable for membership units equal in value to up
to   % of Charter Holdco's equity value, such percentage based on the same
assumptions described on page 2 with respect to our organizational chart.
Membership units received upon exercise of these options will be automatically
exchanged for Class A common stock. None of these options will vest prior to
April 2000. In addition to options available for grant to our employees under
our option plan, our chief executive officer has options to purchase
approximately   % of Charter Holdco's equity value, such percentage based on the
same assumptions that were made with respect to the option plan, at $  per
membership unit. Of the options granted to our chief executive officer, 25% are
immediately exercisable and the remaining 75% will vest in 36 equal monthly
installments commencing on January 1, 2000.
 
     CHARTER HOLDCO'S PENDING ACQUISITIONS. Charter Holdco is a party to
agreements to acquire cable systems or the companies owning cable systems from
the owners of Avalon, Fanch, Falcon and Bresnan. The purchases are described in
"Business -- Acquisitions". As of March 31, 1999, these companies had a total of
$3.0 billion of debt outstanding.
 
     CHARTER COMMUNICATIONS HOLDINGS, LLC. We refer to this company as CC
Holdings. CC Holdings is a co-issuer with one of its subsidiaries of $3.6
billion in principal amount of notes sold in March 1999.
 
     CHARTER COMMUNICATIONS OPERATING, LLC. We refer to this company as Charter
Operating. Charter Operating is a holding company for all of the cable systems
currently owned by Charter Holdco. As of March 31, 1999, this company was the
borrower under credit facilities with total availability of $4.1 billion and had
total outstanding borrowings of $1.75 billion.
                                        4

<PAGE>   8
 
     CHARTER OPERATING COMPANIES. These companies consist of the companies that
operate all of the cable systems currently owned by Charter Holdco. These
companies own the cable systems originally managed by Charter Investment, namely
CCP Holdings (which is now Charter Holdco), CCA Group, and CharterComm Holdings.
Our historical financial information is presented separately for each of these
companies.
 
     CHARTER OPERATING'S PENDING ACQUISITIONS. Charter Operating or one or more
of its subsidiaries has entered into agreements to acquire cable systems or the
companies owning cable systems from the owners of Helicon, InterMedia, Rifkin,
Vista and Cable Satellite. These purchases are described in
"Business -- Acquisitions". As of March 31, 1999, these companies had $875.8
million of total debt outstanding.
 
                                        5

<PAGE>   9
 
                                  THE OFFERING
 

<TABLE>
<S>                                                           <C>
Total Class A common stock offered:
  U.S. offering.............................................
  International offering....................................
                                                              ------
     Total..................................................
                                                              ======
Shares of common stock to be outstanding after the offering:
  Class A common stock......................................
  Class B common stock......................................
 
Charter Holdco membership units to be owned by CCI after the
  offering..................................................
Charter Holdco membership units to be owned by persons or
  entities other than CCI after the offering................
</TABLE>

 
     In calculating the number of shares of each class of our common stock and
the membership units in Charter Holdco that will be outstanding after the
offering, we have made the same assumptions described on page 2 with respect to
our organizational chart.
 
     Shares of Class B common stock are convertible into, and membership units
of Charter Holdco not owned by CCI, Vulcan III or Charter Investment are
exchangeable for, shares of Class A common stock at any time on a one-for-one
basis. Shares of Class B common stock held by Vulcan III and Charter Investment
are convertible into shares of Class A common stock at any time on a one-for-one
basis. If, immediately following the offering, Mr. Allen converted his Class B
common stock into Class A common stock, and Charter Investment and Vulcan III
exchanged their common membership units for Class B common stock and converted
the shares of Class B common stock so received into Class A common stock, they
together would own approximately      % of our Class A common stock. See
"Description of Capital Stock and Membership Units".
                             ----------------------
 
Allen Investments.............   Mr. Allen, through Vulcan III, has agreed to
                                 make an equity contribution of $1.325 billion
                                 to Charter Holdco before September 1, 1999 for
                                 $          per membership unit. In addition,
                                 Mr. Allen, through Vulcan III, has agreed to
                                 make a $750 million equity contribution to
                                 Charter Holdco at the closing of the offering.
                                 He will pay a purchase price per membership
                                 unit equal to the net initial public offering
                                 price per share. The funding of these
                                 investments is a condition to the closing of
                                 the offering.
 
Use of Proceeds...............   By CCI: To acquire           membership units
                                 in Charter Holdco at a price per membership
                                 unit equal to the net price per share of the
                                 Class A common stock in this offering.
 
                                 By Charter Holdco: To partially fund, together
                                 with the proceeds from the $750 million equity
                                 contribution from Vulcan III, a number of our
                                 pending acquisitions. See "Use of Proceeds".
 
Voting Rights.................   Each holder of Class A common stock is entitled
                                 to one vote per share. Each holder of Class B
                                 common stock is entitled to the number of votes
                                 per share equal to:
 
                                 - ten multiplied by the sum of (a) the total
                                   number of shares of Class B common stock held
                                   by the holder and (b) the number of shares of
                                   Class B common stock into
 
                                        6

<PAGE>   10
 
                                   which the Charter Holdco membership units
                                   held, directly or indirectly, by the holder
                                   are exchangeable; divided by
 
                                 - the number of shares of Class B common stock
                                   held by the holder.
 
                                 See "Description of Capital Stock and
                                 Membership Units".
 
Proposed Nasdaq National
Market Symbol.................   " ".
 

                                  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 purchasing the Class A common stock
offered in this prospectus.
 
                           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 services and through
       acquisitions;
 
     - our anticipated capital expenditures for our planned upgrades, and the
       ability to fund such upgrades;
 
     - 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.
 
                                        7

<PAGE>   11
 
                   UNAUDITED SUMMARY PRO FORMA FINANCIAL DATA
 
     You should read the following unaudited summary pro forma financial data of
CCI 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
                                                                 THREE MONTHS ENDED MARCH 31, 1999
                                  -----------------------------------------------------------------------------------------------
                                   CHARTER        RECENT                     PENDING      REFINANCING    OFFERING
                                    HOLDCO     ACQUISITIONS    SUBTOTAL    ACQUISITIONS   ADJUSTMENTS   ADJUSTMENTS      TOTAL
                                  ----------   ------------   ----------   ------------   -----------   -----------   -----------
                                                    (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND CUSTOMER DATA)
<S>                               <C>          <C>            <C>          <C>            <C>           <C>           <C>
Revenues........................  $  286,135     $ 44,877     $  331,012   $   380,178     $     --     $       --    $   711,190
                                  ----------     --------     ----------   -----------     --------     ----------    -----------
Operating expenses:
 Operating, general and
   administrative...............     152,075       22,605        174,680       204,069           --             --        378,749
 Depreciation and
   amortization.................     153,747       22,691        176,438       247,548           --             --        423,986
 Corporate expense charges(a)...       5,323        1,757          7,080         3,038           --             --         10,118
 Management fees................          --          275            275         4,218           --             --          4,493
                                  ----------     --------     ----------   -----------     --------     ----------    -----------
   Total operating expenses.....     311,145       47,328        358,473       458,873           --             --        817,346
                                  ----------     --------     ----------   -----------     --------     ----------    -----------
Loss from operations............     (25,010)      (2,451)       (27,461)      (78,695)          --             --       (106,156)
Interest expense................     (71,591)     (15,122)       (86,713)     (113,728)     (18,000)            --       (218,441)
Interest income.................       1,733          108          1,841           550           --             --          2,391
Other income (expense)..........          15          (16)            (1)         (121)          --             --           (122)
                                  ----------     --------     ----------   -----------     --------     ----------    -----------
Loss before minority interest...     (94,853)     (17,481)      (112,334)     (191,994)     (18,000)            --       (322,328)
Minority interest...............          --           --             --            --           --        241,746        241,746
                                  ----------     --------     ----------   -----------     --------     ----------    -----------
Net loss........................  $  (94,853)    $(17,481)    $ (112,334)  $  (191,994)    $(18,000)    $  241,746    $   (80,582)
                                  ==========     ========     ==========   ===========     ========     ==========    ===========
Basic loss per share............                                                                                      $
                                                                                                                      ===========
Diluted loss per share..........                                                                                      $
                                                                                                                      ===========
Weighted average shares
 outstanding:...................
 Basic..........................
 Diluted........................
OTHER FINANCIAL DATA:
EBITDA(b).......................  $  128,752     $ 20,224     $  148,976   $   168,732                                $   317,708
EBITDA margin(c)................        45.0%        45.1%          45.0%         44.4%                                      44.7%
Adjusted EBITDA(d)..............     134,060       22,272        156,332       176,109                                    332,441
Cash flows from operating
 activities.....................      45,824       13,862         59,686        73,796                                    133,482
Cash interest expense...........                                                                                          175,800
Capital expenditures............     109,629        7,201        116,830       138,950                                    255,780
BALANCE SHEET DATA (AT END OF
 PERIOD):
Total assets....................  $8,357,282     $187,147     $8,544,429   $13,010,614     $     --     $       --    $21,555,043
Total debt......................   4,754,018      165,480      4,919,498     5,449,086           --             --     10,368,584
Minority interest...............          --           --             --            --           --      7,813,771      7,813,771
Members' equity.................   3,326,142           --      3,326,142     4,487,629           --     (7,813,771)            --
Stockholders' equity............          --           --             --            --           --      2,840,000      2,840,000
OPERATING DATA (AT END OF
 PERIOD, EXCEPT FOR AVERAGES):
Homes passed....................   3,977,000      512,000      4,489,000     4,847,000                                  9,336,000
Basic customers.................   2,344,000      374,000      2,718,000     3,363,000                                  6,081,000
Basic penetration(e)............        58.9%        73.0%          60.5%         69.4%                                      65.1%
Premium units...................   1,322,000      230,000      1,552,000     1,334,000                                  2,886,000
Premium penetration(f)..........        56.4%        61.5%          57.1%         39.7%                                      47.5%
Average monthly revenue per
 basic customer(g)..............  $    40.69     $  40.00     $    40.60   $     37.68                                $     38.98
</TABLE>

 
                                        8

<PAGE>   12

<TABLE>
<CAPTION>
                                                  UNAUDITED SUMMARY PRO FORMA STATEMENT OF OPERATIONS
                                                             YEAR ENDED DECEMBER 31, 1998
                                          -------------------------------------------------------------------
                                           CHARTER                      RECENT                     PENDING
                                            HOLDCO       MARCUS      ACQUISITIONS    SUBTOTAL    ACQUISITIONS
                                          ----------   -----------   ------------   ----------   ------------
                                              (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND CUSTOMER DATA)
<S>                                       <C>          <C>           <C>            <C>          <C>
Revenues................................  $  611,690   $   448,192    $  171,951    $1,231,833   $ 1,445,014
                                          ----------   -----------    ----------    ----------   -----------
Operating expenses:
  Operating, general and
    administrative......................     310,100       231,050        88,235       629,385       741,500
  Depreciation and amortization.........     375,899       252,855        90,871       719,625       977,622
  Corporate expense charges(a)..........      16,493        17,042         6,759        40,294        21,322
  Management fees.......................          --            --         1,077         1,077        19,608
                                          ----------   -----------    ----------    ----------   -----------
    Total operating expenses............     702,492       500,947       186,942     1,390,381     1,760,052
                                          ----------   -----------    ----------    ----------   -----------
Loss from operations....................     (90,802)      (52,755)      (14,991)     (158,548)     (315,038)
Interest expense........................    (207,468)     (137,953)      (60,375)     (405,796)     (464,425)
Other income (expense)..................         518            --           (40)          478       (11,472)
                                          ----------   -----------    ----------    ----------   -----------
Loss before minority interest...........    (297,752)     (190,708)      (75,406)     (563,866)     (790,935)
Minority interest.......................          --            --            --            --            --
                                          ----------   -----------    ----------    ----------   -----------
Net loss................................  $ (297,752)  $  (190,708)   $  (75,406)   $ (563,866)  $  (790,935)
                                          ==========   ===========    ==========    ==========   ===========
Basic loss per share....................
Diluted loss per share..................
Weighted average shares outstanding:
  Basic.................................
  Diluted...............................
OTHER FINANCIAL DATA:
EBITDA(b)...............................  $  285,615   $   200,100    $   75,840    $  561,555   $   651,112
EBITDA margin(c)........................        46.7%         44.6%         44.1%         45.6%         45.1%
Adjusted EBITDA(d)......................     301,590       217,142        83,716       602,448       703,514
Cash flows from operating activities....     137,160       139,908        12,399       289,467        61,995
Cash interest expense...................
Capital expenditures....................     213,353       224,723         7,001       445,077       305,151
BALANCE SHEET DATA (AT END OF PERIOD):
Total assets............................  $7,235,656   $        --    $1,227,726    $8,463,382   $13,074,776
Total debt..............................   3,523,201            --     1,203,940     4,727,141     5,450,336
Minority interest.......................          --            --            --            --            --
Members' equity.........................   3,429,291            --            --     3,429,291     4,526,839
Stockholders' equity....................          --            --            --            --            --
OPERATING DATA (AT END OF PERIOD, EXCEPT
  FOR AVERAGES):
Homes passed............................   2,149,000     1,743,000       510,000     4,402,000     4,779,000
Basic customers.........................   1,255,000     1,062,000       365,000     2,682,000     3,232,000
Basic penetration(e)....................        58.4%         60.9%         71.6%         60.9%         67.6%
Premium units...........................     845,000       411,000       227,000     1,483,000     1,195,000
Premium penetration(f)..................        67.3%         38.7%         62.2%         55.3%         37.0%
Average monthly revenue per basic
  customer(g)...........................  $    40.62   $     35.17    $    39.26    $    38.27   $     37.26
 
<CAPTION>
                                          UNAUDITED SUMMARY PRO FORMA STATEMENT OF OPERATIONS
                                               YEAR ENDED DECEMBER 31, 1998
                                          ---------------------------------------
                                          REFINANCING    OFFERING
                                          ADJUSTMENTS   ADJUSTMENTS      TOTAL
                                          -----------   -----------   -----------
                                          (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND CUSTOMER DATA)
<S>                                       <C>           <C>           <C>
Revenues................................   $     --     $       --    $ 2,676,847
                                           --------     -----------   -----------
Operating expenses:
  Operating, general and
    administrative......................         --             --      1,370,885
  Depreciation and amortization.........         --             --      1,697,247
  Corporate expense charges(a)..........         --             --         61,616
  Management fees.......................         --             --         20,685
                                           --------     -----------   -----------
    Total operating expenses............         --             --      3,150,433
                                           --------     -----------   -----------
Loss from operations....................         --             --       (473,586)
Interest expense........................    (15,400)            --       (885,621)
Other income (expense)..................         --                       (10,994)
                                           --------     -----------   -----------
Loss before minority interest...........    (15,400)                   (1,370,201)
Minority interest.......................                 1,027,651      1,027,651
                                           --------     -----------   -----------
Net loss................................   $(15,400)    $1,027,651    $  (342,550)
                                           ========     ===========   ===========
Basic loss per share....................                              $
                                                                      ===========
Diluted loss per share..................                              $
                                                                      ===========
Weighted average shares outstanding:
  Basic.................................
  Diluted...............................
OTHER FINANCIAL DATA:
EBITDA(b)...............................                              $ 1,212,667
EBITDA margin(c)........................                                     45.3%
Adjusted EBITDA(d)......................                                1,305,962
Cash flows from operating activities....                                  351,462
Cash interest expense...................                                  715,786
Capital expenditures....................                                  750,228
BALANCE SHEET DATA (AT END OF PERIOD):
Total assets............................   $125,000     $       --    $21,663,158
Total debt..............................    128,604             --     10,306,081
Minority interest.......................                 7,952,526      7,952,526
Members' equity.........................     (3,604)    (7,952,526)            --
Stockholders' equity....................         --      2,840,000      2,840,000
OPERATING DATA (AT END OF PERIOD, EXCEPT
  FOR AVERAGES):
Homes passed............................                                9,181,000
Basic customers.........................                                5,914,000
Basic penetration(e)....................                                     64.4%
Premium units...........................                                2,678,000
Premium penetration(f)..................                                     45.3%
Average monthly revenue per basic
  customer(g)...........................                              $     37.72
</TABLE>

 
-------------------------
 
(a) Charter Investment provided corporate management and consulting services to
    subsidiaries of Charter Operating during 1998 and 1999 and to subsidiaries
    of Marcus Holdings beginning in October 1998. See "Certain Relationships and
    Related Transactions".
 
                                        9

<PAGE>   13
 
(b) EBITDA represents earnings (loss) before interest, income taxes,
    depreciation and amortization. EBITDA is presented because it is a widely
    accepted financial indicator of a cable television 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 corporate expenses, 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) Basic penetration represents basic customers as a percentage of homes
    passed.
 
(f) Premium penetration represents premium units as a percentage of basic
    customers.
 
(g) 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.
 
                                       10

<PAGE>   14
 
       UNAUDITED SUMMARY HISTORICAL COMBINED FINANCIAL AND OPERATING DATA
 
     You should read the following unaudited summary historical combined
financial and operating data in conjunction with "Unaudited Summary Historical
Combined Financial and Operating Data" and the historical financial statements
and other financial information appearing elsewhere in this prospectus.
 

<TABLE>
<CAPTION>
                                                     CHARTER HOLDCO, CCA GROUP         CHARTER
                                                      AND CHARTERCOMM HOLDINGS          HOLDCO
                                                 ----------------------------------   ----------
                                                 YEAR ENDED DECEMBER 31,    1/1/98     12/24/98
                                                 -----------------------   THROUGH     THROUGH
                                                    1996         1997      12/23/98    12/31/98
                                                 ----------   ----------   --------   ----------
                                                             (DOLLARS IN THOUSANDS,
                                                              EXCEPT CUSTOMER DATA)
<S>                                              <C>          <C>          <C>        <C>
COMBINED STATEMENT OF OPERATIONS:
Revenues.......................................  $  368,553   $  484,155   $570,964   $   23,450
                                                 ----------   ----------   --------   ----------
Operating expenses:
  Operating, general and administrative........     190,084      249,419    288,428       12,679
  Depreciation and amortization................     154,273      198,718    240,294       13,811
  Management fees/corporate expense
     charges(a)................................      15,094       20,759     38,348          766
                                                 ----------   ----------   --------   ----------
     Total operating expenses..................     359,451      468,896    567,070       27,256
                                                 ----------   ----------   --------   ----------
Income (loss) from operations..................  $    9,102   $   15,259   $  3,894   $   (3,806)
                                                 ==========   ==========   ========   ==========
CAPITAL EXPENDITURES...........................  $  110,291   $  162,607   $195,468   $   13,672
BALANCE SHEET DATA (AT END OF PERIOD):
Total assets...................................  $1,660,242   $2,002,181              $7,235,656
Total debt.....................................   1,195,899    1,846,159               3,523,201
Members' equity................................      26,099      (80,505)              3,429,291
OPERATING DATA (AT END OF PERIOD, EXCEPT FOR
  AVERAGES):
Homes passed...................................   1,546,000    1,915,000               3,892,000
Basic customers................................     902,000    1,086,000               2,317,000
Basic penetration(b)...........................        58.3%        56.7%                   59.5%
Premium units..................................     517,000      629,000               1,256,000
Premium penetration(c).........................        57.3%        57.9%                   54.2%
</TABLE>

 
-------------------------
 
(a) Charter Investment provided corporate management and consulting services to
    Charter Holdco, CCA Group and CharterComm Holdings. CCA Group and
    CharterComm Holdings paid fees to Charter Investment as compensation for
    these services and recorded these fees as expense. Charter Holdco recorded
    charges for actual corporate expenses incurred by Charter Investment on
    behalf of Charter Holdco. Management fees and corporate expense charges for
    the year ended December 31, 1998 include $14.4 million of change of control
    payments under the terms of then-existing equity appreciation rights plans.
    These payments were triggered by the acquisition of Charter Holdco by Mr.
    Allen. These payments were made by Charter Investment 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 Charter Holdco by Mr. Allen, and these costs will
    not recur. See "Certain Relationships and Related Transactions".
 
(b) Basic penetration represents basic customers as a percentage of homes
    passed.
 
(c) Premium penetration represents premium units as a percentage of basic
    customers.
 
                                       11

<PAGE>   15
 

                                  RISK FACTORS
 
     Before you invest in CCI's Class A common stock, you should be aware that
there are various risks, including those described below. You should carefully
consider these risk factors, together with all of the other information included
in this prospectus.
 
     Charter Communications, Inc. is a holding company whose sole asset after
completion of the offering will be an approximate      % equity interest and a
more than 50% voting interest in Charter Communications Holding Company, LLC.
The only business of Charter Communications, Inc. will be to act as the sole
manager of Charter Communications Holding Company, LLC. References to "our",
"us" and "we" include Charter Communications, Inc., Charter Communications
Holding Company, LLC and the direct and indirect subsidiaries of Charter
Communications Holding Company, LLC, unless we indicate otherwise or the context
otherwise requires.
 
                         RISKS RELATING TO OUR BUSINESS
 
WE HAVE A SIGNIFICANT AMOUNT OF DEBT. THIS MAY ADVERSELY AFFECT OUR ABILITY TO
OBTAIN FINANCING IN THE FUTURE AND REACT TO CHANGES IN OUR BUSINESS.
 
     As of March 31, 1999, pro forma for our pending acquisitions and
acquisitions completed since that date, our total debt was approximately $10.4
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 under our credit
       facilities and to our noteholders;
 
     - increase our vulnerability to general adverse economic and cable industry
       conditions, including interest rate fluctuations, because a portion of
       our borrowings are and will continue to be at variable rates of interest;
 
     - require us to dedicate a significant 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 for working
       capital, capital expenditures and acquisitions.
 
     We anticipate incurring additional debt in the future to fund the
expansion, maintenance and upgrade of our systems. We may also incur debt to
finance pending or additional acquisitions. If new debt is added to our current
debt levels, the related risks that we and you now face could intensify.
 
OUR DEBT REQUIRES US TO COMPLY WITH VARIOUS FINANCIAL AND OPERATING RESTRICTIONS
WHICH COULD ADVERSELY AFFECT OUR ABILITY TO OPERATE OUR BUSINESS.
 
     Our credit facilities and the indentures governing our notes contain a
number of significant restrictive covenants that could adversely impact our
ability to operate our business. In addition, each of our credit facilities
requires the particular borrower 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 result in
acceleration of the debt. Any default under our credit facilities or our
indentures may adversely affect our growth, our financial condition and our
results of operations.
 
                                       12

<PAGE>   16
 
WE MAY NOT BE ABLE TO OBTAIN CAPITAL SUFFICIENT TO FUND OUR PLANNED UPGRADES AND
TO KEEP PACE WITH TECHNOLOGICAL DEVELOPMENTS. 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.
 
     We intend to upgrade a significant portion of our cable systems over the
coming years and make other capital investments. For the period from January 1,
2000 to December 31, 2002, we plan to spend approximately $2.9 billion to
upgrade the systems we own and the systems we have agreed to acquire in our
pending acquisitions. We also plan to spend an additional $2.6 billion in the
same period to maintain and expand the systems we own and the systems we have
agreed to acquire. 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.
 
     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 this type of rapid technological change will not adversely
affect our plans to upgrade or expand our systems and respond to competitive
pressures. We cannot assure you that we will be able to upgrade, maintain and
expand our systems on a timely basis or at all. Consequently, our growth,
financial condition and results of operations could suffer materially.
 
WE 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. Giving effect to the acquisitions we
completed in 1999 and our pending acquisitions, at June 30, 1999 our systems
served approximately 165% more customers than we 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 and EBITDA over our short
operating history is not necessarily indicative of future performance.
 
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 reported net losses before extraordinary
items of $157 million for 1997, $200 million for 1998 and $94.9 million for the
three months ended March 31, 1999. On a pro forma basis, giving effect to our
recent and pending acquisitions, we had net losses before minority interest of
$1.4 billion for 1998. For the three months ended March 31, 1999, on the same
pro forma basis, we had net losses of $322 million. We expect our net losses to
increase as a result of our recent and pending acquisitions. 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.
 
     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
 
                                       13

<PAGE>   17
 
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.
 
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. In addition, as we upgrade the channel capacity of our
systems, add programming to our basic and expanded basic 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. The inability to pass
these programming cost increases on to our customers will have an adverse impact
on our cash flow and operating margins.
 
DATA PROCESSING FAILURES AFTER DECEMBER 31, 1999 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, 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 or
become incompatible with our systems.
 
     We are addressing the year 2000 problem with respect to our internal
operations. Much of our assessment efforts 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 a significant
third party with whom we communicate and do business through computers, fails 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, including inability to process
transactions, send invoices, accept customer orders or provide customers with
products and services. 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 may acquire prior to December 31, 1999. As a result of any
such disruption, our growth, financial condition and results of operations could
suffer materially.
 
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 have
agreed to acquire in our pending acquisitions will require us to hire
contractors and enter into a number of construction agreements. We may have
difficulty hiring experienced contractors, and the contractors we hire may
encounter cost overruns or delays in construction. Although we have recently
been able to negotiate construction contracts at rates which we believe are
competitive relative to the cable industry as a whole, 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
 
                                       14

<PAGE>   18
 
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.
 
WE MAY NOT HAVE THE ABILITY TO INTEGRATE THE NEW CABLE SYSTEMS THAT WE ACQUIRE
AND THE CUSTOMERS THEY SERVE WITH OUR EXISTING SYSTEMS. THIS COULD ADVERSELY
AFFECT OUR OPERATING RESULTS AND OUR GROWTH STRATEGY.
 
     Upon the completion of our pending acquisitions, we will own and operate
cable systems serving approximately 6.2 million customers, as compared to the
cable systems we currently own which serve approximately 2.7 million customers.
In addition, we may acquire more cable systems in the future, through system
swaps or otherwise. The integration of our new cable systems 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 systems, and
       financial, legal and marketing resources. Our current operating and
       financial systems and controls and information systems may not be
       adequate, and any steps taken to improve these systems and controls may
       not be sufficient;
 
     - 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 additional qualified personnel.
 
     We cannot assure you that we will successfully integrate any acquired
systems into our operations.
 
WE MAY BE UNABLE TO OBTAIN CAPITAL SUFFICIENT TO CONSUMMATE OUR PENDING
ACQUISITIONS.
 
     Our subsidiaries have entered into nine agreements to acquire the equity
and/or assets of other cable operators for a total purchase price of
approximately $13.0 billion, including $3.3 billion of assumed debt. The
proceeds from the offering, Mr. Allen's equity contributions through Vulcan III
to Charter Holdco, borrowings under our credit facility and existing cash will
not be sufficient to consummate the acquisitions, and we may require additional
capital in connection with the acquisitions for any or all of the following
reasons:
 
     - Specified sellers in the Rifkin acquisition may elect to receive part of
       their purchase price in membership units in Charter Holdco and specified
       sellers in the Falcon acquisition may elect to receive more of the
       purchase price in membership units than the minimum number of membership
       units they are required to receive under the acquisition agreement. If
       these sellers do not make these elections, the amount of cash we will
       need to consummate these acquisitions will increase.
 
     - Following consummation of the Helicon, Rifkin, Avalon, Falcon and Bresnan
       acquisitions, we will be required to make an offer to repurchase the
       notes issued by Helicon, Rifkin, Avalon, Falcon and Bresnan under the
       indentures governing these notes. The terms of the Charter Operating
       credit facilities also require us to repurchase the total amount of
       principal and interest outstanding under the Rifkin and Helicon notes
       which is in excess of $250 million. We may also be required to repay debt
       under the Avalon and Bresnan credit facilities. We will need capital
       sufficient to consummate these repurchases and repayments.
 
     - We may complete additional acquisitions.
 
                                       15

<PAGE>   19
 
THE FAILURE TO OBTAIN NECESSARY REGULATORY APPROVALS, OR TO SATISFY OTHER
CLOSING CONDITIONS, COULD IMPEDE THE CONSUMMATION OF A PENDING ACQUISITION. THIS
WOULD PREVENT OR DELAY OUR STRATEGY TO EXPAND OUR BUSINESS AND INCREASE
REVENUES.
 
     Our pending acquisitions are subject to regulatory approvals, including the
approval of state and local franchising authorities and the Federal Trade
Commission under the Hart-Scott-Rodino Act. We cannot assure you that we will be
able to obtain the necessary approvals and as to when, or if, each such
acquisition will be consummated. Any delay, prohibition or modification could
adversely affect the terms of a pending acquisition or could require us to
abandon an otherwise attractive opportunity and forfeit purchase deposit
amounts.
 
OUR PENDING ACQUISITIONS MAY NOT BE CONSUMMATED AND IF NOT CONSUMMATED, OUR
MANAGEMENT WILL HAVE BROAD DISCRETION WITH RESPECT TO THE USE OF THE PROCEEDS
ALLOCATED TO SUCH ACQUISITIONS.
 
     The consummation of each of our pending acquisitions is subject to a number
of conditions. If these conditions are not materially met, the relevant
acquisition may not be consummated. We cannot assure you that any or all of
these acquisitions will be consummated on the terms described in this
prospectus, or at all. This offering is not contingent or in any way dependent
on the consummation of any or all of these acquisitions. If any of these
acquisitions is not consummated, a significant portion of the net proceeds from
the offering will not be designated for a specific use. In these circumstances,
our management will have broad discretion with respect to the use of the
proceeds of the offering and you will not have the opportunity, as part of your
investment decision, to assess whether the proceeds are being used
appropriately.
 
MR. ALLEN HAS THE ABILITY TO CONTROL MATTERS ON WHICH CCI'S STOCKHOLDERS MAY
VOTE.
 
     Following the offering, Mr. Allen will own high vote Class B common stock
representing   % of the voting power of CCI's capital stock. CCI, as the sole
manager and owner of more than 50% of the voting power of Charter Holdco, will
control Charter Holdco. Accordingly, Mr. Allen will have the ability to control
fundamental corporate transactions requiring equity holder approval, including,
without limitation, the election of all of our directors and approval of merger
transactions involving us and sales of all or substantially all of our assets.
Control by Mr. Allen may have the effect of preventing or discouraging
transactions involving an actual or potential change of control. This may
include a transaction in which holders of Class A common stock might otherwise
receive a premium for their shares over the then-current market price.
 
MR. ALLEN MAY HAVE INTERESTS THAT CONFLICT WITH YOUR INTERESTS.
 
     Mr. Allen's direct ownership of shares of CCI's high vote Class B common
stock and indirect ownership of membership units in Charter Holdco and his
service as Chairman of our board of directors could create conflicts of interest
if he is faced with decisions that could have implications both for him
personally or other entities in which he has an interest and for us and the
holders of Class A common stock. These include decisions regarding potential
acquisitions of businesses, competitive positioning in markets, the issuance or
disposition of securities, the election of new or additional directors, the
payment of dividends and other matters. Further, through his effective control
of our management and affairs, Mr. Allen could cause us to enter into contracts
with another corporation in which he owns an interest or cause us to decline a
transaction entered into by him or an entity in which he owns an interest.
 
     Mr. Allen and his affiliates may engage in other businesses involving the
operation of cable television systems, video programming, high-speed Internet
access or electronic commerce or other businesses that compete or may in the
future compete with us, subject to the provisions of CCI's certificate of
incorporation and Charter Holdco's operating agreement summarized in "Certain
Relationships and Related Transactions -- Allocation of Business Opportunities
with Mr. Allen". In addition, Mr. Allen and his affiliates currently engage and
may engage in the future in businesses that are complementary to our cable
television business. Accordingly, conflicts
 
                                       16

<PAGE>   20
 
could arise with respect to the allocation of certain corporate opportunities
between us and Mr. Allen and his affiliates. Current or future agreements
between us and Mr. Allen may not be the result of arm's-length negotiations and
such agreements therefore 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 and, therefore, costs and benefits are not formally allocated among the
parties to the transactions. As a result, there inevitably will be some
discretion left to the parties, who are subject to the potentially conflicting
interests described above.
 
WE CANNOT ENGAGE IN ANY BUSINESS ACTIVITY OTHER THAN THE CABLE TRANSMISSION OF
VIDEO, AUDIO (INCLUDING TELEPHONY) AND DATA UNLESS MR. ALLEN FIRST DETERMINES
NOT TO PURSUE THE 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.
 
     CCI's certificate of incorporation and Charter Holdco's operating agreement
will provide that, until all of the shares of Class B common stock held by Mr.
Allen have automatically converted into shares of Class A common stock in
accordance with CCI's certificate of incorporation, CCI and Charter Holdco
cannot engage in any business transaction outside the cable transmission
business and immaterial other businesses engaged in by Charter Holdco currently
or upon completion of our pending acquisitions, unless we first offer Mr. Allen
the opportunity to pursue the particular business transaction and he decides not
to do so and consents to our engaging in the business transaction. The cable
transmission business means the business of transmitting video, audio (including
telephony) and data on cable television systems owned 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".
 
MR. ALLEN'S CONTROL AND CCI'S ORGANIZATIONAL DOCUMENTS MAY INHIBIT OR PREVENT A
TAKEOVER THAT STOCKHOLDERS MAY CONSIDER FAVORABLE.
 
     Mr. Allen will have the ability to delay or prevent a change of control or
changes in our management that stockholders consider favorable or beneficial.
Provisions in our organizational documents may also have the effect of delaying
or preventing these changes, including provisions authorizing issuance of "blank
check" preferred stock, restricting the calling of special meetings of
stockholders and requiring advanced notice for proposals for stockholder
meetings. If a change of control or change in management is delayed or
prevented, the market price of our Class A common stock could suffer or holders
may not receive a premium over the then-current market price of the Class A
common stock.
 
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 the Chairman of our board of directors, Mr. Allen, and
our Chief Executive Officer, Jerald L. Kent. The loss of the services of Mr.
Allen or Mr. Kent could adversely affect our ability to manage our business and,
in turn, our growth, financial condition and results of operations.
 
                                       17

<PAGE>   21
 
WE OPERATE IN A VERY COMPETITIVE BUSINESS ENVIRONMENT WHICH COULD ADVERSELY
AFFECT OUR BUSINESS AND OPERATIONS.
 
     The industry in which we operate is highly competitive. In some instances,
we compete against companies with easier access to financing, greater personnel
resources, greater brand name recognition and long-standing relationships with
regulatory authorities, and in some cases fewer regulatory burdens. Mergers,
joint ventures and alliances among cable television operators, regional
telephone companies, long distance telephone service providers, competitive
local exchange carriers, providers of cellular and other wireless communications
services, Internet service providers and others may result in providers capable
of offering cable television and other telecommunications services in direct
competition with us. As we expand and introduce new and enhanced products and
services, including Internet and additional telecommunications services, we will
be subject to competition from other telecommunications providers and Internet
service providers. Our current and potential competitors include:
 
     - broadcast television providers, transmitting to "off-air" antennas;
 
     - direct broadcast satellite providers, which transmit programming signals
       via satellite;
 
     - telephone companies providing video, Internet and other
       telecommunications services;
 
     - operators of satellite master antenna television systems, a distribution
       system that feeds satellite signals to multiple dwelling units such as
       hotels and apartments;
 
     - utilities which possess fiber optic transmission lines capable of
       transmitting signals with minimum signal loss or distortion; and
 
     - multichannel multipoint distribution systems, or wireless cable, which
       distribute cable television signals through microwave technology.
 
     Direct broadcast satellite, known as DBS, has emerged as significant
competition to cable operators. DBS has grown rapidly over the last several
years, far exceeding the growth rate of the cable television industry. The U.S.
Congress is considering proposals to remove existing copyright rules and permit
DBS providers to transmit local broadcast signals to local markets on a broader
basis than permitted under current law. If DBS operators gain permission and are
able to deliver local or regional broadcast signals more broadly, cable system
operators will lose a significant competitive advantage over direct broadcast
satellite providers. The continued growth of DBS providers and other competitors
may adversely affect our growth, financial condition and results of operations.
 
     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 has initiated an administrative proceeding to consider its authority
and the possibility of rules to facilitate the deployment of advanced
communications services, including high speed broadband services and interactive
online Internet services. We are unable to predict the ultimate outcome of any
Federal Communications Commission proceeding, the likelihood of success of the
Internet access offered by our competitors or the impact on our business and
operations of these competitive ventures.
 
     Advances in communications technology and changes in the marketplace and
the regulatory and legislative environment are constantly occurring. We cannot
predict the specific effect ongoing or future developments might have on us or
the general effect these developments might have on the cable television
industry. We also cannot predict the extent to which this competition may affect
our growth, financial condition or results of operations in the future.
 
                                       18

<PAGE>   22
 
OUR SUCCESS DEPENDS IN LARGE PART ON OUR ABILITY TO SUCCESSFULLY OFFER NEW
PRODUCTS AND SERVICES AND TO KEEP PACE WITH ADVANCES IN TECHNOLOGY. IF WE ARE
UNABLE TO DO THIS, CONSUMERS MAY STOP USING OUR SERVICES AND OUR REVENUES WOULD
CONSEQUENTLY DECLINE.
 
     We are in the early stages of introducing new products and services such as
digital television, interactive video programming and high-speed Internet
access, and we are exploring opportunities in Internet protocol telephony. Our
inability to introduce in a timely manner, effectively market and sell these new
products and services, could have a material adverse effect on our ability to
compete, and consequently have a material adverse effect on our business,
financial condition and results of operations. We cannot assure you that we will
have sufficient funds to offer the new products and services necessary to
compete effectively, that these new products and services will be technically
feasible or, that once we accomplish our system upgrades or commence new product
and service offerings, there will be adequate demand for new products and
services. Technology in the cable television and telecommunications industry is
changing very rapidly and we cannot assure you that the technology we use or
will use in offering our products and services will not be rendered obsolete by
new and superior technology. In addition, many of the new products and services
that we intend to offer may also be offered by well established competitors that
have substantially greater financial resources and market presence than us.
 
              RISKS RELATED TO 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.
 
     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 expect further efforts of this type, but cannot predict whether 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 U.S. Congress and the Federal Communications
Commission to require all cable operators, including us, 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. A federal
district court in Portland, Oregon, recently upheld the legality of an open
access requirement. This decision is currently under appeal. 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 so that
these companies may deliver Internet services directly to
                                       19

<PAGE>   23
 
customers over cable facilities. 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. In addition, our
Internet service provider competitors would be strengthened. We may also decide
not to upgrade our systems which would prevent us from introducing our planned
new products and services. In addition, we cannot assure you that if we were
required to provide access in this manner, it would not adversely impact our
profitability in many ways, including any or all of the following:
 
     - significantly increasing competition;
 
     - increasing the expenses we incur to maintain our systems; and
 
     - increasing the expense of upgrading and/or expanding our systems.
 
OUR CABLE SYSTEMS ARE OPERATED UNDER FRANCHISES WHICH SUBJECT US TO REGULATION
BY LOCAL FRANCHISE AUTHORITIES AND INCREASE OUR EXPENSES.
 
     Our cable systems generally operate pursuant to non-exclusive franchises,
permits or licenses typically granted by a municipality or other state or local
government controlling the public rights-of-way. 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. In many cases,
franchises are terminable if the franchisee fails to comply with material
provisions set forth in the franchise agreement governing system operations.
Many franchises establish specific customer service standards and establish
monetary penalties for non-compliance. In addition to the franchise document,
cable authorities have also adopted in some jurisdictions regulatory ordinances
that further regulate the operation of cable systems. This additional 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. A sustained failure to renew material franchises could adversely
affect our business in the affected metropolitan area. Local franchising
authorities may also 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.
 
DESPITE RECENT DEREGULATION OF EXPANDED BASIC CABLE PROGRAMMING PACKAGES, WE ARE
CONCERNED THAT CABLE RATE INCREASES COULD GIVE RISE TO FURTHER REGULATION. THIS
COULD IMPAIR OUR ABILITY TO RAISE RATES TO COVER OUR INCREASING COSTS OR CAUSE
US TO DELAY OR CANCEL SERVICE OR PROGRAMMING ENHANCEMENTS.
 
     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 U.S. Congress continue to be concerned
that cable rate increases are exceeding inflation. It is possible that either
the Federal Communications Commission or U.S. 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 telephone or other telecommunications
services, we may be required to obtain federal, state and local licenses or
other authorizations to offer these
                                       20

<PAGE>   24
 
services. We may not be able to obtain such authorizations in a timely manner,
if 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. 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.
 
                         RISKS RELATED TO THE OFFERING
 
RISKS OF EXTREME VOLATILITY OF MARKET PRICE OF CLASS A COMMON STOCK.
 
     The initial public offering price that we determine, with the assistance of
the underwriters, may have no relation to the price at which the Class A common
stock trades after completion of the offering. Among the factors considered in
determining the initial public offering price will be our prospects and those of
the cable industry in general, as well as the revenues, earnings and other
financial and operating information and the market prices of securities of
companies engaged in activities similar to ours. The market price of the Class A
common stock may be extremely volatile for many reasons, including:
 
     - actual or anticipated variations in our revenues and operating results;
 
     - a public market for the Class A common stock may not develop;
 
     - announcements of the development of improved or competitive technologies;
 
     - the use of new products or promotions by us or our competitors;
 
     - the offer and sale by us in the future of additional shares of Class A
       common stock or other securities;
 
     - changes in financial forecasts by securities analysts;
 
     - new conditions or trends in the cable industry; and
 
     - market conditions.
 
THE MARKET PRICE FOR OUR CLASS A COMMON STOCK COULD BE ADVERSELY AFFECTED BY THE
LARGE NUMBER OF ADDITIONAL SHARES ELIGIBLE FOR ISSUANCE IN THE FUTURE.
 
     Immediately following the offering,        shares of Class A common stock
will be issued and outstanding. An additional        shares of Class A common
stock will be issuable upon the exchange of membership units in Charter Holdco
not owned by us and the conversion of shares of outstanding Class B common stock
and Class B common stock issuable in exchange for Charter Holdco membership
units. Some of these exchangeable membership units will be issued in connection
with the Rifkin, Falcon and Bresnan acquisitions. For the purposes of
calculating the number of shares eligible for sale in the future, we have
assumed that, in each instance, the relevant sellers will elect to receive the
maximum number of exchangeable membership units that they are entitled to
receive. Substantially all of the shares of Class A common stock issuable upon
exchange of Charter Holdco membership units and all shares of Class A common
stock issuable upon conversion of shares of our Class B common stock will have
"demand" and "piggyback" registration rights attached to them, including those
issuable to Mr. Allen through
 
                                       21

<PAGE>   25
 
Charter Investment and Vulcan III. "Demand" rights enable the holders to demand
that their shares be registered and may require us to file a registration
statement under the Securities Act of 1933 at our expense. "Piggyback" rights
provide for notice to the relevant holders if we propose to register any of our
securities under the Securities Act, and such holders may include their shares
in the registration statement. Shares of Class A common stock not held by our
affiliates will be freely saleable at the end of the relevant restricted period
pursuant to Rule 144. The sale of a substantial number of shares of Class A
common stock, or the perception that such sales could occur, could adversely
affect prevailing market prices for the Class A common stock. In addition, any
such sale or perception that such sale could occur could make it more difficult
for us to sell equity securities or equity-related securities in the future at a
time and price that we deem appropriate. CCI, all of its directors and executive
officers, Charter Investment and Vulcan III have agreed not to dispose of or
hedge any of their Class A common stock or any of their Charter Holdco
membership units or securities convertible into or exchangeable for Class A
common stock or membership units during the period from the date of this
prospectus continuing through the date 180 days after the date of this
prospectus, except with the prior written consent of Goldman, Sachs & Co. See
"Shares Eligible For Future Sale" and "Underwriting".
 
YOU WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION RESULTING IN YOUR STOCK
BEING WORTH LESS ON A NET TANGIBLE BOOK VALUE BASIS THAN THE AMOUNT YOU
INVESTED.
 
     Purchasers of the Class A common stock offered hereby will experience an
immediate dilution in net tangible book value of $       per share of Class A
common stock purchased. To the extent outstanding options to purchase
exchangeable membership interests in Charter Holdco are exercised and the
membership units issued upon this exercise are exchanged for shares of Class A
common stock, there may be further dilution. Accordingly, in the event we are
liquidated, investors may not receive the full amount of their investment. See
"Dilution".
 
                                       22

<PAGE>   26
 

                                USE OF PROCEEDS
 
     We estimate that the net proceeds from our sale of           shares of
Class A common stock will be $          , after deducting underwriting discounts
and estimated offering expenses. This assumes an initial public offering price
of $     per share, which is the mid-point of the range appearing on the cover
page of this prospectus. In addition, concurrently with the closing of the
offering, Charter Holdco will receive proceeds of $750 million from an equity
contribution by Mr. Allen, through Vulcan III, for membership units at a
purchase price per membership unit equal to the net initial public offering
price per share.
 
     CCI intends to use the net proceeds from the offering to acquire
               membership units, representing an approximate      % equity
interest in Charter Holdco, making all of the assumptions described on page 2
with respect to our organizational chart. The price per membership unit to be
acquired by CCI will be equal to the net price per share of the Class A common
stock sold in the offering.
 
     Charter Holdco will use its proceeds from the sale of the membership units
to CCI, together with the proceeds from the $750 million equity contribution
described above, to finance a portion of the purchase prices in the Fanch,
Falcon and Avalon acquisitions. The amounts of proceeds that will be used to pay
these portions of the purchase price will be $       , $       and $       ,
respectively. These amounts include related transaction fees and expenses and
the Falcon amount assumes that the sellers in this transaction exercise in full
their rights to acquire Charter Holdco membership units. We expect, but cannot
guarantee, that these acquisitions will be consummated in the fourth quarter of
1999. See "Business -- Acquisitions" for further information on these
acquisitions.
 
     Pending Charter Holdco's use of the net proceeds of this offering as
described above, we may use the net proceeds to repay outstanding debt or we may
invest the funds in appropriate investments as determined by us.
 
     We intend to raise additional equity to finance the Bresnan acquisition
which we estimate will require a cash payment of $1.1 billion, including related
fees and expenses. See "Risk Factors -- We may not be able to obtain capital
sufficient to consummate our pending acquisitions".
 
                                       23

<PAGE>   27
 

                                DIVIDEND POLICY
 
     We do not expect to pay any cash dividends on our Class A common stock in
the foreseeable future. Charter Holdco is required under certain circumstances
to pay distributions pro rata to all its common members to the extent necessary
for any common member to pay taxes incurred with respect to its taxable income.
Covenants in the indentures and credit agreements governing the indebtedness of
Charter Holdco's subsidiaries restrict their ability to make distributions to us
and, accordingly, limit our ability to declare or pay cash dividends. We intend
to cause Charter Holdco and its subsidiaries to retain future earnings, if any,
to finance the expansion of the business of Charter Holdco and its subsidiaries.
 
                                       24

<PAGE>   28
 

                                 CAPITALIZATION
 
     The following table sets forth as of March 31, 1999 on a consolidated
basis:
 
     - the actual capitalization of Charter Holdco;
 
     - the pro forma capitalization of CCI to reflect:
 
        (1) the issuance and sale by us of the shares of our Class A common
            stock offered in this prospectus for total net proceeds of $2.84
            billion, after deducting underwriting discounts and estimated
            offering expenses totaling $160 million; and
 
        (2) the purchase by us of      membership units in Charter Holdco
            resulting in the consolidation of Charter Holdco by CCI; and
 
     - the pro forma as adjusted capitalization of CCI assuming that as of March
31, 1999:
 
        (1) all acquisitions closed since March 31, 1999 had been completed;
 
        (2) all of our pending acquisitions had been completed;
 
        (3) Mr. Allen, through Vulcan III, had made a $1.325 billion equity
            contribution to Charter Holdco;
 
        (4) Mr. Allen, through Vulcan III, had purchased membership units from
            Charter Holdco for $750 million at a price per membership unit equal
            to the net initial public offering price per share; and
 
        (5) an additional $1.1 billion equity contribution had been made to
            Charter Holdco for membership units to fund a portion of the
            purchase price in the Bresnan acquisition.
 
     This table should be read in conjunction with the "Unaudited Pro Forma
Financial Statements" and the accompanying notes included elsewhere in this
prospectus. See also "Use of Proceeds".
 
                                       25

<PAGE>   29
 

<TABLE>
<CAPTION>
                                                             AS OF MARCH 31, 1999
                                                   ----------------------------------------
                                                                            CCI
                                                    CHARTER      --------------------------
                                                     HOLDCO                      PRO FORMA
                                                     ACTUAL       PRO FORMA     AS ADJUSTED
                                                   ----------    -----------    -----------
                                                      (IN THOUSANDS, EXCEPT SHARE DATA)
<S>                                                <C>           <C>            <C>
Long-term debt:
  Credit facilities..............................  $1,750,000    $ 1,750,000    $ 5,921,071
  8.250% senior notes -- CC Holdings.............     598,398        598,398        598,398
  8.625% senior notes -- CC Holdings.............   1,495,480      1,495,480      1,495,480
  9.920% senior discount notes -- CC Holdings....     909,055        909,055        909,055
  10% senior discount notes -- Renaissance.......          --             --         82,616
  Notes and debentures -- Falcon(a)..............          --             --        698,124
  Notes -- Avalon(b).............................          --             --        278,730
  Notes -- Bresnan(c)............................          --             --        359,025
  Other(d).......................................       1,085          1,085         26,085
                                                   ----------    -----------    -----------
  Total long-term debt...........................   4,754,018      4,754,018     10,368,584
                                                   ----------    -----------    -----------
Members' equity(e)...............................   3,326,142             --             --
                                                   ----------    -----------    -----------
Minority interest(e)(f)..........................          --      3,326,142      7,813,771
                                                   ----------    -----------    -----------
Stockholders' equity:
  Class A common stock; $.001 par value;
     shares authorized;        shares issued and
     outstanding on a pro forma basis............          --          3,000          3,000
  Class B common stock; $     par value;
     shares authorized;        shares issued and
     outstanding on a pro forma basis............          --             --             --
  Preferred stock; $.001 par value;
     shares authorized; no shares issued and
     outstanding.................................          --             --             --
  Additional paid-in capital.....................                  2,837,000      2,837,000
                                                   ----------    -----------    -----------
     Total stockholders' equity(f)(g)............          --      2,840,000      2,840,000
                                                   ----------    -----------    -----------
          Total capitalization...................  $8,080,160    $10,920,160    $21,022,355
                                                   ==========    ===========    ===========
</TABLE>

 
---------------
 (a) Consists of 8.375% senior debentures of $380,625, 9.285% senior discount
     debentures of $302,499, and 11.56% subordinated notes of $15,000.
 
 (b) Consists of 9.375% senior subordinated notes of $155,250 and 11.25% senior
     discount notes of $123,480.
 
 (c) Consists of 8.0% senior notes of $173,400 and 9.25% senior discount notes
     of $185,625.
 
 (d) Represents preferred limited liability company interests in one of Charter
     Operating's subsidiaries issued to one of the Helicon sellers and notes of
     certain subsidiaries not tendered.
 
 (e) Actual members' equity of Charter Holdco becomes pro forma minority
     interest in the consolidated balance sheet of CCI upon the consolidation of
     Charter Holdco into CCI. Pro forma as adjusted minority interest includes
     additional equity contributions into Charter Holdco by Mr. Allen, through
     Vulcan III, of $2.075 billion, and additional equity interests in Charter
     Holdco membership units issued to sellers of Falcon and Bresnan recorded at
     $1.3 billion. We expect an additional $1.1 billion equity contribution to
     Charter Holdco to fund the Bresnan acquisition. If we funded this part of
     the Bresnan purchase price with debt, total long-term debt would increase
     to $11.5 billion and minority interest would decrease to $6.7 billion.
 
                                       26

<PAGE>   30
 
 (f) Approximately      % of the equity interests of Charter Holdco are
     exchangeable for Class A common stock of CCI at the option of the equity
     holder. If all equity holders in Charter Holdco except Mr. Allen's
     affiliates exchanged their units for Class A common stock, total
     stockholders' equity would increase by $1.3 billion and minority interest
     would decrease by $1.3 billion.
 
 (g) Assuming the underwriters' option to purchase additional shares of Class A
     common stock is exercised, total stockholders' equity would increase by
     $          .
 
                                       27

<PAGE>   31
 
                                    DILUTION
 
     The following table illustrates the dilution in pro forma net tangible book
value (total assets less total liabilities) on a per share basis. In calculating
the dilution, we have made the same assumptions described on page 2 above with
respect to our organizational chart. We have also assumed the issuance of
       shares of Class A common stock offered in this prospectus.
 

<TABLE>
<S>                                                             <C>
Initial public offering price per share.....................    $
  Pro forma net tangible book value per share at March 31,
     1999...................................................    $
  Increase in pro forma net tangible book value per share
     attributable to new investors purchasing shares in the
     offering...............................................
                                                                ------
Pro forma net tangible book value per share after the
  offering..................................................
                                                                ------
Pro forma dilution per share to new investors assuming the
  exchange of all membership units of Charter Holdco for
  shares of our Class A common stock........................    $
                                                                ======
</TABLE>

 
     The following table summarizes the relative investment in Charter Holdings
of the existing holders of Charter Holdco membership units and us, giving pro
forma effect to the sale of Charter Holdco membership units to us.
 

<TABLE>
<CAPTION>
                                          SHARES PURCHASED         CONSIDERATION        AVERAGE
                                        --------------------   ---------------------   PRICE PER
                                          NUMBER     PERCENT      PAID       PERCENT     SHARE
                                        ----------   -------   -----------   -------   ---------
<S>                                     <C>          <C>       <C>           <C>       <C>
Existing holders of membership
  units...............................                     %   $                   %    $
Charter Communications, Inc...........
                                        ----------    -----    -----------    -----
          Total.......................                     %   $                   %
                                        ==========    =====    ===========    =====
</TABLE>

 
     The table above and related discussion assumes no exercise of any stock
options outstanding. At June 30, 1999, there were options outstanding to
purchase        membership units at a weighted-average exercise price of 
$     per unit. Membership units received upon exercise of these options will 
be automatically exchanged for shares of Class A common stock on a one-for-one
basis. To the extent that any of these options are exercised, there will be
further dilution to the new investors.
 
                                       28

<PAGE>   32
 
                    UNAUDITED PRO FORMA FINANCIAL STATEMENTS
 
     The following Unaudited Pro Forma Financial Statements of CCI are based on
the pro forma financial statements of Charter Holdco. Prior to the issuance and
sale by CCI of Class A common stock in the offering, CCI is a holding company
with no material assets or operations. The net proceeds from the initial public
offering will be used to purchase membership units in Charter Holdco, including
a controlling voting interest. As a result, CCI will consolidate the financial
statements of Charter Holdco. Charter Holdco has recently closed several
acquisitions and has numerous pending acquisitions. Charter Holdco's financial
statements are adjusted on a pro forma basis to illustrate the estimated effects
of its recently completed and pending acquisitions as if such transactions had
occurred on March 31, 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 Holdco on December 23, 1998 by Mr. Allen;
 
     (2) the acquisition of Sonic Communications Inc. on May 20, 1998 by Charter
         Holdco;
 
     (3) the acquisition of Marcus Holdings on April 23, 1998 by an affiliate of
         Mr. Allen;
 
     (4) the acquisitions and dispositions during 1998 by Marcus Holdings;
 
     (5) Charter Holdco's merger with Marcus Holdings;
 
     (6) Charter Holdco's recently completed and pending acquisitions; and
 
     (7) the refinancing of all debt of our subsidiaries.
 
     The Unaudited Pro Forma Financial Statements also illustrate the estimated
effects of the issuance and sale by CCI of the shares of Class A common stock,
after deducting underwriting discounts and estimated offering expenses, and the
equity contribution of the net proceeds to Charter Holdco. We have assumed the
net proceeds would purchase a 25% economic interest in Charter Holdco. As such,
the consolidated pro forma financial statements of CCI show a minority interest
equal to the equity of Charter Holdco prior to the investment by CCI and show
75% of the net losses of Charter Holdco being allocated to the minority
interest.
 
     The Unaudited Pro Forma Financial Statements reflect the application of the
principles of purchase accounting to the transactions listed in items (1)
through (4) and (6). The allocation of purchase price is based, in part, on
preliminary information which is subject to adjustment upon obtaining complete
valuation information of intangible assets. We believe that finalization of the
purchase price allocation will not have a material impact on the results of
operations or financial position of CCI or Charter Holdco.
 
     The unaudited pro forma adjustments are based upon available information
and certain assumptions that we believe are reasonable. In particular, we assume
that the sellers of Rifkin will elect all cash for payment of the Rifkin
purchase price. The Rifkin sellers may elect to take a portion of the purchase
price in Charter Holdco membership units. In addition, we assume that we will
raise an additional $1.1 billion of equity to fund in part the closing of the
Bresnan transaction. We also assume that specified sellers in the Falcon
acquisition elect to receive the maximum of the $450-$550 million range of the
purchase price payable in Charter Holdco membership units. We may choose to fund
the Bresnan transaction with debt. The estimated impact of such items is
disclosed in the notes.
 
     In addition, Charter Holdco membership units not held by CCI are
exchangeable for common stock of CCI. We assume no such equity interests are
exchanged. The impact of such is disclosed in the notes set out below. The
Unaudited Pro Forma Financial Statements and accompanying notes should be read
in conjunction with the historical financial statements and other financial
information appearing elsewhere in this prospectus, including "Capitalization"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations".
                                       29

<PAGE>   33
 
     The Unaudited Pro Forma Financial Statements of CCI 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.
 

<TABLE>
<CAPTION>
                                                          UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
                                                               THREE MONTHS ENDED MARCH 31, 1999
                               --------------------------------------------------------------------------------------------------
                                               RECENT                       PENDING        REFINANCING    OFFERING
                                CHARTER     ACQUISITIONS                  ACQUISITIONS     ADJUSTMENTS   ADJUSTMENTS
                                 HOLDCO       (NOTE A)      SUBTOTAL        (NOTE A)        (NOTE B)      (NOTE C)       TOTAL
                               ----------   ------------   ----------   ----------------   -----------   -----------   ----------
                                                   (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND CUSTOMER DATA)
<S>                            <C>          <C>            <C>          <C>                <C>           <C>           <C>
Revenues.....................  $  286,135     $ 44,877     $  331,012      $  380,178       $     --      $     --     $  711,190
                               ----------     --------     ----------      ----------       --------      --------     ----------
Operating expenses:
  Operating, general and
    administrative...........     152,075       22,605        174,680         204,069             --            --        378,749
  Depreciation and
    amortization.............     153,747       22,691        176,438         247,548             --            --        423,986
  Corporate expense charges
    (Note D).................       5,323        1,757          7,080           3,038             --            --         10,118
  Management fees............          --          275            275           4,218             --            --          4,493
                               ----------     --------     ----------      ----------       --------      --------     ----------
    Total operating
      expenses...............     311,145       47,328        358,473         458,873             --            --        817,346
                               ----------     --------     ----------      ----------       --------      --------     ----------
Loss from operations.........     (25,010)      (2,451)       (27,461)        (78,695)            --            --       (106,156)
Interest expense.............     (71,591)     (15,122)       (86,713)       (113,728)       (18,000)           --       (218,441)
Interest income..............       1,733          108          1,841             550             --            --          2,391
Other income (expense).......          15          (16)            (1)           (121)            --            --           (122)
                               ----------     --------     ----------      ----------       --------      --------     ----------
Income (loss) before minority
  interest...................     (94,853)     (17,481)      (112,334)       (191,994)       (18,000)           --       (322,328)
Minority interest............          --           --             --              --             --       241,746        241,746
                               ----------     --------     ----------      ----------       --------      --------     ----------
Net loss.....................  $  (94,853)    $(17,481)    $ (112,334)     $ (191,994)      $(18,000)     $241,746     $  (80,582)
                               ==========     ========     ==========      ==========       ========      ========     ==========
Basic loss per share.........                                                                                          $
                                                                                                                       ==========
Diluted loss per share.......                                                                                          $
                                                                                                                       ==========
Weighted average shares
  outstanding:
  Basic......................
  Diluted....................
OTHER FINANCIAL DATA:
EBITDA (Note E)..............  $  128,752     $ 20,224     $  148,976      $  168,732                                  $  317,708
EBITDA margin (Note F).......        45.0%        45.1%          45.0%           44.4%                                       44.7%
Adjusted EBITDA (Note G).....     134,060       22,272        156,332         176,109                                     332,441
Cash flows from operating
  activities.................      45,824       13,862         59,686          73,796                                     133,482
Cash interest expense........                                                                                             175,800
Capital expenditures.........     109,629        7,201        116,830         138,950                                     255,780
OPERATING DATA (AT END OF
  PERIOD, EXCEPT FOR
  AVERAGES):
Homes passed.................   3,977,000      512,000      4,489,000       4,847,000                                   9,336,000
Basic customers..............   2,344,000      374,000      2,718,000       3,363,000                                   6,081,000
Basic penetration (Note H)...        58.9%        73.0%          60.5%           69.4%                                       65.1%
Premium units................   1,322,000      230,000      1,552,000       1,334,000                                   2,886,000
Premium penetration (Note
  I).........................        56.4%        61.5%          57.1%           39.7%                                       47.5%
Average monthly revenue per
  basic customer (Note J)....  $    40.69     $  40.00     $    40.60      $    37.68                                  $    38.98
</TABLE>

 
                                       30

<PAGE>   34
 
              NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
 
     NOTE A:  Pro forma operating results for our recent acquisitions and
pending acquisitions consist of the following (dollars in thousands):
 

<TABLE>
<CAPTION>
                                                                  THREE MONTHS ENDED MARCH 31, 1999
                                                              ------------------------------------------
                                                                  RECENT ACQUISITIONS -- HISTORICAL
                                                              ------------------------------------------
                                                                                       GREATER
                                                                            AMERICAN    MEDIA     TOTAL
                                                              RENAISSANCE    CABLE     SYSTEMS   RECENT
                                                              -----------   --------   -------   -------
<S>                                                           <C>           <C>        <C>       <C>
Revenues....................................................    $15,254     $ 9,151    $20,394   $44,799
                                                                -------     -------    -------   -------
Operating expenses:
  Operating, general and administrative.....................      6,889       4,681    12,757     24,327
  Depreciation and amortization.............................      6,655       5,536     2,425     14,616
  Management fees...........................................         --         275        --        275
                                                                -------     -------    -------   -------
    Total operating expenses................................     13,544      10,492    15,182     39,218
                                                                -------     -------    -------   -------
Interest expense............................................     (4,797)     (2,450)     (157)    (7,404)
Interest income.............................................         90          18        --        108
Other income (expense)......................................         --          --       (16)       (16)
                                                                -------     -------    -------   -------
Income (loss) before income tax expense.....................     (2,997)     (3,773)    5,039     (1,731)
Income tax expense..........................................         58          --     2,088      2,146
                                                                -------     -------    -------   -------
Income (loss) before extraordinary item.....................    $(3,055)    $(3,773)   $2,951    $(3,877)
                                                                =======     =======    =======   =======
</TABLE>

 

<TABLE>
<CAPTION>
                                                                 THREE MONTHS ENDED MARCH 31, 1999
                                                                PENDING ACQUISITIONS -- HISTORICAL
                                  -----------------------------------------------------------------------------------------------
                                  INTERMEDIA                                                                              TOTAL
                                   SYSTEMS     HELICON   RIFKIN(A)    AVALON     FALCON     FANCH    BRESNAN    OTHER    PENDING
                                  ----------   -------   ---------   --------   --------   -------   --------   ------   --------
<S>                               <C>          <C>       <C>         <C>        <C>        <C>       <C>        <C>      <C>
Revenues........................   $ 48,288    $21,252   $ 50,914    $ 24,577   $105,809   $48,874   $ 67,295   $3,354   $370,363
                                   --------    -------   --------    --------   --------   -------   --------   ------   --------
Operating expenses:
  Operating, general and
    administrative..............     26,080     11,277     27,028      13,821     57,810    22,596     41,007    1,594    201,213
  Depreciation and
    amortization................     26,100      6,828     26,187      10,839     54,426    15,708     13,669      938    154,695
  Management fees...............        781      1,063        841          --         --     1,078         --       --      3,763
                                   --------    -------   --------    --------   --------   -------   --------   ------   --------
    Total operating expenses....     52,961     19,168     54,056      24,660    112,236    39,382     54,676    2,532    359,671
                                   --------    -------   --------    --------   --------   -------   --------   ------   --------
Income (loss) from operations...     (4,673)     2,084     (3,142)        (83)    (6,427)    9,492     12,619      822     10,692
Interest expense................     (5,778)    (7,821)   (11,414)    (11,730)   (32,445)     (261)   (14,546)    (758)   (84,753)
Interest income.................         77         51         --         299         --        41         --                 468
Other income (expense)..........         --         --     (3,851)         --     10,738       (22)      (263)      --      6,602
                                   --------    -------   --------    --------   --------   -------   --------   ------   --------
Income (loss) before income tax
  expense (benefit).............    (10,374)    (5,686)   (18,407)    (11,514)   (28,134)    9,250     (2,190)      64    (66,991)
Income tax expense (benefit)....     (1,396)        --       (537)     (1,362)    (1,134)       61         --       --     (4,368)
                                   --------    -------   --------    --------   --------   -------   --------   ------   --------
Income (loss) before
  extraordinary item............   $ (8,978)   $(5,686)  $(17,870)   $(10,152)  $(27,000)  $ 9,189   $ (2,190)  $   64   $(62,623)
                                   ========    =======   ========    ========   ========   =======   ========   ======   ========
</TABLE>

 
                                       31

<PAGE>   35

<TABLE>
<CAPTION>
                                                 THREE MONTHS ENDED MARCH 31, 1999
                       --------------------------------------------------------------------------------------
                                        RECENT ACQUISITIONS                          PENDING ACQUISITIONS
                       ------------------------------------------------------    ----------------------------
                                                    PRO FORMA                                    PRO FORMA
                                    -----------------------------------------                 ---------------
                       HISTORICAL   ACQUISITIONS(B)   ADJUSTMENTS     TOTAL      HISTORICAL   ACQUISITIONS(B)
                       ----------   ---------------   -----------    --------    ----------   ---------------
<S>                    <C>          <C>               <C>            <C>         <C>          <C>
Revenues.............   $44,799          $ 78          $     --      $ 44,877     $370,363       $ 26,334
                        -------          ----          --------      --------     --------       --------
Operating expenses:
  Operating, general
    and
    administrative...    24,327            35            (1,757)(d)    22,605      201,213         14,105
  Depreciation and
    amortization.....    14,616            34             8,041(e)     22,691      154,695          7,068
  Corporate expense
    charges..........        --            --             1,757(d)      1,757           --             --
  Management fees....       275            --                --           275        3,763            913
                        -------          ----          --------      --------     --------       --------
  Total operating
    expenses.........    39,218            69             8,041        47,328      359,671         22,086
                        -------          ----          --------      --------     --------       --------
Income (loss) from
  operations.........     5,581             9            (8,041)       (2,451)      10,692          4,248
Interest expense.....    (7,404)          (25)           (7,693)(f)   (15,122)     (84,753)        (1,601)
Interest income......       108            --                --           108          468             82
Other income
  (expense)..........       (16)           --                --           (16)       6,602         49,029
                        -------          ----          --------      --------     --------       --------
Income (loss) before
  income tax expense
  (benefit)..........    (1,731)          (16)          (15,734)      (17,481)     (66,991)        51,758
Income tax (benefit)
  expense............     2,146            --            (2,146)(h)        --       (4,368)         1,288
                        -------          ----          --------      --------     --------       --------
Income (loss) before
  extraordinary
  item...............   $(3,877)         $(16)         $(13,588)     $(17,481)    $(62,623)      $ 50,470
                        =======          ====          ========      ========     ========       ========
 
<CAPTION>
                           THREE MONTHS ENDED MARCH 31, 1999
                       ------------------------------------------
                                  PENDING ACQUISITIONS
                       ------------------------------------------
                                       PRO FORMA
                       ------------------------------------------
                       DISPOSITIONS(C)   ADJUSTMENTS      TOTAL
                       ---------------   -----------    ---------
<S>                    <C>               <C>            <C>
Revenues.............     $(16,519)       $      --     $ 380,178
                          --------        ---------     ---------
Operating expenses:
  Operating, general
    and
    administrative...       (8,211)          (3,038)(d)   204,069
  Depreciation and
    amortization.....       (7,101)          92,886(e)    247,548
  Corporate expense
    charges..........           --            3,038(d)      3,038
  Management fees....         (458)              --         4,218
                          --------        ---------     ---------
  Total operating
    expenses.........      (15,770)          92,886       458,873
                          --------        ---------     ---------
Income (loss) from
  operations.........         (749)         (92,886)      (78,695)
Interest expense.....           22          (27,396)(f)  (113,728)
Interest income......           --               --           550
Other income
  (expense)..........       (2,555)         (53,197)(g)      (121)
                          --------        ---------     ---------
Income (loss) before
  income tax expense
  (benefit)..........       (3,282)        (173,479)     (191,994)
Income tax (benefit)
  expense............           --            3,080(h)         --
                          --------        ---------     ---------
Income (loss) before
  extraordinary
  item...............     $ (3,282)       $(176,559)    $(191,994)
                          ========        =========     =========
</TABLE>

 
---------------
 
(a) 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 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........................    $24,017        $1,351      $2,102    $ 6,146   $17,298   $ 50,914
Income (loss) from operations...        467           404        (361)    (4,523)      871     (3,142)
Income (loss) before
  extraordinary item............     (5,000)          305        (564)    (5,131)   (7,480)   (17,870)
</TABLE>

 
(b) Represents the historical results of operations for the period from January
    1, 1999 through the date of purchase for acquisitions completed by Rifkin,
    and for the period from January 1, 1999 through March 31, 1999 for
    acquisitions to be completed by Fanch and Bresnan subsequent to March 31,
    1999.
 
                                       32

<PAGE>   36
 
     These acquisitions will be accounted for using the purchase method of
accounting. A definitive written agreement exists for all acquisitions that have
not yet closed. The purchase price in millions and anticipated closing dates for
significant acquisitions are as follows:
 

<TABLE>
<CAPTION>
                                                  RIFKIN               FANCH          BRESNAN
                                               ACQUISITIONS         ACQUISITIONS    ACQUISITIONS
                                           ---------------------    ------------    ------------
<S>                                        <C>                      <C>             <C>
Purchase price.........................    $165.0                   $248.0          $40.0
Closing date...........................    Feb. 1999                Feb. 1999       Jan. 1999
 
Purchase price.........................    $53.8                    $112.0          $27.0
Closing date...........................    anticipated July 1999    March 1999      March 1999
 
Purchase price.........................                             $50.0
Closing date...........................                             June 1999
</TABLE>

 
(c) Represents the elimination of the operating results primarily related to the
    cable systems to be transferred to InterMedia. A definitive written
    agreement exists for the disposition on these systems. The fair value of our
    systems to be transferred is $420 million. No material gain or loss is
    anticipated on the disposition as these systems were recently acquired and
    recorded at fair value at that time. It is anticipated that this transfer
    will close during the third or fourth quarter of 1999.
 
(d) Reflects a reclassification of expenses representing corporate expenses that
    would have occurred at Charter Investment.
 
(e) Represents additional amortization of franchises as a result of our recent
    and pending acquisitions. A large portion of the purchase price was
    allocated to franchises ($12.2 billion) that are amortized over 15 years.
    Depreciation and amortization expense consists of the following (in
    millions):
 

<TABLE>
<S>                                                           <C>
Amortization of franchises..................................  $203.3
Depreciation................................................    66.9
                                                              ------
     Total depreciation and amortization....................  $270.2
                                                              ======
</TABLE>

 
(f) Reflects additional interest expense on borrowings under the credit
    facilities which will be used to finance the acquisitions using a composite
    current interest rate of 7.3% (See Note B).
 
(g) Represents the elimination of gain (loss) on sale of assets.
 
(h) Reflects the elimination of income tax expense (benefit) as a result of
    being acquired by a limited liability company.
 
                                       33

<PAGE>   37
 
     NOTE B:  In March 1999, we extinguished substantially all of our long-term
debt, excluding borrowings of our previous credit facilities and refinanced all
previous credit facilities. In addition, we incurred and plan to incur
additional debt in connection with our pending and recently completed
acquisitions. See "Capitalization". The refinancing adjustment to interest
expense consists of the following (dollars in thousands):
 

<TABLE>
<CAPTION>
                                                              INTEREST
                        DESCRIPTION                           EXPENSE
                        -----------                           --------
<S>                                                           <C>
$600 million 8.25% senior notes.............................  $ 12,400
$1.5 billion 8.625% senior notes............................    32,400
$1.475 billion 9.92% senior discount notes..................    22,450
Credit facilities (at composite current rate of 7.4%).......    61,750
Amortization of debt issuance costs.........................     3,900
Commitment fee on unused portion of our credit facilities
  ($267,000 at 0.375%)......................................       250
10% senior discount notes -- Renaissance....................     2,000
8.375% senior debentures -- Falcon..........................     8,100
9.285% senior discount debentures -- Falcon.................     7,000
11.56% subordinated notes -- Falcon.........................       400
9.375% senior subordinated notes -- Avalon..................     3,600
11.875% senior discount notes -- Avalon.....................     3,700
8.0% senior notes -- Bresnan................................     3,500
9.25% senior discount notes -- Bresnan......................     4,300
Credit facilities of acquisitions (at composite current rate
  of 7.3%)..................................................    51,900
Other.......................................................       750
                                                              --------
  Total pro forma interest expense..........................   218,400
  Less -- interest expense (including our recent and pending
     acquisitions)..........................................  (200,400)
                                                              --------
     Adjustment.............................................  $ 18,000
                                                              ========
</TABLE>

 
     An increase in the interest rate of 0.125% on the credit facilities would
result in an increase in interest expense of $1.9 million. Additionally, the
Rifkin sellers may take up to $250 million in equity in Charter Holdco instead
of cash. This would reduce interest expense by up to $4.6 million. Finally, if
we elect to fund the $1.1 billion necessary to close the Bresnan transaction
with debt, interest expense would increase $22.0 million, assuming an 8%
interest rate.
 
     NOTE C:  Represents the allocation of 75% of the net loss of Charter Holdco
to the minority interest.
 
     NOTE D:  Charter Investment has provided corporate management and
consulting services to Charter Holdco. In connection with the offering, the
existing management agreement will be assigned to CCI and CCI will enter into a
new management agreement with Charter Holdco. See "Certain Relationships and
Related Transactions".
 
     NOTE E:  EBITDA represents earnings (loss) before interest, income taxes,
depreciation and amortization. EBITDA is presented because it is a widely
accepted financial indicator of a cable television 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. 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.
 
                                       34

<PAGE>   38
 
     NOTE G:  Adjusted EBITDA means EBITDA before corporate expenses, 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:  Basic penetration represents basic customers as a percentage of
homes passed.
 
     NOTE I:  Premium penetration represents premium units as a percentage of
basic customers.
 
     NOTE J:  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 March 31, 1999.
 
                                       35

<PAGE>   39
 

<TABLE>
<CAPTION>
                                                        UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
                                                                YEAR ENDED DECEMBER 31, 1998
                         ----------------------------------------------------------------------------------------------------------
                          CHARTER                   RECENT                     PENDING      REFINANCING    OFFERING
                          HOLDCO      MARCUS     ACQUISITIONS                ACQUISITIONS   ADJUSTMENTS   ADJUSTMENTS
                         (NOTE A)    (NOTE B)      (NOTE C)      SUBTOTAL      (NOTE C)      (NOTE D)      (NOTE E)        TOTAL
                         ---------   ---------   ------------   ----------   ------------   -----------   -----------   -----------
                                                 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND CUSTOMER DATA)
<S>                      <C>         <C>         <C>            <C>          <C>            <C>           <C>           <C>
Revenues...............  $ 611,690   $ 448,192     $171,951     $1,231,833    $1,445,014     $     --     $       --    $ 2,676,847
                         ---------   ---------     --------     ----------    ----------     --------     -----------   -----------
Operating expenses:
 Operating, general and
   administrative......    310,100     231,050       88,235        629,385       741,500           --             --      1,370,885
 Depreciation and
   amortization........    375,899     252,855       90,871        719,625       977,622           --             --      1,697,247
 Corporate expense
   charges (Note F)....     16,493      17,042        6,759         40,294        21,322           --             --         61,616
 Management fees.......         --          --        1,077          1,077        19,608           --             --         20,685
                         ---------   ---------     --------     ----------    ----------     --------     -----------   -----------
    Total operating
      expenses.........    702,492     500,947      186,942      1,390,381     1,760,052           --             --      3,150,433
                         ---------   ---------     --------     ----------    ----------     --------     -----------   -----------
Loss from operations...    (90,802)    (52,755)     (14,991)      (158,548)     (315,038)          --             --       (473,586)
Interest expense.......   (207,468)   (137,953)     (60,375)      (405,796)     (464,425)     (15,400)            --       (885,621)
                                                                                                          -----------
Other income
  (expense)............        518          --          (40)           478       (11,472)          --             --        (10,994)
                         ---------   ---------     --------     ----------    ----------     --------     -----------   -----------
Net income (loss)
  before minority
  interest.............   (297,752)   (190,708)     (75,406)      (563,866)     (790,935)     (15,400)            --     (1,370,201)
Minority interest......         --          --           --             --            --           --      1,027,651      1,027,651
                         ---------   ---------     --------     ----------    ----------     --------     -----------   -----------
Net income (loss)......  $(297,752)  $(190,708)    $(75,406)    $ (563,866)   $ (790,935)    $(15,400)    $1,027,651    $  (342,550)
                         =========   =========     ========     ==========    ==========     ========     ===========   ===========
Basic loss per share...                                                                                                 $
                                                                                                                        ===========
Diluted loss per
  share................                                                                                                 $
                                                                                                                        ===========
Weighted average shares
  outstanding:
  Basic................
  Diluted..............
OTHER FINANCIAL DATA:
EBITDA (Note G)........  $ 285,615   $ 200,100     $ 75,840     $  561,555    $  651,112                                $ 1,212,667
EBITDA margin (Note
  H)...................       46.7%       44.6%        44.1%          45.6%         45.1%                                      45.3%
Adjusted EBITDA (Note
  I)...................    301,590     217,142       83,716        602,448       703,514                                  1,305,962
Cash flows from
  operating
  activities...........    137,160     139,908       12,399        289,467        61,995                                    351,462
Cash interest
  expense..............                                                                                                     715,786
Capital expenditures...    213,353     224,723        7,001        445,077       305,151                                    750,228
OPERATING DATA (AT END
  OF PERIOD, EXCEPT FOR
  AVERAGES):
Homes passed...........  2,149,000   1,743,000      510,000      4,402,000     4,779,000                                  9,181,000
Basic customers........  1,255,000   1,062,000      365,000      2,682,000     3,232,000                                  5,914,000
Basic penetration (Note
  J)...................       58.4%       60.9%        71.6%          60.9%         67.6%                                      64.4%
Premium units..........    845,000     411,000      227,000      1,483,000     1,195,000                                  2,678,000
Premium penetration
  (Note K).............       67.3%       38.7%        62.2%          55.3%         37.0%                                      45.3%
Average monthly revenue
  per basic customer
  (Note L).............  $   40.62   $   35.17     $  39.26     $    38.27    $    37.26                                $     37.72
</TABLE>

 
                                       36

<PAGE>   40
 
            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, consist of the following (dollars in thousands):

<TABLE>
<CAPTION>
                                                               12/24/98   1/1/98
                                                               THROUGH    THROUGH
                               1/1/98 THROUGH 12/23/98         12/31/98   5/20/98
                          ----------------------------------   --------   -------
                             CCA      CHARTERCOMM
                            GROUP      HOLDINGS       CHARTER HOLDCO       SONIC    ELIMINATIONS     SUBTOTAL
                          ---------   -----------   -------------------   -------   ------------     ---------
<S>                       <C>         <C>           <C>        <C>        <C>       <C>              <C>
Revenues................  $ 324,432    $196,801     $ 49,731   $23,450    $17,276     $    --        $ 611,690
                          ---------    --------     --------   -------    -------     -------        ---------
Operating expenses:
  Operating, general and
    administrative......    164,145      98,331       25,952    12,679      8,993          --          310,100
  Depreciation and
    amortization........    136,689      86,741       16,864    13,811      2,279          --          256,384

  Management
    fees/corporate
    expense charges.....     17,392      14,780        6,176       766         --          --           39,114
                          ---------    --------     --------   -------    -------     -------        ---------
    Total operating
      expenses..........    318,226     199,852       48,992    27,256     11,272          --          605,598
                          ---------    --------     --------   -------    -------     -------        ---------
Income (loss) from
  operations............      6,206      (3,051)         739    (3,806)     6,004          --            6,092
Interest expense........   (113,824)    (66,121)     (17,277)   (5,051)    (2,624)      1,900(c)      (202,997)
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)   (8,724)     3,365          --         (196,387)
Provision for income
  taxes.................         --          --           --        --      1,346          --            1,346
                          ---------    --------     --------   -------    -------     -------        ---------
Income (loss) before
  extraordinary item....  $(102,950)   $(70,856)    $(17,222)  $(8,724)   $ 2,019     $    --        $(197,733)
                          =========    ========     ========   =======    =======     =======        =========
 
<CAPTION>
 
                                  PRO FORMA
                          -------------------------
 
                          ADJUSTMENTS       TOTAL
                          -----------     ---------
<S>                       <C>             <C>
Revenues................   $      --      $ 611,690
                           ---------      ---------
Operating expenses:
  Operating, general and
    administrative......                    310,100
  Depreciation and
    amortization........     119,515(a)     375,899

  Management
    fees/corporate
    expense charges.....     (22,621)(b)     16,493
                           ---------      ---------
    Total operating
      expenses..........      96,894        702,492
                           ---------      ---------
Income (loss) from
  operations............     (96,894)       (90,802)
Interest expense........      (4,471)(d)   (207,468)
Other income
  (expense).............          --            518
                           ---------      ---------
Income (loss) before
  income taxes..........    (101,365)      (297,752)
Provision for income
  taxes.................      (1,346)(e)         --
                           ---------      ---------
Income (loss) before
  extraordinary item....   $(100,019)     $(297,752)
                           =========      =========
</TABLE>

 
-------------------------
 
(a) Represents additional amortization of franchises 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 is amortized over 15 years.
 
(b) Reflects the reduction in corporate expense charges of approximately $8.2
    million to reflect the actual costs incurred. Management fees charged to CCA
    Group and CharterComm Holdings, companies not controlled by Charter
    Investment at that time, exceeded the allocated costs incurred by Charter
    Investment on behalf of those companies by $8.2 million. Also reflects the
    elimination of approximately $14.4 million of change of control payments
    under the terms of then-existing equity appreciation rights plans. Such
    payments were triggered by the acquisition of Charter Holdco by Mr. Allen.
    Such payments were made by Charter Investment 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 Charter Holdco by Mr. Allen, and these costs will
    not recur.
 
(c) Represents the elimination of intercompany interest on a note payable from
    Charter Holdco to CCA Group.
 
(d) Reflects additional interest expense on borrowings used to finance the
    acquisition by us of Sonic, using a 7.4% interest rate.
 
(e) Reflects the elimination of provision for income taxes, as Charter Holdco
    will operate as a limited liability company and all income taxes will flow
    through to the members.
 
                                       37

<PAGE>   41
 
     NOTE B:  Pro forma operating results for Marcus Holdings consist of the
following (dollars in thousands):
 

<TABLE>
<CAPTION>
                                       JANUARY 1,
                                          1998      APRIL 23, 1998
                                        THROUGH        THROUGH                                PRO FORMA
                                       APRIL 22,     DECEMBER 23,    ------------------------------------------------------------
                                          1998           1998        ACQUISITIONS(A)   DISPOSITIONS(B)   ADJUSTMENTS      TOTAL
                                       ----------   --------------   ---------------   ---------------   -----------    ---------
<S>                                    <C>          <C>              <C>               <C>               <C>            <C>
Revenues.............................  $ 157,763       $ 332,320         $2,620           $(44,511)       $      --     $ 448,192
                                       ---------       ---------         ------           --------        ---------     ---------
Operating expenses:
  Operating, general and
    administrative...................     84,746         181,347          1,225            (20,971)         (15,297)(c)   231,050
  Depreciation and
    amortization.....................     64,669         174,968             --                 --           13,218(d)    252,855
  Corporate expense charges..........                         --                                             17,042(c)     17,042
  Management fees....................         --           3,048             --                 --           (3,048)(c)        --
  Transaction and severance costs....    114,167          16,034             --                 --         (130,201)(e)        --
                                       ---------       ---------         ------           --------        ---------     ---------
    Total operating expenses.........    263,582         375,397          1,225            (20,971)        (118,286)      500,947
                                       ---------       ---------         ------           --------        ---------     ---------
Income (loss) from
  operations.........................   (105,819)        (43,077)         1,395            (23,540)         118,286       (52,755)
Interest (expense) benefit...........    (49,905)        (93,103)            --                 --            5,055(d)   (137,953)
Other income (expense)...............     43,662              --             --            (43,662)              --            --
                                       ---------       ---------         ------           --------        ---------     ---------
Income (loss) before extraordinary
  item...............................  $(112,062)      $(136,180)        $1,395           $(67,202)       $ 123,341     $(190,708)
                                       =========       =========         ======           ========        =========     =========
</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 expenses. 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 on
    behalf of Marcus Holdings. Management fees charged to Marcus Holdings
    exceeded the costs incurred by Charter Investment by $1.3 million.
 
(d) As a result of the acquisition of Marcus Holdings by Mr. Allen and an
    affiliate, a large portion of the purchase price ($2.5 billion) was recorded
    as franchises that are amortized over 15 years. This resulted in additional
    amortization for the period from January 1, 1998 through April 23, 1998.
    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 period from January 1, 1998 through
    April 23, 1998.
 
(e) As a result of the acquisition of Marcus Holdings by Mr. Allen and an
    affiliate, Marcus Holdings recorded transaction costs of approximately
    $114.2 million. These costs comprised approximately $90.2 million paid to
    employees of Marcus Holdings in settlement of specially designated Class B
    units and approximately $24.0 million of transaction fees paid to certain
    equity partners for investment banking services. In addition, Marcus
    Holdings recorded costs related to employee and officer stay-bonus and
    severance arrangements of approximately $16.0 million.
 
                                       38

<PAGE>   42
 
     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
                                                              ----------------------------------------------
                                                                    RECENT ACQUISITIONS -- HISTORICAL
                                                              ----------------------------------------------
                                                                                         GREATER
                                                                             AMERICAN     MEDIA      TOTAL
                                                              RENAISSANCE     CABLE      SYSTEMS     RECENT
                                                              -----------    --------    -------    --------
<S>                                                           <C>            <C>         <C>        <C>
Revenues....................................................   $ 41,524      $15,685     $78,635    $135,844
                                                               --------      -------     -------    --------
Operating expenses:
  Operating, general and administrative.....................     21,037        7,441      48,852      77,330
  Depreciation and amortization.............................     19,107        6,784       8,612      34,503
  Corporate expense charges.................................         --           --          --          --
  Management fees...........................................         --          471          --         471
                                                               --------      -------     -------    --------
    Total operating expenses................................     40,144       14,696      57,464     112,304
                                                               --------      -------     -------    --------
Income from operations......................................      1,380          989      21,171      23,540
Interest expense............................................    (14,358)      (4,501)       (535)    (19,394)
Interest income.............................................        158          122          --         280
Other income (expense)......................................         --           --        (493)       (493)
                                                               --------      -------     -------    --------
Income (loss) before income tax expense (benefit)...........    (12,820)      (3,390)     20,143       3,933
Income tax (benefit) expense................................        135           --       7,956       8,091
                                                               --------      -------     -------    --------
Income (loss) before extraordinary item.....................   $(12,955)     $(3,390)    $12,187    $ (4,158)
                                                               ========      =======     =======    ========
</TABLE>

 

<TABLE>
<CAPTION>
                                                                 YEAR ENDED DECEMBER 31, 1998
                             ----------------------------------------------------------------------------------------------------
                                                              PENDING ACQUISITIONS -- HISTORICAL
                             ----------------------------------------------------------------------------------------------------
                             INTERMEDIA                                                                                  TOTAL
                              SYSTEMS     HELICON    RIFKIN(a)    AVALON     FALCON      FANCH     BRESNAN    OTHER     PENDING
                             ----------   --------   ---------   --------   ---------   --------   --------   ------   ----------
<S>                          <C>          <C>        <C>         <C>        <C>         <C>        <C>        <C>      <C>
Revenues...................   $176,062    $ 75,577   $124,382    $ 18,187   $ 307,558   $141,104   $261,964   $9,336   $1,114,170
                              --------    --------   --------    --------   ---------   --------   --------   ------   ----------
Operating expenses:........
  Operating, general and
    administrative.........     86,753      40,179     63,815      10,067     161,233     62,977    150,750    4,618      580,392
  Depreciation and
    amortization...........     85,982      24,290     47,657       8,183     152,585     45,886     54,308    2,794      421,685
  Corporate expense
    charges................         --          --         --         655          --        105         --       --          760
  Management fees..........      3,147       3,496      4,106          --          --      3,998         --       --       14,747
                              --------    --------   --------    --------   ---------   --------   --------   ------   ----------
        Total operating
          expenses.........    175,882      67,965    115,578      18,905     313,818    112,966    205,058    7,412    1,017,584
                              --------    --------   --------    --------   ---------   --------   --------   ------   ----------
Income (loss) from
  operations...............        180       7,612      8,804        (718)     (6,260)    28,138     56,906    1,924       96,586
Interest expense...........    (25,449)    (27,634)   (30,482)     (8,223)   (102,591)    (1,873)   (18,296)  (2,375)    (216,923)
Interest income............        341          93         --         173          --         17         --       --          624
Other income (expense).....     23,030          --     44,959        (463)     (3,093)    (6,628)    26,754        3       84,562
                              --------    --------   --------    --------   ---------   --------   --------   ------   ----------
Income (loss) before income
  tax expense (benefit)....     (1,898)    (19,929)    23,281      (9,231)   (111,944)    19,654     65,364     (448)     (35,151)
Income tax expense
  (benefit)................      1,623          --     (4,178)        186       1,897        286         --       --         (186)
                              --------    --------   --------    --------   ---------   --------   --------   ------   ----------
Income (loss) before
  extraordinary item.......   $ (3,521)   $(19,929)  $ 27,459    $ (9,417)  $(113,841)  $ 19,368   $ 65,364   $ (448)  $  (34,965)
                              ========    ========   ========    ========   =========   ========   ========   ======   ==========
</TABLE>

 
                                       39

<PAGE>   43

<TABLE>
<CAPTION>
                                                            YEAR ENDED DECEMBER 31, 1998
                                -------------------------------------------------------------------------------------
                                                 RECENT ACQUISITIONS                         PENDING ACQUISITIONS
                                ------------------------------------------------------   ----------------------------
                                                             PRO FORMA                                   PRO FORMA
                                             -----------------------------------------                ---------------
                                                                               TOTAL
                                HISTORICAL   ACQUISITIONS(b)   ADJUSTMENTS     RECENT    HISTORICAL   ACQUISITIONS(b)
                                ----------   ---------------   -----------    --------   ----------   ---------------
<S>                             <C>          <C>               <C>            <C>        <C>          <C>
Revenues......................   $135,844        $36,107        $     --      $171,951   $1,114,170      $414,286
                                 --------        -------        --------      --------   ----------      --------
Operating expenses:
 Operating, general and
   administrative.............     77,330         17,664          (6,759)(d)    88,235      580,392       209,800
 Depreciation and
   amortization...............     34,503         13,988          42,380(e)     90,871      421,685       111,766
 Corporate expense charges....         --             --           6,759(d)      6,759          760        14,962
 Management fees..............        471            606              --         1,077       14,747         5,835
                                 --------        -------        --------      --------   ----------      --------
   Total operating expenses...    112,304         32,258          42,380       186,942    1,017,584       342,363
                                 --------        -------        --------      --------   ----------      --------
Income (loss) from
 operations...................     23,540          3,849         (42,380)      (14,991)      96,586        71,923
Interest expense..............    (19,394)        (5,787)        (35,194)(f)   (60,375)    (216,923)      (52,452)
Interest income...............        280            157              --           437          624           961
Other income (expense)........       (493)           112             (96)(g)      (477)      84,562         4,729
                                 --------        -------        --------      --------   ----------      --------
Income (loss) before income
 tax expense (benefit)........      3,933         (1,669)        (77,670)      (75,406)     (35,151)       25,161
Income tax expense (benefit)..      8,091          1,191          (9,282)(h)        --         (186)         (793)
                                 --------        -------        --------      --------   ----------      --------
Income (loss) before
 extraordinary item...........   $ (4,158)       $(2,860)       $(68,388)     $(75,406)  $  (34,965)     $ 25,954
                                 ========        =======        ========      ========   ==========      ========
 
<CAPTION>
                                       YEAR ENDED DECEMBER 31, 1998
                                -------------------------------------------
                                           PENDING ACQUISITIONS
                                -------------------------------------------
                                                 PRO FORMA
                                -------------------------------------------
                                                                   TOTAL
                                DISPOSITIONS(c)   ADJUSTMENTS     PENDING
                                ---------------   -----------    ----------
<S>                             <C>               <C>            <C>
Revenues......................     $(83,442)       $      --     $1,445,014
                                   --------        ---------     ----------
Operating expenses:
 Operating, general and
   administrative.............      (43,092)          (5,600)(d)    741,500
 Depreciation and
   amortization...............      (43,959)         488,130(e)     977,622
 Corporate expense charges....           --            5,600(d)      21,322
 Management fees..............         (974)              --         19,608
                                   --------        ---------     ----------
   Total operating expenses...      (88,025)         488,130      1,760,052
                                   --------        ---------     ----------
Income (loss) from
 operations...................        4,583         (488,130)      (315,038)
Interest expense..............       19,548         (214,598)(f)   (464,425)
Interest income...............           (9)              --          1,576
Other income (expense)........       (1,459)        (100,880)(g)    (13,048)
                                   --------        ---------     ----------
Income (loss) before income
 tax expense (benefit)........       22,663         (803,608)      (790,935)
Income tax expense (benefit)..          310              669(h)          --
                                   --------        ---------     ----------
Income (loss) before
 extraordinary item...........     $ 22,353        $(804,277)    $ (790,935)
                                   ========        =========     ==========
</TABLE>

 
-------------------------
 
(a) 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 before extraordinary item...................     24,419        3,040      27,459
</TABLE>

 
(b) 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, Avalon, Falcon, Fanch
    and Bresnan and for the period from January 1, 1998 through December 31,
    1998 for acquisitions to be completed in 1999. A definitive written
    agreement exists for all acquisitions that have not yet closed.
 
                                       40

<PAGE>   44
 
     These acquisitions will be accounted for using the purchase method of
     accounting. Definitive written agreements exist for all acquisitions that
     have not yet closed. Purchase prices and the closing dates or anticipated
     closing dates for significant acquisitions are as follows:

<TABLE>
<CAPTION>
                            RENAISSANCE   INTERMEDIA      HELICON        RIFKIN         AVALON         FALCON         FANCH
                            ACQUISITION   ACQUISITION   ACQUISITION   ACQUISITIONS   ACQUISITIONS   ACQUISITIONS   ACQUISITIONS
                            -----------   -----------   -----------   ------------   ------------   ------------   ------------
    <S>                     <C>           <C>           <C>           <C>            <C>            <C>            <C>
    Purchase price........  $309.5        $29.1         $26.1         $165.0         $30.5          $88.2          $248.0
    Closing date..........  April 1998    Dec. 1998     Dec. 1998     Feb. 1999      July 1998      July 1998      Feb. 1999
    Purchase price........                                            $53.8          $431.6         $158.6         $112.0
    Closing date..........                                            anticipated    Nov. 1998      Sept. 1996     March 1999
                                                                      July 1999
    Purchase price........                                                                          $513.5         $50.0
    Closing date..........                                                                          Sept. 1998     June 1999
    Purchase price........
    Closing date..........
 
<CAPTION>
                              BRESNAN
                            ACQUISITIONS
                            ------------
    <S>                     <C>
    Purchase price........  $17.0
    Closing date..........  Feb. 1998
    Purchase price........  $11.8
    Closing date..........  Oct. 1998
    Purchase price........  $40.0
    Closing date..........  Jan. 1999
    Purchase price........  $27.0
    Closing date..........  March 1999
</TABLE>

 
    The InterMedia acquisition was part of a "swap" of cable systems. The net
    increase in InterMedia assets as a result of the "swap" was $3.0 million.
 
(c) Represents the elimination of the operating results primarily related to the
    cable systems to be transferred to InterMedia as part of a swap of cable
    systems and related to the sale of several smaller cable systems. A
    definitive written agreement exists for the disposition on these systems.
    The fair value of the systems to be transferred is $420 million. No material
    gain or loss is anticipated on the disposition as these systems were
    recently acquired and recorded at fair value at that time. It is anticipated
    that this transfer will close during the third or fourth quarter of 1999.
 
(d) Reflects a reclassification of expenses representing corporate expenses that
    would have occurred at Charter Investment.
 
(e) Represents additional amortization of franchises as a result of our recently
    completed and pending acquisitions. A large portion of the purchase price
    was allocated to franchises ($12.5 billion) that are amortized over 15
    years. Depreciation and amortization expense consists of the following (in
    millions):
 

<TABLE>
<S>                                                           <C>
Amortization of franchises..................................  $  813.3
Depreciation................................................     255.2
                                                              --------
  Total depreciation and amortization.......................  $1,068.5
                                                              ========
</TABLE>

 
(f) Reflects additional interest expense on borrowings which will be used to
    finance the acquisitions using a composite current interest rate of 7.4%
    (see Note D).
 
(g) Represents the elimination of gain (loss) on the sale of assets.
 
(h) Reflects the elimination of income tax expense (benefit) as a result of
    being acquired by a limited liability company.
 
                                       41

<PAGE>   45
 
     NOTE D:  In March 1999, we extinguished substantially all of our long-term
debt, excluding borrowings of our previous credit facilities and refinanced all
previous credit facilities. In addition, we incurred and plan to incur
additional debt in connection with our pending and recently completed
acquisitions. See "Capitalization". The refinancing adjustment to interest
expense consists of the following (dollars in thousands):
 

<TABLE>
<CAPTION>
                                                              INTEREST
DESCRIPTION                                                    EXPENSE
-----------                                                   ---------
<S>                                                           <C>
$600 million 8.25% senior notes.............................  $  49,600
$1.5 billion 8.625% senior notes............................    129,600
$1.475 billion 9.92% senior discount notes..................     89,800
Credit facilities (at composite current rate of 7.4%).......    262,000
Amortization of debt issuance costs.........................     15,600
Commitment fee on unused portion of credit facilities
  ($267,000 at 0.375%)......................................      1,000
10% senior discount notes -- Renaissance....................      8,000
8.375% senior debentures -- Falcon..........................     31,400
9.285% senior discount debentures -- Falcon.................     27,400
11.56% subordinated notes -- Falcon.........................     11,600
9.375% senior subordinated notes -- Avalon..................     14,100
11.875% senior discount notes -- Avalon.....................     13,500
8.0% senior notes -- Bresnan................................     13,600
9.25% senior discount notes -- Bresnan......................     16,200
Credit facilities of acquisitions (at composite current rate
  of 7.4%)..................................................    202,200
                                                              ---------
  Total pro forma interest expense..........................    885,600
  Less -- interest expense (including Marcus Cable and
     recent acquisitions and pending acquisitions)..........   (870,200)
                                                              ---------
     Adjustment.............................................  $  15,400
                                                              =========
</TABLE>

 
     An increase in the interest rate of 0.125% would result in an increase in
interest expense of $4.3 million. Additionally, the Rifkin sellers may take up
to $250 million in equity instead of cash. This would reduce interest expense by
up to $18.5 million. Finally, if we elect to fund the $1.1 billion necessary to
close the Bresnan transaction with debt, interest expense would increase by
$88.0 million, assuming an 8% interest rate.
 
     NOTE E:  Represents the allocation of 75% of the net loss of Charter Holdco
to the minority interest.
 
     NOTE F:  Charter Investment provided corporate management and consulting
services to Charter Holdco in 1998 and to Marcus Holdings beginning in October
1998. See "Certain Relationships and Related Transactions".
 
     NOTE G:  EBITDA represents earnings (loss) before interest, income taxes,
depreciation and amortization. EBITDA is presented because it is a widely
accepted financial indicator of a cable television 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. In addition, because EBITDA
is not calculated identically by all
 
                                       42

<PAGE>   46
 
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 H:  EBITDA margin represents EBITDA as a percentage of revenues.
 
     NOTE I:  Adjusted EBITDA means EBITDA before corporate expenses, 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 J:  Basic penetration represents basic customers as a percentage of
homes passed.
 
     NOTE K:  Premium penetration represents premium units as a percentage of
basic customers.
 
     NOTE L:  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.
 
                                       43

<PAGE>   47
 

<TABLE>
<CAPTION>
                                             UNAUDITED PRO FORMA BALANCE SHEET
                                                   AS OF MARCH 31, 1999
                            -------------------------------------------------------------------
                                            RECENT                     PENDING       OFFERING
                             CHARTER     ACQUISITIONS                ACQUISITIONS   ADJUSTMENTS    PRO FORMA
                              HOLDCO       (NOTE A)      SUBTOTAL      (NOTE A)      (NOTE B)        TOTAL
                            ----------   ------------   ----------   ------------   -----------   -----------
                                                  (DOLLARS IN THOUSANDS)
<S>                         <C>          <C>            <C>          <C>            <C>           <C>
BALANCE SHEET
Cash and cash
  equivalents.............  $1,038,360   $(1,025,818)   $   12,542   $    52,467    $        --   $    65,009
Accounts receivable,
  net.....................      30,314         4,480        34,794        70,715             --       105,509
Prepaid expenses and
  other...................      15,882         4,869        20,751        33,121             --        53,872
                            ----------   -----------    ----------   -----------    -----------   -----------
     Total current
       assets.............   1,084,556    (1,016,469)       68,087       156,303             --       224,390
Property, plant and
  equipment...............   1,533,197       138,117     1,671,314     1,733,967             --     3,405,281
Franchises................   5,607,539     1,065,499     6,673,038    11,112,867             --    17,785,905
Other assets..............     131,990            --       131,990         7,477             --       139,467
                            ----------   -----------    ----------   -----------    -----------   -----------
     Total assets.........  $8,357,282   $   187,147    $8,544,429   $13,010,614    $        --   $21,555,043
                            ==========   ===========    ==========   ===========    ===========   ===========
 
Accounts payable and
  accrued expenses........  $  216,397   $    17,294    $  233,691   $   213,672    $        --   $   447,363
Payables to manager of
  cable television
  systems.................      12,554            --        12,554            --             --        12,554
                            ----------   -----------    ----------   -----------    -----------   -----------
     Total current
       liabilities........     228,951        17,294       246,245       213,672             --       459,917
Pending acquisition
  payable.................          --            --            --     2,840,000     (2,840,000)           --
Long-term debt............   4,754,018       165,480     4,919,498     5,449,086             --    10,368,584
Other long-term
  liabilities.............      48,171         4,373        52,544        20,227             --        72,771
Minority interest.........          --            --            --            --      7,813,771     7,813,771
Members' equity...........   3,326,142            --     3,326,142     4,487,629     (7,813,771)           --
                            ----------   -----------    ----------   -----------    -----------   -----------
Common stock..............          --            --            --            --          3,000         3,000
Additional paid-in
  capital.................          --            --            --            --      2,837,000     2,837,000
                            ----------   -----------    ----------   -----------    -----------   -----------
     Total stockholders'
       equity.............          --            --            --            --      2,840,000     2,840,000
                            ----------   -----------    ----------   -----------    -----------   -----------
     Total liabilities and
       stockholders'
       equity.............  $8,357,282   $   187,147    $8,544,429   $13,010,614    $        --   $21,555,043
                            ==========   ===========    ==========   ===========    ===========   ===========
</TABLE>

 
                                       44

<PAGE>   48
 
                 NOTES TO THE UNAUDITED PRO FORMA BALANCE SHEET
 
     NOTE A:  Pro forma balance sheet for our recently completed acquisitions
and pending acquisitions consists of the following (dollars in thousands):
 

<TABLE>
<CAPTION>
                                                                         AS OF MARCH 31, 1999
                                                              -------------------------------------------
                                                                   RECENT ACQUISITIONS -- HISTORICAL
                                                              -------------------------------------------
                                                                                       GREATER
                                                                            AMERICAN    MEDIA     TOTAL
                                                              RENAISSANCE    CABLE     SYSTEMS    RECENT
                                                              -----------   --------   -------   --------
<S>                                                           <C>           <C>        <C>       <C>
Cash and cash equivalents...................................   $  8,901     $  1,201   $ 2,440   $ 12,542
Accounts receivable, net....................................      1,283          620     2,577      4,480
Receivable from related party...............................         --           --        --         --
Prepaid expenses and other..................................        381        1,436     3,052      4,869
Deferred income tax asset...................................         --           --        --         --
                                                               --------     --------   -------   --------
  Total current assets......................................     10,565        3,257     8,069     21,891
Receivable from related party...............................         --           --        --         --
Property, plant and equipment...............................     64,594       15,327    58,196    138,117
Franchises..................................................    222,971      143,546     2,653    369,170
Deferred income tax assets..................................         --           --        --         --
Other assets................................................     16,129        2,334        80     18,543
                                                               --------     --------   -------   --------
  Total assets..............................................   $314,259     $164,464   $68,998   $547,721
                                                               ========     ========   =======   ========
Accounts payable and accrued expenses.......................   $  7,649     $  3,623   $ 6,022   $ 17,294
Current deferred revenue....................................         --           --     1,904      1,904
Note payable to related party...............................         --           --        --         --
Other current liabilities...................................         --           --        --         --
                                                               --------     --------   -------   --------
  Total current liabilities.................................      7,649        3,623     7,926     19,198
Deferred revenue............................................        651           --        --        651
Deferred income taxes.......................................         --           --        --         --
Long-term debt..............................................    212,503      118,000        --    330,503
Note payable to related party, including accrued interest...        135           --        --        135
Other long-term liabilities, including redeemable preferred
  shares....................................................        755           --     3,618      4,373
                                                               --------     --------   -------   --------
  Total liabilities.........................................    221,693      121,623    11,544    354,860
Members' equity.............................................     92,566       42,841    57,454    192,861
                                                               --------     --------   -------   --------
  Total liabilities and members' equity.....................   $314,259     $164,464   $68,998   $547,721
                                                               ========     ========   =======   ========
</TABLE>

 
                                       45

<PAGE>   49

<TABLE>
<CAPTION>
                                                AS OF MARCH 31, 1999
                              ---------------------------------------------------------
                                         PENDING ACQUISITIONS -- HISTORICAL
                              ---------------------------------------------------------
                              INTERMEDIA
                               SYSTEMS      HELICON     RIFKIN     AVALON      FALCON
                              ----------   ---------   --------   --------   ----------
<S>                           <C>          <C>         <C>        <C>        <C>
Cash and cash equivalents...   $     --    $  11,464   $  7,580     13,227       31,345
Accounts receivable, net....     13,949        1,619     12,009      6,210       18,410
Receivable from related
  party.....................      5,038           --         --         --        3,200
Prepaid expenses and other..      1,053        2,867      2,789        741       22,457
                               --------    ---------   --------   --------   ----------
  Total current assets......     20,040       15,950     22,378     20,178       75,412
Receivable from related
  party.....................         --           --         --         --           --
Property, plant and
  equipment.................    225,682       88,723    283,208    115,200      519,967
Franchises..................    240,567       12,096    456,523    473,323      387,458
Deferred income tax assets..     13,994           --         --         --           --
Other assets................      3,697       83,546     72,148         94      470,851
                               --------    ---------   --------   --------   ----------
  Total assets..............   $503,980    $ 200,315   $834,257   $608,795   $1,453,688
                               ========    =========   ========   ========   ==========
Current maturities of long-
  term debt.................   $     --    $      --   $     --   $     20   $       --
Accounts payable and accrued
  expenses..................   $ 19,030    $  16,496   $ 34,486   $ 18,197   $  101,025
Current deferred revenue....     11,944           --      2,092      3,363           --
Note payable to related
  party.....................      3,057           --         --      3,388           --
                               --------    ---------   --------   --------   ----------
  Total current
    liabilities.............     34,031       16,496     36,578     24,968      101,025
Deferred revenue............      3,900           --         --         --           --
Deferred income taxes.......         --           --      7,405         --        7,428
Long-term debt..............         --      295,345    541,575    442,727    1,643,447
Note payable to related
  party, including accrued
  interest..................    412,436        5,137         --         --           --
Other long-term liabilities,
  including redeemable
  preferred shares..........     14,430       18,708         --         --           --
                               --------    ---------   --------   --------   ----------
  Total liabilities.........    464,797      335,686    585,558    467,695    1,751,900
Members' equity.............     39,183     (135,371)   248,699    141,100     (298,212)
                               --------    ---------   --------   --------   ----------
  Total liabilities and
    members' equity.........   $503,980    $ 200,315   $834,257   $608,795   $1,453,688
                               ========    =========   ========   ========   ==========
 
<CAPTION>
                                         AS OF MARCH 31, 1999
                              ------------------------------------------
                                  PENDING ACQUISITIONS -- HISTORICAL
                              ------------------------------------------
                                                                TOTAL
                               FANCH     BRESNAN     OTHER     PENDING
                              --------   --------   -------   ----------
<S>                           <C>        <C>        <C>       <C>
Cash and cash equivalents...       494      2,679   $   585   $   67,374
Accounts receivable, net....    16,327     10,371     1,450       80,345
Receivable from related
  party.....................        --         --        --        8,238
Prepaid expenses and other..     2,537         --       110       32,554
                              --------   --------   -------   ----------
  Total current assets......    19,358     13,050     2,145      188,511
Receivable from related
  party.....................        --         --        --           --
Property, plant and
  equipment.................   217,473    325,663     9,934    1,785,850
Franchises..................        --    327,804    55,452    1,953,223
Deferred income tax assets..        --         --        --       13,994
Other assets................   564,322     21,632       205    1,216,495
                              --------   --------   -------   ----------
  Total assets..............  $801,153   $688,149   $67,736   $5,158,073
                              ========   ========   =======   ==========
Current maturities of long-
  term debt.................  $    971   $     --   $    --   $      991
Accounts payable and accrued
  expenses..................  $  4,249   $ 22,340   $ 1,899   $  217,722
Current deferred revenue....        --         --     1,207       18,606
Note payable to related
  party.....................     2,331      7,583        --       16,359
                              --------   --------   -------   ----------
  Total current
    liabilities.............     7,551     29,923     3,106      253,678
Deferred revenue............        --         --        --        3,900
Deferred income taxes.......        --         --        --       14,833
Long-term debt..............    21,852    848,007    38,914    3,831,867
Note payable to related
  party, including accrued
  interest..................        --         --        --      417,573
Other long-term liabilities,
  including redeemable
  preferred shares..........        45     20,568        --       53,751
                              --------   --------   -------   ----------
  Total liabilities.........    29,448    898,498    42,020    4,575,602
Members' equity.............   771,705   (210,349)   25,716      582,471
                              --------   --------   -------   ----------
  Total liabilities and
    members' equity.........  $801,153   $688,149   $67,736   $5,158,073
                              ========   ========   =======   ==========
</TABLE>

 
                                       46

<PAGE>   50

<TABLE>
<CAPTION>
                                                                      AS OF MARCH 31, 1999
                                  ---------------------------------------------------------------------------------------------
                                              RECENT ACQUISITIONS                             PENDING ACQUISITIONS
                                  --------------------------------------------   ----------------------------------------------
                                                          PRO FORMA                                       PRO FORMA
                                               -------------------------------                ---------------------------------
                                  HISTORICAL    ADJUSTMENTS           TOTAL      HISTORICAL   ACQUISITIONS(a)   DISPOSITIONS(b)
                                  ----------   --------------      -----------   ----------   ---------------   ---------------
<S>                               <C>          <C>                 <C>           <C>          <C>               <C>
Cash and cash equivalents.......   $ 12,542     $(1,038,360)(c)    $(1,025,818)  $   67,374      $(13,110)         $  (1,797)
Accounts receivable, net........      4,480              --              4,480       80,345            86             (1,671)
Receivable from related party...         --              --                 --        8,238           591                 --
Prepaid expenses and other......      4,869              --              4,869       32,554           854               (287)
                                   --------     -----------        -----------   ----------      --------          ---------
  Total current assets..........     21,891      (1,038,360)        (1,016,469)     188,511       (11,579)            (3,755)
Property, plant and equipment...    138,117              --            138,117    1,785,850        26,144            (78,027)
Franchises......................    369,170         696,329(f)       1,065,499    1,953,223        48,626           (342,844)
Deferred income tax assets......         --              --                 --       13,994            --                 --
Other assets....................     18,543         (18,543)(h)             --    1,216,495            28               (523)
                                   --------     -----------        -----------   ----------      --------          ---------
  Total assets..................   $547,721     $  (360,574)       $   187,147   $5,158,073      $ 63,219          $(425,149)
                                   ========     ===========        ===========   ==========      ========          =========
Current maturities of long-term
  debt..........................   $     --     $        --        $        --   $      991      $     --          $      --
Accounts payable and accrued
  expenses......................     17,294              --             17,294      217,722         1,185             (4,280)
Current deferred revenue........      1,904          (1,904)(d)             --       18,606            --                 --
Note payable to related party...         --              --                 --       16,359            --                 --
Other current liabilities.......         --              --                 --           --            --                 --
                                   --------     -----------        -----------   ----------      --------          ---------
  Total current liabilities.....     19,198          (1,904)            17,294      253,678         1,185             (4,280)
Deferred revenue................        651            (651)(d)             --        3,900           173                 --
Deferred income taxes...........         --              --                 --       14,833           359                 --
Pending acquisition payable.....         --              --                 --           --            --                 --
Long-term debt..................    330,503        (165,023)(j)        165,480    3,831,867        49,901           (420,528)
Note payable to related party,
  including accrued interest....        135            (135)(i)             --      417,573            --                 --
Other long-term liabilities.....      4,373              --              4,373       53,751            --               (341)
                                   --------     -----------        -----------   ----------      --------          ---------
  Total liabilities.............    354,860        (167,713)           187,147    4,575,602        51,618           (425,149)
Members' equity.................    192,861        (192,861)(k)             --      582,471        11,601                 --
                                   --------     -----------        -----------   ----------      --------          ---------
  Total liabilities and members'
    equity......................   $547,721     $  (360,574)       $   187,147   $5,158,073      $ 63,219          $(425,149)
                                   ========     ===========        ===========   ==========      ========          =========
 
<CAPTION>
                                      AS OF MARCH 31, 1999
                                  ----------------------------
                                      PENDING ACQUISITIONS
                                  ----------------------------
                                           PRO FORMA
                                  ----------------------------
                                  ADJUSTMENTS         TOTAL
                                  -----------      -----------
<S>                               <C>              <C>
Cash and cash equivalents.......  $       --       $    52,467
Accounts receivable, net........      (8,045)(d)        70,715
Receivable from related party...      (8,829)(e)            --
Prepaid expenses and other......          --            33,121
                                  ----------       -----------
  Total current assets..........     (16,874)          156,303
Property, plant and equipment...          --         1,733,967
Franchises......................   9,453,862(f)     11,112,867
Deferred income tax assets......     (13,994)(g)            --
Other assets....................  (1,208,523)(h)         7,477
                                  ----------       -----------
  Total assets..................  $8,214,471       $13,010,614
                                  ==========       ===========
Current maturities of long-term
  debt..........................  $     (991)(e)   $        --
Accounts payable and accrued
  expenses......................        (955)          213,672
Current deferred revenue........     (18,606)(d)            --
Note payable to related party...     (16,359)(i)            --
Other current liabilities.......          --                --
                                  ----------       -----------
  Total current liabilities.....     (36,911)          213,672
Deferred revenue................      (4,073)(d)            --
Deferred income taxes...........     (15,192)(g)            --
Pending acquisition payable.....   2,840,000         2,840,000
Long-term debt..................   1,987,846(j)      5,449,086
Note payable to related party,
  including accrued interest....    (417,573)(i)            --
Other long-term liabilities.....     (33,183)(i)        20,227
                                  ----------       -----------
  Total liabilities.............   4,320,914         8,522,985
Members' equity.................   3,893,557(k)      4,487,629
                                  ----------       -----------
  Total liabilities and members'
    equity......................  $8,214,471       $13,010,614
                                  ==========       ===========
</TABLE>

 
                                       47

<PAGE>   51
 
-------------------------
 
(a) Represents the historical balance sheets as of March 31, 1999, for
    acquisitions to be completed subsequent to March 31, 1999.
 
(b) Represents the historical assets and liabilities as of March 31, 1999, of
    the cable systems to be transferred to InterMedia as part of a swap of cable
    systems. The cable systems being swapped will be accounted for at fair
    value. No material gain or loss is anticipated in conjunction with the swap.
    See the "Business" section.
 
(c) Represents the use of Charter Holdings cash for the recent and pending
    acquisitions. The sources of cash for the recent and pending acquisitions
    are as follows (in millions):
 

<TABLE>
    <S>                                                           <C>
    Charter Holdings historical cash............................  $ 1,038.4
    Expected equity contributions...............................    7,328.0
    Expected credit facilities draw down........................    4,171.0
    Renaissance notes...........................................       82.7
    Falcon debentures...........................................      698.0
    Avalon notes................................................      279.0
    Bresnan notes...............................................      359.0
    Other.......................................................       25.0
                                                                  ---------
                                                                  $13,981.1
                                                                  =========
</TABLE>

 
(d) Represents the offset of advance billings against deferred revenue to be
    consistent with Charter Holdings' accounting policy and the elimination of
    deferred revenue.
 
(e) Reflects assets retained by the seller.
 
(f) Substantial amounts of the purchase price in (c) above have been allocated
    to franchises based on estimated fair values. This results in an allocation
    of purchase price as follows (in thousands):
 

<TABLE>
<CAPTION>
                                                                GREATER
                                                     AMERICAN    MEDIA     INTERMEDIA
                                       RENAISSANCE    CABLE     SYSTEMS     SYSTEMS     HELICON      RIFKIN
                                       -----------   --------   --------   ----------   --------   ----------
    <S>                                <C>           <C>        <C>        <C>          <C>        <C>
    Working capital..................   $  2,916     $   (366)  $  2,047    $(12,503)   $  1,364   $  (12,147)
    Property, plant and equipment....     64,594       15,327     58,196     147,655      88,723      287,217
    Franchises.......................    397,085      225,039    443,375     737,202     459,913    1,184,930
    Other............................       (755)          --     (3,618)        341          --           --
                                        --------     --------   --------    --------    --------   ----------
                                        $463,840     $240,000   $500,000    $872,695    $550,000   $1,460,000
                                        ========     ========   ========    ========    ========   ==========
</TABLE>

 

<TABLE>
<CAPTION>
                                  AVALON        FALCON       FANCH       BRESNAN      OTHER        TOTAL
                                -----------   ----------   ----------   ----------   --------   -----------
    <S>                         <C>           <C>          <C>          <C>          <C>        <C>
    Working capital...........   $(11,335)    $  (28,813)  $   15,109   $   (9,290)  $    246   $   (52,772)
    Property, plant and
      equipment...............    118,569        519,967      227,273      325,663     18,900     1,872,084
    Franchises................    751,724      3,038,060    2,157,618    2,654,916    128,504    12,178,366
    Other.....................         --          8,000           --      (20,568)        --       (16,600)
                                 --------     ----------   ----------   ----------   --------   -----------
                                 $858,958     $3,537,214   $2,400,000   $2,950,721   $147,650   $13,981,078
                                 ========     ==========   ==========   ==========   ========   ===========
</TABLE>

 
(g) Represents the elimination of deferred income tax assets and liabilities.
 
                                       48

<PAGE>   52
 
(h) Represents the elimination of the unamortized historical cost of various
    assets based on estimated fair values as follows:
 

<TABLE>
<S>                                                           <C>
Subscriber lists............................................  $  (548,071)
Noncompete agreements.......................................      (14,570)
Deferred financing costs....................................      (62,078)
Goodwill....................................................     (775,266)
Other assets................................................      (98,710)
                                                              -----------
                                                               (1,498,695)
Less-accumulated amortization...............................      271,629
                                                              -----------
                                                              $ 1,227,066
                                                              ===========
</TABLE>

 
(i) Represents liabilities retained by the seller.
 
(j) Represents the following:
 

<TABLE>
<S>                                                           <C>
Long-term debt not assumed..................................  (1,364,406)
Additional borrowings under credit facilities...............   3,629,976
                                                              ----------
                                                              $2,265,570
                                                              ==========
</TABLE>

 
(k) Represents the following:
 

<TABLE>
<S>                                                           <C>
Elimination of historical equity............................  $ (786,933)
Additional contributions into Charter Holdco................   4,487,629
                                                              ----------
                                                              $3,700,696
                                                              ==========
</TABLE>

 
     NOTE B: Offering adjustments include the issuance and sale by CCI of Class
A common stock totaling $2.84 billion, after deducting underwriting discounts
and commissions and estimated offering expenses. Also included as an offering
adjustment is the effect of consolidating Charter Holdco into CCI based on CCI's
purchase of membership units in Charter Holdco. This results in the $7.8 billion
of member's equity in Charter Holdco becoming minority interest in the
consolidated balance sheet of CCI.
 
     Certain equity interests in Charter Holdco are exchangeable into Class A
common stock of CCI. We assume no such equity interests are exchanged. If all
equity holders in Charter Holdco except Mr. Allen's affiliates exchanged their
units for Class A common stock, total stockholders' equity would increase by
$1.3 billion and minority interest would decrease by $1.3 billion.
 
                                       49

<PAGE>   53
 
                         UNAUDITED SELECTED HISTORICAL
                     COMBINED FINANCIAL AND OPERATING DATA
 
     Charter Holdco was acquired by Mr. Allen on December 23, 1998. Prior to
this acquisition, Charter Investment was the manager of three groups of
companies. Each of these groups had separate financial statements. For this
reason, our historical financial information is presented separately for each of
these groups of companies. They are:
 
        - Charter Holdco;
 
        - CCA Group, consisting of three sister companies which have been merged
          into existing subsidiaries of CC Holdings; and
 
        - CharterComm Holdings, LLC, which has been merged into CC Holdings.
 
     The Unaudited Selected Historical Combined Financial and Operating Data for
the years ended December 31, 1996, 1997 and 1998 have been derived from the
separate financial statements of Charter Holdco, CCA Group and CharterComm
Holdings, which have been audited by Arthur Andersen LLP, independent public
accountants, and are included elsewhere in this prospectus. The combined
financial and operating data represent the sum of the results of each of Charter
Holdco's then-existing subsidiaries prior to its merger with Marcus Holdings and
its recent acquisitions. Each such subsidiary was managed by Charter Investment
in accordance with its respective management agreement during the presented
periods. Since these subsidiaries were under common management, we believe
presenting combined financial information of these companies is informative.
 
     As a result of the acquisition of Charter Holdco by Mr. Allen, we have
applied the purchase accounting method which had the effect of increasing total
assets, total debt and members' equity as of December 23, 1998. In addition, we
have retroactively restated our financial statements to include the results of
operations of Marcus Holdings for the period from December 24, 1998, through
December 31, 1998, and the balance sheet of Marcus Holdings as of December 31,
1998. As a result of the acquisition of Charter Holdco by Mr. Allen and its
merger with Marcus Holdings, we believe that the periods on or prior to December
23, 1998 are not comparable to the periods after December 23, 1998.
 
                                       50

<PAGE>   54
 

<TABLE>
<CAPTION>
                                                 CHARTER HOLDCO, CCA GROUP AND       CHARTER
                                                      CHARTERCOMM HOLDINGS            HOLDCO
                                               ----------------------------------   ----------
                                               YEAR ENDED DECEMBER 31,    1/1/98     12/24/98
                                               -----------------------   THROUGH     THROUGH
                                                  1996         1997      12/23/98    12/31/98
                                               ----------   ----------   --------   ----------
                                                (DOLLARS IN THOUSANDS, EXCEPT CUSTOMER DATA)
<S>                                            <C>          <C>          <C>        <C>
COMBINED STATEMENT OF OPERATIONS:
Revenues.....................................  $  368,553   $  484,155   $570,964   $   23,450
                                               ----------   ----------   --------   ----------
Operating expenses:
  Operating, general and administrative......     190,084      249,419    288,428       12,679
  Depreciation and amortization..............     154,273      198,718    240,294       13,811
  Management fees/corporate expense
     charges(a)..............................      15,094       20,759     38,348          766
                                               ----------   ----------   --------   ----------
     Total operating expenses................     359,451      468,896    567,070       27,256
                                               ----------   ----------   --------   ----------
Income (loss) from operations................  $    9,102   $   15,259   $  3,894   $   (3,806)
                                               ==========   ==========   ========   ==========
CAPITAL EXPENDITURES.........................  $  110,291   $  162,607   $195,468   $   13,672
BALANCE SHEET DATA (AT END OF PERIOD):
Total assets.................................  $1,660,242   $2,002,181              $7,235,656
Total debt...................................   1,195,899    1,846,159               3,523,201
Members' equity..............................      26,099      (80,505)              3,429,291
OPERATING DATA (AT END OF PERIOD, EXCEPT FOR
  AVERAGES):
Homes passed.................................   1,546,000    1,915,000               3,892,000
Basic customers..............................     902,000    1,086,000               2,317,000
Basic penetration(b).........................        58.3%        56.7%                   59.5%
Premium units................................     517,000      629,000               1,256,000
Premium penetration(c).......................        57.3%        57.9%                   54.2%
</TABLE>

 
-------------------------
 
(a) Charter Investment provided corporate management and consulting services to
    Charter Holdco, CCA Group and CharterComm Holdings. CCA Group and
    CharterComm Holdings paid fees to Charter Investment as compensation for
    these services and recorded these fees as expense. Charter Holdco recorded
    actual corporate expense charges incurred by Charter Investment on behalf of
    Charter Holdco's subsidiaries. Management fees and corporate expenses for
    the year ended December 31, 1998 include $14.4 million of change of control
    payments under the terms of then-existing equity appreciation rights plans.
    These payments were triggered by the acquisition of Charter Holdco by Mr.
    Allen. These payments were made by Charter Investment and were not subject
    to reimbursement by Charter Holdco, but were allocated to Charter Holdco for
    financial reporting purposes. The equity appreciation rights plans were
    terminated in connection with the acquisition of Charter Holdco by Mr.
    Allen, and these costs will not recur. See "Certain Relationships and
    Related Transactions".
 
(b) Basic penetration represents basic customers as a percentage of homes
    passed.
 
(c) Premium penetration represents premium units as a percentage of basic
    customers.
 
                                       51

<PAGE>   55
 
                       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, and from December 24, 1998 through December 31, 1998, are derived from the
consolidated financial statements of Charter Holdco. They 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 predecessor of
Charter Holdco's 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 Holdco's
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 Holdco and related notes included
elsewhere in this prospectus.
 

<TABLE>
<CAPTION>
                                                       PREDECESSOR OF
                                                       CHARTER HOLDCO                          CHARTER HOLDCO
                                                   ----------------------   ----------------------------------------------------
                                                                                          YEAR ENDED
                                                    YEAR ENDED    1/1/95    10/1/95      DECEMBER 31,       1/1/98     12/24/98
                                                   DECEMBER 31,   THROUGH   THROUGH    -----------------   THROUGH     THROUGH
                                                       1994       9/30/95   12/31/95    1996      1997     12/23/98    12/31/98
                                                   ------------   -------   --------   -------   -------   --------   ----------
                                                                              (DOLLARS IN THOUSANDS)
<S>                                                <C>            <C>       <C>        <C>       <C>       <C>        <C>
STATEMENT OF OPERATIONS:
Revenues.........................................    $  6,584     $ 5,324   $ 1,788    $14,881   $18,867   $49,731    $   23,450
                                                     --------     -------   -------    -------   -------   --------   ----------
Operating expenses:
  Operating, general and
    administrative...............................       3,247       2,581       931      8,123    11,767    25,952        12,679
  Depreciation and amortization..................       2,508       2,137       648      4,593     6,103    16,864        13,811
  Management fees/corporate expense charges......         106         224        54        446       566     6,176           766
                                                     --------     -------   -------    -------   -------   --------   ----------
    Total operating expenses.....................       5,861       4,942     1,633     13,162    18,436    48,992        27,256
                                                     --------     -------   -------    -------   -------   --------   ----------
Income (loss) from operations....................         723         382       155      1,719       431       739        (3,806)
Interest expense.................................          --          --      (691)    (4,415)   (5,120)  (17,277)       (5,051)
Interest income..................................          26          --         5         20        41        44           133
Other income (expense)...........................          --          38        --        (47)       25      (728)           --
                                                     --------     -------   -------    -------   -------   --------   ----------
Net income (loss)................................    $    749     $   420   $  (531)   $(2,723)  $(4,623)  $(17,222)  $   (8,724)
                                                     ========     =======   =======    =======   =======   ========   ==========
BALANCE SHEET DATA (AT END OF PERIOD):
Total assets.....................................    $ 25,511     $26,342   $31,572    $67,994   $55,811   $281,969   $7,235,656
Total debt.......................................      10,194      10,480    28,847     59,222    41,500   274,698     3,523,201
Members' equity (deficit)........................      14,822      15,311       971      2,648    (1,975)   (8,397)    3,429,291
</TABLE>

 
                                       52

<PAGE>   56
 

          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS
 
INTRODUCTION
 
     Because of recently completed and pending significant events, including:
 
     - the acquisition of Charter Holdco by Mr. Allen,
 
     - the merger of CC Holdings with Marcus Holdings,
 
     - our recently completed and pending acquisitions,
 
     - the refinancing of our previous credit facilities, and
 
     - the purchase of publicly held notes that had been issued by several of
       our subsidiaries,
 
we do not believe that our historical results of operations are accurate
indicators of future results. Below we provide a discussion of:
 
     - our operations and development prior to the acquisition of Charter Holdco
       by Mr. Allen,
 
     - the acquisition of Charter Holdco by Mr. Allen,
 
     - the merger of CC Holdings with Marcus Holdings, and
 
     - our recently completed and pending acquisitions.
 
     Prior to the acquisition of Charter Holdco by Mr. Allen, the cable systems
now owned by Charter Holdco were operated under three groups of companies. We
refer to these groups of companies collectively as the Charter Companies.
 
     - CCP Holdings, which is now Charter Holdco,
 
     - the CCA Group, and
 
     - CharterComm Holdings.
 
     Charter Investment did not have controlling interests in the CCA Group and
CharterComm Holdings. The Charter Companies were, however, parties to separate
management agreements with Charter Investment pursuant to which Charter
Investment provided management and consulting services. In December 1998,
Charter Investment acquired the remaining interests it did not previously own in
the CCA Group and CharterComm Holdings.
 
     In February 1999, CC Holdings was formed as a wholly owned subsidiary of
Charter Investment, and Charter Operating was formed as a wholly owned
subsidiary of CC Holdings. All of Charter Investment's direct interests in the
Charter Companies were transferred to Charter Operating. All of the prior
management agreements were terminated and a new management agreement was entered
into between Charter Investment and Charter Operating.
 
     In May 1999, Charter Holdco was formed as a wholly owned subsidiary of
Charter Investment. All of Charter Investment's interests in CC Holdings were
transferred to Charter Holdco.
 
     The acquisition of Charter Holdco 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 for an aggregate
purchase price of $2.2 billion, excluding $2.0 billion in debt that remained
outstanding.
 
     The end result of these events was that:
 
     (1) the Charter Companies became wholly owned subsidiaries of Charter
         Operating;
 
     (2) Charter Operating became a wholly owned subsidiary of CC Holdings;
 
                                       53

<PAGE>   57
 
     (3) CC Holdings became a wholly owned subsidiary of Charter Holdco; and
 
     (4) Charter Holdco became a wholly owned subsidiary of Charter Investment.
 
     For accounting purposes, the contribution of CCP Holdings to Charter
Operating was accounted for as a reorganization under common control and the
financial statements included elsewhere in this prospectus for periods prior to
December 24, 1998 include the accounts of CCP Holdings. The acquisitions of the
other Charter Companies by Charter Investment were accounted for in accordance
with purchase accounting. Accordingly, the financial statements for periods
after December 23, 1998 include the accounts of all of the Charter Companies.
 
     The merger of CC Holdings with Marcus Holdings was accounted for as a
reorganization under common control similar to a pooling of interests because of
the controlling interests in both Marcus Holdings and CC Holdings. As a result,
the accounts of CC Holdings and Marcus Holdings have been consolidated since
December 23, 1998.
 
     In the second quarter of 1999, we acquired American Cable, Renaissance and
the Greater Media cable systems. In addition to these acquisitions, since the
beginning of 1999, we have entered into definitive agreements to acquire cable
systems or the companies owning cable systems from the owners of the Helicon,
InterMedia, Rifkin, Vista, Cable Satellite, Avalon, Fanch, Falcon and Bresnan
cable systems, all as set forth in the table below. These acquisitions are
described in "Business -- Acquisitions".
 

<TABLE>
<CAPTION>
                                                                                     FOR THE THREE MONTHS ENDED MARCH 31, 1999
                                                                                   ----------------------------------------------
                                                                                               (DOLLARS IN THOUSANDS)
                                                                                   ----------------------------------------------
                                                                                                                       CASH FLOWS
                                                                                                                          FROM
                                                                        BASIC       PURCHASE                           OPERATING
ACQUISITION                                           DATE(a)        SUBSCRIBERS      PRICE      REVENUE     EBITDA    ACTIVITIES
-----------                                           -------        -----------    --------     -------     ------    ----------
<S>                                              <C>                 <C>           <C>           <C>        <C>        <C>
American Cable.................................         4/99             68,000    $   240,000   $ 9,151    $  4,195    $ 2,664
Renaissance....................................         4/99            132,000        459,000    15,254       8,365      5,390
Greater Media systems..........................         6/99            174,000        500,000    20,394       7,621      5,808
Helicon........................................         7/99            172,000        550,000    21,252       8,912      4,056
InterMedia systems.............................  3rd or 4th Quarter     408,000        872,700(b)  48,288     21,427     21,027
                                                        1999           (142,000)
                                                                     ----------
                                                                        266,000
Rifkin.........................................  3rd or 4th Quarter     463,000      1,460,000    50,914      19,194       (603)
                                                        1999
Vista and Cable Satellite......................   3rd Quarter 1999       36,000        148,000     3,354       1,760      1,502
Avalon.........................................   4th Quarter 1999      237,000        845,000    24,577      11,354     10,599
Fanch..........................................   4th Quarter 1999      519,000      2,400,000    48,874      25,178     (1,771)
Falcon.........................................   4th Quarter 1999    1,001,000      3,600,000   105,809      58,737     29,429
Bresnan........................................   1st Quarter 2000      656,000      3,100,000    67,295      26,025     10,931
                                                                     ----------    -----------   --------   --------    -------
   Total.......................................                      $3,724,000    $14,124,700   $415,162   $192,768    $89,032
                                                                     ==========    ===========   ========   ========    =======
</TABLE>

 
(a) Represents the closing date for recent acquisitions and the anticipated
    closing date for pending acquisitions.
 
(b) Plus systems swap.
 
OVERVIEW
 
     Approximately 87% of our revenues 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. We derive our other revenues from
installation and reconnection fees charged to customers to commence or reinstate
service, pay-per-view programming, advertising revenues and commissions related
to the sale of merchandise by home shopping services. We have increased our
revenues in each of the past three fiscal years, primarily through internal
customer growth, basic and expanded tier rate increases and acquisitions. Our
revenues have also increased as a result of innovative marketing of programming
services, such as our MVP package of premium services. This
 
                                       54

<PAGE>   58
 
package entitles customers to receive a substantial discount on bundled premium
services of HBO, Showtime, Cinemax and The Movie Channel. The MVP package has
increased premium revenue by 3.4% and premium cash flow by 5.5% in the initial
nine months of its rollout.
 
     We are beginning to offer our customers a number of new products and
services, including digital cable television services and interactive video
programming. We are also beginning to offer high speed Internet access through
cable modems and television-based Internet access through our WorldGate service.
 
     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
account for approximately 46% of our operating costs. 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. A significant factor
with respect to increased programming costs is 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 reduced increases in our programming
costs relative to what the increases would otherwise have been. We also believe
that we will 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 our premium packages, such as the MVP package,
which reduced the negative 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
to or charges from Charter Investment for corporate management and consulting
services. We record actual corporate expense charges incurred by Charter
Investment on behalf of us. Prior to the acquisition of us by Mr. Allen, the CCA
Group and CharterComm Holdings recorded management fees payable to Charter
Investment equal to 3.0% to 5.0% of gross revenues plus certain expenses. In
October 1998, Charter Investment began managing the cable operations of Marcus
Holdings under a management agreement, which was terminated in February 1999 and
replaced by a master management agreement between Charter Investment and Charter
Operating. Our credit facilities limit management fees payable to Charter
Investment to 3.5% of gross revenues.
 
     In connection with the offering, the existing management agreement between
Charter Investment and Charter Operating will be assigned to CCI and CCI will
enter into a new management agreement with Charter Holdco. This management
agreement will be substantially similar to the existing management agreement
except that CCI will only be entitled to receive reimbursement of its expenses
as consideration for its providing 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 the depreciation and amortization expenses
associated with our acquisitions and the capital expenditures related to the
construction and upgrading of our systems and interest costs on
 
                                       55

<PAGE>   59
 
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 Holdco (comprising CCP Holdings only) for the period from
         January 1, 1998 through March 31, 1998, and
 
     (2) Charter Holdco (comprising CCP Holdings, the CCA Group, CharterComm
         Holdings and Marcus Holdings) for the period from January 1, 1999
         through March 31, 1999.
 
     The following table sets forth the percentages that items in the statements
of operations bear to operating revenues for the indicated periods.
 

<TABLE>
<CAPTION>
                                                               THREE MONTHS ENDED
                                                     --------------------------------------
                                                          3/31/99              3/31/98
                                                     -----------------    -----------------
<S>                                                  <C>         <C>      <C>        <C>
STATEMENT OF OPERATIONS
Revenues...........................................  $286,135    100.0%   $ 4,782    100.00%
                                                     --------    -----    -------    ------
Operating expenses:
  Operating, general and administrative............   152,075     53.1%     2,638      55.2%
  Depreciation and amortization....................   153,747     53.7%     1,605      33.6%
  Management fees/corporate expense charges........     5,323      1.9%       143       3.0%
                                                     --------    -----    -------    ------
          Total operating expenses.................   311,145    108.7%     4,386      91.7%
                                                     --------    -----    -------    ------
Income (loss) from operations......................   (25,010)    (8.7%)      396       8.3%
Interest income....................................     1,733      0.6%         8       0.2%
Interest expense...................................   (71,591)   (25.0%)   (1,329)    (27.8%)
Other income.......................................        15      0.0%         2       0.0%
                                                     --------    -----    -------    ------
Loss before extraordinary item.....................   (94,853)    33.1%      (923)    (19.3%)
Extraordinary item-loss from early extinguishment
  of debt..........................................     3,604     (1.3%)       --       0.0%
                                                     --------    -----    -------    ------
          Net loss.................................  $(98,457)   (34.4%)  $  (923)    (19.3%)
                                                     ========    =====    =======    ======
</TABLE>

 
PERIOD FROM JANUARY 1, 1999 THROUGH MARCH 31, 1999
COMPARED TO PERIOD FROM JANUARY 1, 1998 THROUGH MARCH 31, 1998
 
     REVENUES.  Revenues increased by $281.4 million, or 5,883.6%, from $4.8
million for the three months ended March 31, 1998 to $286.1 million for the
three months ended March 31, 1999. This increase primarily resulted from the
acquisitions of the CCA Group, CharterComm Holdings and Sonic (acquired by CCP
Holdings in May 1998 for a purchase price of $220.6 million), and our merger
with Marcus Holdings. The revenues of these entities for the three months ended
March 31, 1999 were $89.4 million, $53.4 million, $13.1 million and $125.2
million, respectively.
 
     OPERATING, GENERAL AND ADMINISTRATIVE EXPENSES.  Operating, general and
administrative expenses increased by $149.4 million, or 5,664.8%, from $2.6
million for the three months ended March 31, 1998 to $152.1 million for the
three months ended March 31, 1999. This increase was due primarily to the
acquisitions of the CCA Group, CharterComm Holdings and Sonic and our merger
with Marcus Holdings. The operating, general and administrative expenses of
these entities for the three months ended March 31, 1999 were $46.5 million,
$26.9 million, $6.9 million and $69.0 million, respectively.
 
                                       56

<PAGE>   60
 
     DEPRECIATION AND AMORTIZATION.  Depreciation and amortization expense
increased by $152.1 million, or 9,479.3%, from $1.6 million for the three months
ended March 31, 1998 to $153.7 million for the three months ended March 31,
1999. This increase in amortization resulted from the acquisitions of the CCA
Group, CharterComm Holdings and Sonic and our merger with Marcus Holdings. The
incremental amortization expenses for the three months ended March 31, 1999
resulting from these acquisitions were $49.1 million, $32.6 million, $4.3
million and $63.7 million, respectively.
 
     MANAGEMENT FEES/CORPORATE EXPENSE CHARGES.  Management fees/corporate
expense charges increased by $5.2 million, or 3,622.4%, from $0.1 million for
the three months ended March 31, 1998 to $5.3 million for the three months ended
March 31, 1999. This increase was the result of the acquisitions of the CCA
Group, CharterComm Holdings and Sonic and our merger with Marcus Holdings.
 
     INTEREST EXPENSE.  Interest expense increased by $70.3 million, or
5,286.8%, from $1.3 million for the three months ended March 31, 1998 to $71.6
million for the three months ended March 31, 1999. This increase resulted
primarily from financing the CCA Group and CharterComm Holdings acquisitions and
our merger with Marcus Holdings. The interest expense resulting from each of
these transactions for the three months ended March 31, 1999 were $14.4 million,
$12.0 million and $26.1 million, respectively.
 
     NET LOSS.  Net loss increased by $97.5 million, or 10,567.1%, from $0.9
million for the three months ended March 31, 1998 to $98.5 million for the three
months ended March 31, 1999. This increase occurred primarily because the
revenue increase resulting from the CCA Group, CharterComm Holdings and Sonic
acquisitions and our merger with Marcus Holdings was not sufficient to offset
the significant costs related to the acquisitions.
 
     The following discusses results of operations for:
 
     (1) Charter Holdco (comprising CCP Holdings, the CCA Group, CharterComm
         Holdings and Marcus Holdings) for the period from December 24, 1998
         through December 31, 1998, and
 
     (2) Charter Holdco (comprising CCP Holdings only) for the period from
         January 1, 1998 through December 23, 1998 and for the years ended
         December 31, 1997 and 1996.
 
                                       57

<PAGE>   61
 
     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>
STATEMENT OF OPERATIONS
Revenues..................................  $14,881    100.0%   $18,867    100.0%   $ 49,731    100.0%   $23,450    100.0%
                                            -------    -----    -------    -----    --------    -----    -------    -----
Operating expenses:
 Operating costs..........................    5,888     39.6%     9,157     48.5%     18,751     37.7%     9,957     42.5%
 General and administrative...............    2,235     15.0%     2,610     13.8%      7,201     14.5%     2,722     11.6%
 Depreciation and amortization............    4,593     30.9%     6,103     32.3%     16,864     33.9%    13,811     58.9%
 Management fees/corporate expense
   charges................................      446      3.0%       566      3.0%      6,176     12.4%       766      3.3%
                                            -------    -----    -------    -----    --------    -----    -------    -----
 Total operating expenses.................   13,162     88.4%    18,436     97.7%     48,992     98.5%    27,256    116.2%
                                            -------    -----    -------    -----    --------    -----    -------    -----
Income (loss) from operations.............    1,719     11.6%       431      2.3%        739      1.5%    (3,806)   (16.2%)
Interest income...........................       20      0.1%        41      0.2%         44      0.1%       133      0.6%
Interest expense..........................   (4,415)   (29.7%)   (5,120)   (27.1%)   (17,277)   (34.7%)   (5,051)   (21.5%)
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%)  $(8,724)   (37.2%)
                                            =======    =====    =======    =====    ========    =====    =======    =====
</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 CCP Holdings, but also the results of operations of the
CCA Group, CharterComm Holdings and Marcus Holdings. 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 $30.8 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. This increase resulted primarily from the acquisition of
Sonic, whose revenues for that period were $30.5 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, whose operating expenses for that period were $11.5
million. The increase for this period was 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, whose general and administrative
expenses for that period were $4.4 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. Of this
increase, $10.3 million was attributable to the acquisition of Sonic.
 
     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. This increase was
the result of additional Charter Investment
 
                                       58

<PAGE>   62
 
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 $1.5
million in management fees charged by Charter Investment 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 $12.1
million of additional interest expense attributable to indebtedness of $220.6
million, including a note payable for $60.7 million, incurred in connection with
the acquisition of Sonic.
 
     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. This increase occurred primarily because the increase in
revenues that resulted from cable television customer growth during this period
was not sufficient to offset the significant costs 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 was the
acquisition of five cable systems in 1996 that increased the number of customers
by 58.9%. Revenues of CCP Holdings, 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 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 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 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 charges 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
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. This increase is primarily related to the $1.4
million loss on the sale of a cable system.
 
LIQUIDITY AND CAPITAL RESOURCES
 
     Our business requires cash to fund acquisitions, debt service, capital
expenditures and our ongoing operations. We have substantial ongoing capital
requirements for the construction, expansion and maintenance of our cable
systems. Capital expenditures are primarily made to rebuild and upgrade our
existing cable systems. We also spend capital on plant extensions, the launch of
new products and services, converters and system maintenance. Historically, we
have been able to meet our capital requirements through our cash flows from
operations, equity contributions, debt financings and available borrowings under
our credit facilities.
 
                                       59

<PAGE>   63
 
     Upgrading our existing plants 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 network and point-to-point
services and digital advertising insertion.
 
     For the period from January 1, 2000 to December 31, 2002, we plan to spend
approximately $5.5 billion for capital expenditures, approximately $2.9 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 $2.6
billion will be used for plant extensions, new services, converters and system
maintenance. Capital expenditures for 2000, 2001 and 2002 are expected to be
approximately $1.5 billion, $2.0 billion and $2.0 billion, respectively.
 
     For the three months ended March 31, 1999, we made capital expenditures,
excluding the acquisitions of cable television systems, of $109.6 million. We
made capital expenditures of $29.0 million for all of 1998. The majority of the
capital expenditures relate to rebuild of existing cable systems.
 
     On March 17, 1999, we issued $3.6 billion principal amount of senior notes.
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 and for working capital
purposes. Semi-annual interest payments with respect to the 8.250% notes and the
8.625% notes will be approximately $89.4 million, commencing on October 1, 1999.
No interest on the 9.920% notes will be payable prior to April 1, 2004.
Thereafter, semiannual interest payments will be approximately $162.6 million in
the aggregate for all our senior notes, commencing on October 1, 2004.
 
     Concurrently with the issuance of the original notes, we refinanced
substantially all of our previous 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 notes except for $1.1 million were
paid off.
 
     Our new credit facilities provide 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). Our new credit facilities also provide for a $1.25 billion revolving
credit facility with a maturity date of September 2008. After giving effect to
the pending acquisitions, we have approximately $791 million of borrowing
availability under our new credit facilities. In addition, an uncommitted
incremental term facility of up to $500 million with terms similar to these of
the credit facilities is permitted under the credit facilities, but will be
conditioned on receipt of additional new commitments from existing and new
lenders. Amounts under our new 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 March 31, 1999 was 7.4%.
 
     We acquired Renaissance in April 1999. Renaissance has outstanding publicly
held debt comprised of 10% senior discount notes due 2008 with a $163.2 million
principal amount at maturity and $100.0 million accreted value. The Renaissance
notes no cash interest until April 15, 2003. From and after April 15, 2003, the
Renaissance notes will bear interest, payable semi-annually in cash, on each
April 15 and October 15, commencing October 15, 2003. The Renaissance notes are
due on April 15, 2008.
 
     Much of our anticipated capital expenditures and interest expense will be
funded from cash generated from operations. In 1998, our EBITDA was $1.2 billion
pro forma for our pending
 
                                       60

<PAGE>   64
 
acquisitions. For the three months ended March 31, 1999, our EBITDA was $318
million pro forma for our pending acquisitions. We also anticipate that we will
need to finance certain of these acquisitions with additional borrowings under
our credit facilities.
 
     The following table sets forth the sources and uses as of March 31, 1999,
giving effect to additional borrowings under our credit facilities and
additional equity contributions in connection with refinancing of our previous
credit facilities and funding of our pending acquisitions as if such
transactions had occurred on that date.
 

<TABLE>
<CAPTION>
   SOURCES (IN MILLIONS):                            USES (IN MILLIONS):
   ----------------------                            -------------------
<S>                            <C>       <C>                                          <C>
CC Holdings Notes:
                                         14.00% senior secured discount
  8.250% notes...............  $   600   debentures.................................  $   109
  8.625% notes...............    1,500   11.25% senior notes........................      125
                                         13.50% senior subordinated discount
  9.920% notes...............      903   notes......................................      383
Credit Facilities:                       14.25% senior discount notes...............      241
  Tranche A..................    1,000   Unamortized premium and
  Tranche B..................    1,850   redemption adjustment......................      149
  Revolver...................    1,250   Previous credit facilities.................    2,535
Acquired companies                       Recent and pending acquisitions............   14,125
     credit facilities.......    1,912   Fees and expenses..........................      280
                                                                                      -------
Publicly Held Debt:
  Renaissance debt...........       83
  Falcon debt................      698
  Avalon debt................      279
  Bresnan debt...............      359
Minority interest............    4,488
Other........................       25
 
Equity:
  Class A common stock.......        3
  Additional paid-in
     capital.................    2,997
                               -------
                               $17,947                                                $17,947
                               =======                                                =======
</TABLE>

 
     We have agreed to acquire the Helicon, InterMedia, Rifkin, Vista, Cable
Satellite, Avalon, Fanch, Falcon and Bresnan systems. The aggregate
consideration payable by us for all of these acquisitions is $13.0 billion,
including $1.4 billion that may be payable by us to satisfy requirements to make
offers to repurchase these companies' outstanding debt securities. We intend to
finance these acquisitions through $5.5 billion of debt and the issuance of $7.5
billion of equity.
 
     Prior to our acquisition by Mr. Allen, we have received minimal equity
contributions. In order to fund a portion of the pending acquisitions, Mr.
Allen, through Vulcan III, has committed to contribute $1.325 billion of
additional equity in Charter Holdco before September 1, 1999 and $750 million of
additional equity in Charter Holdco concurrently with this offering. In
addition, we anticipate that we will need to raise $1.1 billion in additional
capital to fund the acquisition of Bresnan.
 
                                       61

<PAGE>   65
 
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...................        --         --         --         --         --   $  984,509   $  984,509    $  974,327
 Average Interest Rate.......        --         --         --         --         --         13.5%        13.5%
Variable Rate................  $ 87,950   $110,245   $148,950   $393,838   $295,833   $1,497,738   $2,534,554    $2,534,533
 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>

 
     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 LIBOR
rates for the year of maturity based on the yield curve in effect at December
31, 1998 plus the borrowing margin in effect for each credit facility 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 credit facilities. The following
table set forth the fair values and contract terms of the long-term debt
maintained by us as of March 31, 1999:
 

<TABLE>
<CAPTION>
                                               EXPECTED MATURITY DATE                                           FAIR VALUE AT
                                 --------------------------------------------------                               MARCH 31,
                                   1999       2000       2001      2002      2003     THEREAFTER     TOTAL          1999
                                 --------   --------   --------   -------   -------   ----------   ----------   -------------
<S>                              <C>        <C>        <C>        <C>       <C>       <C>          <C>          <C>
DEBT
Fixed Rate.....................        --         --         --        --        --   $3,575,000   $3,575,000    $3,004,023
 Average Interest Rate.........        --         --         --        --        --          9.0%         9.0%
Variable Rate..................        --         --         --   $13,125   $17,500   $1,719,375   $1,750,000    $1,750,000
 Average Interest Rate.........        --         --         --       5.9%      6.0%         6.4%         6.4%
</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 March 31, 1998 plus the borrowing margin in effect for each credit facility
at March 31, 1999.
 
                                       62

<PAGE>   66
 
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
upcoming change in the century. 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 also 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 suffer
"integration failure" because their methods of dealing with the problem is not
compatible.
 
     These problems are expected to increase in frequency and severity as the
year 2000 approaches. This 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.
 
     THIRD PARTIES.  We also 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 or a significant third party on which we rely fails to become year
2000 ready, 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 are addressing the Year 2000 problem with respect
to our internal operations in three stages:
 
     (1) conducting an inventory and evaluation of our systems, components, and
         other significant infrastructure to identify those elements that
         reasonably could be expected to be affected by the year 2000 problems.
         This initiative has been completed;
 
     (2) remediating or replacing equipment that will fail to operate properly
         in the year 2000. We plan to be finished with the remediation by
         September 1999; and
 
     (3) testing of the remediation and replacement conducted in stage two. We
         plan to complete all testing by September 1999.
 
     Much of our assessment efforts in stage one have involved, and depend on,
inquiries to third party service providers, who are the suppliers and vendors of
various parts or components of our systems. 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 will on a timely basis 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 are utilizing a third party, in
cooperation with other cable operators, to test a "mock-up" of our major billing
and
 
                                       63

<PAGE>   67
 
plant components, including pay-per-view systems, as an integrated system. We
are utilizing another third party to also conduct comprehensive testing on our
advertising related scheduling and billing systems. In addition, we are
evaluating the potential impact of third party failure and integration failure
on our systems.
 
     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.
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. The year
2000 taskforce is expected to significantly reduce our level of uncertainty
about the year 2000 problem and, in particular, about the year 2000 compliance
and readiness of our material vendors.
 
     We are in the process of acquiring certain cable televisions systems, and
have negotiated certain contractual rights in the acquisition agreements
relating to the year 2000. We have included the acquired cable television
systems in our year 2000 taskforce's plan. We are monitoring the remediation
process for systems we are acquiring to ensure completion of remediation before
or as we acquire these systems. We have found that these companies are following
a three stage process similar to that outlined above and are on a similar time
line. We are not currently aware of any likely material system failures relating
to the year 2000 affecting the acquired systems.
 
     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 interrupted service providing video,
voice and data products to our customers. The normal contingency planning is
being reviewed and will be revised by August 1999, where appropriate, to
specifically address year 2000 exposure with respect to service to customers.
 
     COST.  We have incurred $4.9 million in costs to date directly related to
addressing the year 2000 problem. 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 $7 million. Although we will continue to make substantial capital
expenditures in the ordinary course of meeting our telecommunications system
upgrade goals through the year 2000, we will not specifically accelerate those
expenditures to facilitate year 2000 readiness, and accordingly those
expenditures are not included in the above estimate.
 
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, 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).
 
                                       64

<PAGE>   68
 

 
                                   BUSINESS
 
OVERVIEW
 
     We are the 4th largest operator of cable television systems in the United
States, serving approximately 6.2 million customers, after giving effect to our
pending acquisitions. We are currently the 6th largest operator of cable
television systems in the United States serving approximately 2.7 million
customers.
 
     We offer a full range of traditional cable services. As part of our "wired
world" vision, we are also beginning to offer an array of new products and
services including:
 
     - digital television;
 
     - interactive video programming; and
 
     - high-speed Internet access.
 
We are also exploring opportunities in telephony.
 
     These new products and services 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.
 
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 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 Charter's
     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.
 
                                       65

<PAGE>   69
 
          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. We introduced a customer care team that has worked
closely with city governments to improve customer service. 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-three weeks to three-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. In addition, we have
begun to 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 At Home Corporation.
 
     UPGRADE THE BANDWIDTH OF OUR SYSTEMS. We plan to spend approximately $2.9
billion from 2000 to 2002 to upgrade to 550 megahertz or greater the bandwidth
of our existing systems and those of our pending acquisitions. 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 more 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 March 31, 1999, approximately 60% of our customers were served by
cable systems with at least 550 megahertz bandwidth capacity, and approximately
35% of our customers had two-way communication capability. By year-end 2003,
including all pending acquisitions, we expect that approximately 94% of our
customers will be served by cable systems with at least 550 megahertz bandwidth
capacity and two-way communication capability.
 
     Our planned upgrades will reduce the number of headends from 1,243 in 1999
to 479 in 2003, including our pending acquisitions. 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.
 
     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. We believe that our customer service efforts have contributed to
 
                                       66

<PAGE>   70
 
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 our customers. We use demographic "cluster codes" to
address messages to target audiences through direct mail and telemarketing. 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 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 Holdco has adopted a plan to distribute to employees and
consultants, including members of corporate management and key regional and
system-level management personnel, equity-based incentive compensation based on
  % of the equity value of Charter Holdco.
 
     CONCENTRATE OUR SYSTEMS IN TIGHTER GEOGRAPHICAL CLUSTERS. To improve
operating margins and increase operating efficiencies, we 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. Clustering enables us to consolidate headends and
spread fixed costs over a larger subscriber base.
 
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
 
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<PAGE>   71
 
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 plant and infrastructure;
 
     - increased leverage for negotiating programming contracts; and
 
     - increased influence on the evolution of important new technologies
       affecting our business.
 
     See "Description of Certain Indebtedness" for a description of the material
debt that we have assumed or intend to assume in connection with our recent and
pending acquisitions.
 
RECENTLY COMPLETED ACQUISITIONS
 
     AMERICAN CABLE. In April 1999, we purchased American Cable Entertainment,
LLC for approximately $240 million. American Cable owns cable systems located in
California serving approximately 68,000 customers and is being operated as part
of our Western region. For the three months ended March 31, 1999, American Cable
had revenues of approximately $9.2 million, EBITDA of approximately $4.2 million
and cash flows from operating activities of approximately $2.7 million. For the
year ended December 31, 1998, American Cable had revenues of approximately $15.7
million, EBITDA of approximately $7.8 million and cash flows from operating
activities of approximately $4.7 million. At year-end 1998, none of the American
Cable system's customers were served by systems with at least 550 megahertz
bandwidth capacity or greater.
 
     RENAISSANCE. In April 1999, we purchased Renaissance Media Group LLC for
approximately $459 million, consisting of $348 million in cash and $111 million
of publicly held debt to be assumed. As a result of a Change of Control, we
recently completed a tender offer for this publicly held debt. Holders of the
notes tendered 30% of the outstanding principal amount of these 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 three months ended March 31, 1999, Renaissance had
revenues of approximately $15.3 million, EBITDA of approximately $8.4 million
and cash flows from operating activities of approximately $5.4 million. For the
year ended December 31, 1998, Renaissance had revenues of approximately $41.5
million, EBITDA of approximately $20.5 million and cash flows from operating
activities of approximately $22.7 million. As of March 31, 1999, there was
$110.5 million total principal outstanding under the Renaissance notes. At
year-end 1998, approximately 36% of Renaissance's customers were served by
systems with at least 550 megahertz bandwidth capacity.
 
     GREATER MEDIA SYSTEMS. In June 1999, we purchased certain cable systems of
Greater Media Cablevision Inc. for approximately $500 million. The Greater Media
systems are located in
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<PAGE>   72
 
Massachusetts, have approximately 174,000 customers and are being operated as
part of our Northeast Region. For the three months ended March 31, 1999, the
Greater Media systems had revenues of approximately $20.4 million, EBITDA of
approximately $7.6 million and cash flows from operating activities of
approximately $5.8 million. For the year ended December 31, 1998, the Greater
Media systems had revenues of approximately $78.6 million, EBITDA of
approximately $29.3 million and cash flows from operating activities of
approximately $29.8 million. At year-end 1998, approximately 75% of the Greater
Media systems' customers were served by systems with at least 550 megahertz
bandwidth capacity.
 
PENDING ACQUISITIONS
 
     HELICON. In March 1999, we entered into an agreement to acquire Helicon
Partners I, L.P. for approximately $550 million of which $25 million will be
payable in a preferred limited liability company interest in one of Charter
Operating's subsidiaries. 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 by
Charter Helicon LLC 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. The sellers in this transaction have the
right to purchase a total of $12 million of our Class A common stock in the
offering. Helicon owns cable systems located in Alabama, Georgia, New Hampshire,
North Carolina, West Virginia, South Carolina, Tennessee, Pennsylvania,
Louisiana and Vermont, and has approximately 174,000 customers. For the three
months ended March 31, 1999, Helicon had revenues of approximately $21.3
million, EBITDA of approximately $8.9 million and cash flows from operating
activities of approximately $4.1 million. For the year ended December 31, 1998,
Helicon had revenues of approximately $75.6 million, EBITDA of approximately
$31.9 million and cash flows from operating activities of approximately $7.1
million. At year-end 1998, approximately 69% of Helicon's customers were served
by systems with at least 550 megahertz bandwidth capacity. Following regulatory
approvals, we anticipate that this transaction will close during the third
quarter of 1999. As of March 31, 1999, there was $115 million aggregate
principal outstanding under the Helicon notes. Within 45 days of our acquisition
of Helicon, we will be required to make an offer to repurchase the Helicon notes
at a price equal to 101% of their aggregate principal amount, plus accrued
interest, to the date of the purchase. In connection with the acquisition of
Helicon, Charter Investment entered into separate agreements with Baum
Investments, Inc. and with Roberts Cable Corporation, GAK Cable, Inc. and Gimbel
Cable Corp., pursuant to which Charter Investment:
 
     - agreed to cause the underwriters to make $12 million worth of shares of
       our Class A common stock being sold in this offering available for
       purchase by Baum Investments, Roberts Cable, GAK Cable and Gimbel Cable,
       at the initial public offering price; and
 
     - to the extent that this offering is consummated prior to the Helicon
       acquisition, to loan, on an interest-free basis, to Baum Investments,
       Roberts Cable, GAK Cable and Gimbel Cable an amount equal to the purchase
       price of these shares.
 
     INTERMEDIA SYSTEMS. In April 1999, we entered into agreements to purchase
certain cable systems of InterMedia Capital Partners IV, L.P., InterMedia
Partners and their affiliates in exchange for cash in the amount of $872.7
million and certain of our cable systems. The InterMedia systems serve
approximately 408,000 customers in North Carolina, South Carolina, Georgia and
Tennessee. As part of this transaction, we will "swap" some of our non-strategic
cable systems serving approximately 142,000 customers located in Indiana,
Montana, Utah and northern Kentucky. This transaction will result in a net
increase of 266,000 customers. For the three months ended March 31, 1999, the
InterMedia systems had revenues of approximately $48.3 million, EBITDA of
approximately $21.4 million and cash flows from operating activities of
approximately $21.0 million. For the year ended December 31, 1998, the
InterMedia systems had revenues of approximately $176.1 million, EBITDA of
approximately $109.2 million and cash flows
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<PAGE>   73
 
from operating activities of approximately $83.2 million. At year-end 1998,
approximately 79% of these customers were served by systems with at least 550
megahertz bandwidth capacity. Following regulatory approvals, we anticipate that
the acquisition of the InterMedia systems will close during the third or fourth
quarter of 1999.
 
     RIFKIN. In April 1999, Charter Investment entered into agreements to
purchase Rifkin Acquisition Partners, L.L.L.P. and Interlink Communications
Partners, LLLP for a purchase price of approximately $1.46 billion in cash and
assumed debt. Charter Investment has assigned its rights under such agreements
to a subsidiary of Charter Holdco. Although none of the material terms of the
grant described below have been finalized, Charter Investment has agreed to
grant to some of the sellers under the Rifkin purchase agreements the right to
elect to receive all or any portion of their part of the purchase price in
membership units in Charter Holdco. If the Rifkin acquisition occurs before or
concurrently with this offering:
 
     -  The membership units will be preferred membership units, exchangeable
        for shares of our Class A common stock at the initial public offering
        price. The exact number and value of the preferred membership units in
        Charter Holdco will be determined according to a formula intended to
        value Charter Holdco at the time of the acquisition closing, by taking
        into consideration many factors, including the value of our pending
        acquisition targets and our debt levels.
 
     -  The preferred membership units will accrete at 8.0% annually and mature
        fifteen years after the closing of the acquisition.
 
     -  The holders of the preferred membership units will have the right to
        cause Charter Holdco to redeem the units for five years from the closing
        of the acquisition. In exchange for membership units, an entity
        controlled by Mr. Allen will make a capital contribution to Charter
        Holdco in an amount equal to the redemption price concurrently with the
        redemption.
 
     -  The exchange ratio will be calculated to issue to the Rifkin sellers the
        number of shares of Class A common stock equal in value to the then
        accreted value of the preferred membership units being exchanged.
 
     -  The right to exchange the preferred membership units for Class A common
        stock terminates concurrently with this offering.
 
If the Rifkin acquisition closes after this offering:
 
     -  The sellers may elect to receive common membership units in Charter
        Holdco.
 
     -  The common membership units will be exchangeable for shares of Class A
        common stock at any time and will represent a percentage interest in
        Charter Holdco determined by reference to the value of CCI's membership
        interest in Charter Holdco. The value of CCI's membership interest in
        Charter Holdco will be determined by reference to the average trading
        price of our Class A common stock at the time of exchange, taking into
        consideration any other debts and/or assets of CCI.
 
     -  The exchange ratio will be calculated so that the Rifkin sellers will be
        issued the number of shares of our Class A common stock equal in value
        to the membership units being exchanged.
 
     -  The exchange ratio for these common membership units will be determined
        by reference to the twenty-day average trading price of our Class A
        common stock prior to the exchange. If we reasonably determine that the
        issuance of shares of our Class A common stock in exchange for these
        common membership units would have to be registered under the Securities
        Act, we will have the right to purchase or register the units.
 
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<PAGE>   74
 
Depending on the level of seller interest, this rollover equity, if issued,
would be valued between approximately $25 million and $250 million. Because the
terms of this equity have not been finalized, and seller participation has not
been determined, we cannot be certain that any equity will be issued to the
Rifkin sellers or that the cash portion of the purchase price will be reduced
below $1.46 billion. It is also contemplated that these sellers will be granted
registration rights with respect to the shares of our Class A common stock
issued in exchange for membership units in Charter Holdco. These rights will
most likely include "piggy back" and two "demand" registration rights. The
demand registration rights would be exercisable with respect to shares of Class
A common stock with a minimum value to be determined and not until we are
eligible to file a registration statement on Form S-3 under the Securities Act
of 1933.
 
     Rifkin owns cable systems primarily in Florida, Georgia, Illinois, Indiana,
Tennessee, Virginia and West Virginia and serves approximately 463,000
customers. For the three months ended March 31, 1999, Rifkin had revenues of
approximately $50.9 million, EBITDA of approximately $19.2 million and cash
flows used in operating activities of approximately $0.6 million. For the year
ended December 31, 1998, Rifkin had revenues of approximately $124.4 million,
EBITDA of approximately $56.5 million and cash flows from operating activities
of approximately $40.4 million. As of March 31, 1999, there was $229.5 million
total principal and accrued interest outstanding under the Rifkin notes. At
year-end 1998, approximately 36% of Rifkin's customers were served by systems
with at least 550 megahertz bandwidth capacity. Following regulatory approvals,
we anticipate that this transaction will close during the third or fourth
quarter of 1999.
 
     AVALON.  In May 1999, we entered into an agreement to purchase 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 $845 million in cash
and assumed debt. Avalon Cable operates primarily in Michigan and New England
and serves approximately 260,000 customers. For the three months ended March 31,
1999, Avalon Cable had revenues of approximately $24.6 million, EBITDA of
approximately $11.4 million and cash flows from operating activities of
approximately $10.6 million. For the year ended December 31, 1998, Avalon Cable
had revenues of approximately $18.2 million, EBITDA of approximately $1.0
million and cash flows from operating activities of approximately $7.3 million.
As of March 31, 1999, there was $150.7 million, $114.8 million and $177.4
million total principal outstanding under the Avalon 9 3/8% notes, the Avalon
11 7/8% notes and the Avalon credit facilities, respectively. At year-end 1998,
approximately 21% of Avalon Cable's customers were served by systems with at
least 550 megahertz bandwidth capacity. Following regulatory approvals, we
anticipate that the transaction will close during the fourth quarter of 1999.
 
     FANCH.  In May 1999, Charter Investment entered into an agreement to
purchase 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. and Cable
Systems, Inc. for a total combined purchase price of approximately $2.4 billion.
Charter Investment has assigned its rights under the purchase agreement to
Charter Holdco. The cable television systems to be acquired in this acquisition
are located in Colorado, Indiana, Kansas, Kentucky, Michigan, Mississippi, New
Mexico, Oklahoma, Texas and Wisconsin, and serve approximately 519,000
customers. For the three months ended March 31, 1999, the cable systems to be
acquired had revenues of approximately $48.9 million, EBITDA of approximately
$25.2 million and cash flows from operating activities of approximately ($1.8)
million. For the year ended December 31, 1998, the systems to be acquired had
revenues of approximately $141.1 million, EBITDA of approximately $67.4 million
and cash flows from operating activities of approximately $72.8 million. As of
March 31, 1999, there was $21.9 million total principal and interest outstanding
under the Fanch credit facilities. At year-end 1998, approximately half of these
systems' customers were
 
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<PAGE>   75
 
served by systems with at least 550 megahertz bandwidth capacity. Following
regulatory approvals, we anticipate that this transaction will close during the
last quarter of 1999.
 
     FALCON.  In May 1999, Charter Investment entered into an agreement to
purchase 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. Charter Investment has assigned its rights under the
purchase agreement to Charter Holdco. Under the Falcon purchase agreements,
Falcon Holding Group, L.P. has agreed to contribute to Charter Holdco a portion
of its partnership interest in Falcon Communications, L.P. in exchange for
membership units in Charter Holdco on the following terms:
 
     - The purchase price for the transaction is approximately $3.6 billion in
       cash, membership interests in Charter Holdco and assumed debt. From $450
       to $550 million of the purchase price will be paid in the form of
       membership units in Charter Holdco. The exact minimum amount of purchase
       price payable in membership units will be determined by reference to a
       formula in the purchase agreement.
 
     - The exact number of membership units in Charter Holdco to be issued will
       be determined according to a formula intended to value Charter Holdco at
       the closing of the acquisition, taking into consideration many factors,
       including the value of our pending acquisition targets and our debt
       levels.
 
     - The membership units in Charter Holdco issued to Falcon Holding will be
       exchangeable at any time for shares of our Class A common stock, but we
       have the obligation to register or purchase the membership units if the
       issuance of shares of our Class A common stock in exchange for these
       units would require registration under the Securities Act.
 
     - The exchange ratio will be calculated to issue to Falcon Holding the
       number of shares of our Class A common stock equal in value to the
       membership units being exchanged.
 
     - If the units are exchanged concurrently with this offering, the shares of
       our Class A common stock will be valued at the initial public offering
       price.
 
     - If the units are exchanged after this offering, the shares of Class A
       common stock will be valued by reference to a twenty-day average trading
       price of our Class A common stock. The membership units in Charter Holdco
       will be valued by reference to the twenty-day average trading price and
       by using it to determine the value of CCI's membership interest in
       Charter Holdco, taking into consideration many factors, including the
       value of our pending acquisition targets and our debt levels.
 
     - If the Falcon acquisition is consummated prior to or concurrently with
       this offering, Falcon Holding has agreed to exercise its right to
       exchange the membership units immediately prior to this offering, so long
       as certain tax requirements are satisfied.
 
     If Mr. Allen sells 25% or more of his interest in Charter Investment, or if
Charter Investment sells 25% or more of its interest in us, Falcon Holding will
have the right to participate in certain of Mr. Allen's or Charter Investment's
sales. Falcon Holding will have "piggyback" registration rights and, beginning
180 days after the offering, up to four "demand" registration rights with
respect to the Class A common stock issued in exchange for the membership units
in Charter Holdco. The demand registration rights must be exercised with respect
to tranches of Class A common stock worth at least $40 million at the time of
notice of demand or at least $60 million at the initial public offering price. A
majority of the holders of Class A common stock making a demand may also require
us to satisfy our registration obligations by filing a shelf-registration
statement. The selling holders of our Class A common stock may also exercise
their "piggy back" rights with respect to this offering, to the extent the
offering occurs concurrently with the
 
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<PAGE>   76
 
closing of the Falcon acquisition. The registration rights terminate with
respect to any shares of our Class A common stock that:
 
     - are covered by an effective registration statement under the Securities
       Act of 1933;
 
     - have been validly sold and are not restricted securities with respect to
       the transferee under the securities laws;
 
     - may be validly sold under Rule 144 under the Securities Act of 1933 and
       without restriction by the volume limitations thereunder; or
 
     - are no longer outstanding.
 
     The systems to be acquired are located in California and the Pacific
Northwest, Missouri, North Carolina, Alabama and Georgia and serve approximately
1 million customers. For the three months ended March 31, 1999, the cable
systems to be acquired had revenues of approximately $105.8 million, EBITDA of
approximately $58.7 million and cash flows from operating activities of
approximately $29.4 million. For the year ended December 31, 1998, the cable
systems to be acquired had revenues of approximately $307.6 million, EBITDA of
approximately $143.2 million and cash flows from operating activities of
approximately $71.6 million. As of March 31, 1999, there was $675.1 million
total principal and interest outstanding under the Falcon debentures. At
year-end 1998, approximately 19% of the customers of the systems to be acquired
were served by systems with at least 550 megahertz bandwidth capacity. Following
regulatory approvals, we anticipate that the transaction will close during the
fourth quarter of 1999.
 
     BRESNAN. In June 1999, Charter Holdco entered into an agreement to purchase
Bresnan Communications Company Limited Partnership for a purchase price of
approximately $1.1 billion in cash and $1.0 billion in the form of equity in
Charter Holdco. We also agreed to assume approximately $1.0 billion in debt. The
equity portion of the purchase price will be membership units in Charter Holdco,
the total amount of which is currently calculated to equal 6.14% of the total
membership interests in Charter Holdco. We calculated this percentage interest
based on a number of assumptions about Charter Holdco and our pending
acquisitions, including our debt, the value of our pending acquisition targets
and the enterprise value of Charter Holdco. Accordingly, this percentage
interest may change at or prior to the closing of the Bresnan acquisition. The
holders of the membership units may exchange all or part of their units at any
time for shares of our Class A common stock. The exchange ratio will be
calculated as follows:
 
     - If we have no assets or debt other than our interest in Charter Holdco at
       the time of the exchange, each exchanging holder of membership units will
       receive the number of shares of our Class A common stock representing an
       indirect equity interest in Charter Holdco equal to the holder's
       pre-exchange direct equity interest in Charter Holdco.
 
     - If we have assets or debt other than our interest in Charter Holdco at
       the time of the exchange, each exchanging holder of membership units will
       receive a number of shares of our Class A common stock equal in value to
       the holder's membership units in Charter Holdco, taking into
       consideration many factors, including the value of our pending
       acquisition targets and our debt levels.
 
     If necessary, the value of the shares of our Class A common stock issued in
exchange for membership units will be calculated as follows:
 
     - if the exchange right is exercised concurrently with this offering,
       according to the initial public offering price; or
 
     - if the exchange right is exercised after this offering, according to the
       twenty-day average trading price.
 
     If Mr. Allen sells 25% or more of his interest in Charter Investment, or if
Charter Investment sells 25% or more of its interest in us, the Bresnan sellers
will have the right to participate in
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<PAGE>   77
 
certain of Mr. Allen's or Charter Investment's sales. Collectively, the Bresnan
sellers will have "piggyback" registration rights and, beginning 180 days after
this offering, up to four "demand" registration rights with respect to our Class
A common stock issued in exchange for the membership units in Charter Holdco.
The demand registration rights must be exercised with respect to tranches of our
Class A common stock worth at least $40 million at the time of notice of demand
or at least $60 million at the initial public offering price. The registration
rights terminate with respect to any shares of our Class A common stock that:
 
     - are covered by an effective registration statement under the Securities
       Act of 1933;
 
     - have been validly sold and are not restricted securities with respect to
       the transferee under the securities laws;
 
     - may be validly sold under Rule 144 under the Securities Act of 1933 and
       without restriction by the volume limitations thereunder; or
 
     - are no longer outstanding.
 
     TCI Bresnan LLC will have the right to put to Charter Holdco its membership
units or shares of Class A common stock issued in exchange for its membership
units. After 2002 and through 2010, TCI Bresnan may exercise this right once a
year during the 90-day period following each anniversary of the Bresnan closing
and no more than twice in total.
 
     The cable television systems to be acquired in this acquisition are located
in Michigan, Minnesota, Wisconsin and Nebraska and serve approximately 656,000
customers. For the three months ended March 31, 1999, the Bresnan cable systems
we are buying had revenues of approximately $67.3 million, EBITDA of
approximately $26.3 million and cash flows from operating activities of
approximately $10.9 million. For the year ended December 31, 1998, these systems
had revenues of approximately $262.0 million, EBITDA of approximately $138.0
million and cash flows from operating activities of approximately $102.4
million. As of March 31, 1999, there was $445 million and $501.6 million total
principal and interest outstanding under the Bresnan notes and credit
facilities. At year-end 1998, approximately 61% of these systems' customers were
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.
 
     OTHER ACQUISITIONS. In addition to the acquisitions described above,
Charter Investment and Charter Communications, LLC have entered into definitive
agreements for such subsidiary to purchase Vista Broadband Communications, LLC
and certain cable assets of Cable Satellite of South Miami, Inc. 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 is approximately $148 million. For the three months ended March 31,
1999, these systems to be acquired had revenues of approximately $3.4 million,
EBITDA of approximately $1.8 million and cash flows from operating activities of
approximately $1.5 million. For the year ended December 31, 1998, the cable
systems to be acquired in connection with these other acquisitions had revenues
of $9.3 million, EBITDA of approximately $4.7 million and cash flows from
operating activities of approximately $4.1 million.
 
     MARCUS MERGER.  On April 7, 1999, the holding company parent of the Marcus
companies merged into one of our subsidiaries, which was the surviving entity of
the merger. The subsidiaries of the Marcus holding company thereby became our
subsidiaries. Mr. Allen and a corporation he controlled, had entered into the
agreement to purchase the Marcus cable systems in April 1998. In October 1998
and pending the Marcus merger, the Marcus cable systems came under common
operating management with us.
 
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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.  More than 85% 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. About 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. As of March 31, 1999, the average monthly fee was
       $11.07 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. As of March 31,
       1999, the average monthly fee was $18.80 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. As of
       March 31, 1999, the average monthly fee was $6.47 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 $3 to $9 for movies. For special events,
       such as championship boxing matches, we have charged a fee of up to
       $49.99.
 
     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
 
                                       75

<PAGE>   79
 
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; and
 
     - telephony and data transmission services.
 
     We believe that we are well positioned to compete with other providers of
these services due to the high bandwidth of cable technology and our ability to
access homes and businesses.
 
     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
 
     - 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 June 30, 1999, we had
in excess of 8,700 customers subscribing to digital services offered by sixteen
of our cable systems, which serve approximately 330,000 basic cable customers.
By December 31, 1999, we anticipate that approximately 2 million of our
customers will be 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.
 
                                       76

<PAGE>   80
 
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 28.8 kilobits per second
telephone modem. Furthermore, a two-way communication cable system using the HFC
architecture can support the entire connection at cable modem speeds without any
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 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 25% of 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 29 markets including: Los Angeles, California; St.
Louis, Missouri; and Fort Worth, Texas. Generally, we offer Internet access
through cable modems to our customers in systems that have been upgraded to at
least 550 megahertz bandwidth capacity.
 
     As of June 30, 1999, we provided Internet access service to approximately
13,460 homes and 160 businesses. The following table indicates the historical
and projected availability of cable modem Internet access services in our
systems, pro forma for our recent and pending acquisitions 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
                                                        ----------------------------------
                                                        JUNE 30, 1999    DECEMBER 31, 1999
                                                        -------------    -----------------
                                                          (ACTUAL)          (PROJECTED)
<S>                                                     <C>              <C>
  High Speed Access Corp. ............................      671,618          1,101,077
  EarthLink...........................................      661,273            775,823
  At Home.............................................      387,860          1,004,420
  In-House/Other......................................           --            584,054
  Convergence.com.....................................           --            404,097
  Road Runner.........................................           --             73,720
                                                          ---------          ---------
     Total Homes Passed...............................    1,720,751          3,943,191
                                                          =========          =========
</TABLE>

 
     We have an agreement with EarthLink, an independent Internet service
provider, to provide as a private label service Charter Pipeline(TM), which is a
cable modem-based, high-speed Internet access service we offer. We currently
charge a monthly usage fee of between $24.95 and $34.95.
 
                                       77

<PAGE>   81
 
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 June 30, 1999, we offered
EarthLink Internet access to approximately 660,000 of our homes passed and have
approximately 5,800 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(TM) 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 At 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 June 30,
1999, High Speed Access offered Internet access to approximately 670,000 of our
homes passed, and approximately 7,000 customers have signed up for the service.
During the remaining 6 months of 1999, we, jointly with High Speed Access, plan
to launch service in an additional 18 systems, covering approximately 429,500
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 also have a revenue sharing agreement with At Home, under which At Home
currently provides Internet service to customers in our systems serving Fort
Worth, University Park and Highland Park, Texas. The At Home network provides
high-speed, cable modem-based Internet access using our cable infrastructure. As
of June 30, 1999, we offered At Home Internet service to approximately 388,000
of our homes passed and had approximately 3,000 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, 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,
41% use WorldGate at least once a day, and 77% use it at least once a week.
Although the WorldGate service bears the WorldGate brand name, the Internet
domain name of the customers who use this service is "Charter.net". This allows
the customer to switch or expand to our other Internet services without a change
of e-mail address.
 
                                       78

<PAGE>   82
 
     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 our systems in Logan, Utah, Maryville, Illinois and Newtown, Connecticut, and
plan to introduce it in eight additional systems by December 31, 1999. Charter
Investment owns a minority interest in WorldGate. See "Certain Relationships and
Related Transactions". As of June 30, 1999, we provided WorldGate Internet
service to approximately 4,300 customers.
 
     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.
 
     MISCELLANEOUS SERVICES.  We also offer paging services to our customers in
certain markets. As of June 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 March 31, 1999, our systems consisted of approximately 65,900 miles
of coaxial and approximately 8,500 sheath miles of fiber optic cable passing
approximately 4.0 million households and serving approximately 2.3 million
customers. As of March 31, 1999, approximately 60% of our customers were served
by systems with at least 550 megahertz bandwidth capacity, approximately 40% had
at least 750 megahertz bandwidth capacity and approximately 35% were served by
systems capable of providing two-way interactive communication capability, such
as two-way Internet connections, Wink services and interactive program guides.
These amounts do not reflect the impact of our recent or pending acquisitions.
 
     OPERATING REGIONS.  To manage and operate our systems, we have established
two divisions that contain a total of seven operating regions: Western; Central;
MetroPlex (Dallas/Ft.
 
                                       79

<PAGE>   83
 
Worth); North Central; Northeast; Southeast; and Southern. Each of the two
divisions is managed by a Senior Vice President who reports directly to Jerald
L. Kent and is responsible for overall supervision of the operating regions
within. 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 groups known as "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. We
anticipate that we will reorganize into a total of eleven regions with the
closings of our pending acquisitions.
 
                                       80

<PAGE>   84
 
     The following table provides an overview of selected technical, operating
and financial data for each of our operating regions for the three months ended
March 31, 1999. The following table does not reflect the impact of our recent or
pending acquisitions. We currently serve approximately 2.7 million customers
after giving effect to our recently completed acquisitions and approximately 6.2
million customers after giving effect to our recent and pending acquisitions.
 
      SELECTED TECHNICAL, OPERATING AND FINANCIAL DATA BY OPERATING REGION
                   FOR THE THREE MONTHS ENDED MARCH 31, 1999
 

<TABLE>
<CAPTION>
                                                                NORTH
                               WESTERN   CENTRAL   METROPLEX   CENTRAL   NORTHEAST   SOUTHEAST   SOUTHERN     TOTAL
                               -------   -------   ---------   -------   ---------   ---------   --------   ---------
<S>                            <C>       <C>       <C>         <C>       <C>         <C>         <C>        <C>
TECHNICAL DATA:
Miles of coaxial cable.......    7,500     8,800      5,700     10,000      4,600      16,700     12,600       65,900
Density(a)...................      132        67         85         60         32          39         40           60
Headends.....................       21        34         16         86          7          60         59          283
Planned headend
  eliminations...............        3         3          1         30          0          11          8           56
Plant bandwidth(b):
450 megahertz or less........     21.9%     53.7%      28.0%      41.9%      51.2%       37.9%      58.2%        42.7%
550 megahertz................      8.0%     10.2%      14.4%      12.9%      33.5%       25.6%      13.8%        16.9%
750 megahertz or greater.....     70.1%     36.1%      57.6%      45.2%      15.4%       36.5%      28.0%        40.4%
Two-way capability...........     55.6%     45.5%      62.2%      56.2%      15.4%       15.5%      19.8%        35.1%
OPERATING DATA:
Homes passed.................  993,000   592,000    486,000    603,000    148,000     648,000    507,000    3,977,000
Basic customers..............  502,000   363,000    186,000    399,000    124,000     451,000    319,000    2,344,000
Basic penetration(c).........     50.6%     61.3%      38.3%      66.2%      83.8%       69.6%      62.9%        58.9%
Premium units................  316,000   203,000    133,000    146,000    118,000     254,000    152,000    1,322,000
Premium penetration(d).......     62.9%     55.9%      71.5%      36.6%      95.2%       56.3%      47.6%        56.4%
FINANCIAL DATA:
Revenues, in millions(e).....    $65.7     $47.9      $25.6      $44.6      $15.9       $49.2      $37.2       $286.1
Average monthly total revenue
  per customer(f)............   $43.63    $43.99     $45.88     $37.26     $42.74      $36.36     $38.87       $40.69
</TABLE>

 
-------------------------
 
(a) Represents homes passed divided by miles of coaxial cable.
 
(b) Represents percentage of basic customers within a region served by the
    indicated plant bandwidth.
 
(c) Represents basic customers as a percentage of homes passed.
 
(d) Represents premium units as a percentage of basic customers.
 
(e) Gives effect to all acquisitions and dispositions as if they had occurred on
    January 1, 1999. See "Unaudited Pro Forma Financial Statement and Operating
    Data".
 
(f) Represents total revenues divided by three divided by the number of
    customers at period end.
 
                                       81

<PAGE>   85
 
     WESTERN REGION.  The Western Region consists of cable systems serving
approximately 502,000 customers located entirely in the state of California,
with approximately 401,000 customers located within the Los Angeles metropolitan
area. These customers reside primarily in the communities of Pasadena, Alhambra,
Glendale, Long Beach and Riverside. We also have approximately 101,000 customers
in central California, principally located in the communities of San Luis
Obispo, West Sacramento and Turlock. The Western Region will also be responsible
for managing the approximately 4,000 customers associated with the pending
acquisition of Rifkin. According to National Decision Systems, the projected
median household growth in the counties currently served by this region's
systems is 5.2% for the period ending 2003, which matches the projected U.S.
median household growth of 5.2% for the same period.
 
     The Western Region's cable systems have been significantly upgraded with
approximately 78% of the region's customers served by cable systems with at
least 550 megahertz bandwidth capacity as of March 31, 1999. The planned upgrade
of the Western Region's cable systems will reduce the number of headends from 21
to 18 by December 31, 2001. We expect that by December 31, 2001, 99% of this
region's customers will be served by systems with at least 550 megahertz
bandwidth capacity and two-way communication capability.
 
     CENTRAL REGION.  The Central Region consists of cable systems serving
approximately 363,000 customers of which approximately 247,000 customers reside
in and around St. Louis County or in adjacent areas in Illinois, and over 94%
are served by two headends. The remaining approximately 116,000 of these
customers reside in Indiana, and these systems are primarily classic cable
systems serving small to medium-sized communities. The Indiana systems will be
"swapped" as part of the InterMedia transaction. See "-- Recent Events". The
Central Region will also be responsible for managing approximately 112,000
customers associated with the pending acquisition of Rifkin. According to
National Decision Systems, the projected median household growth in the counties
currently served by this region's systems is 4.7% for the period ending 2003,
versus the projected U.S. median household growth of 5.2% for the same period.
 
     As of March 31, 1999, approximately 46% of the Central Region's customers
were served by cable systems with at least 550 megahertz bandwidth capacity. The
majority of the cable plants in the Illinois systems have been upgraded to 750
megahertz bandwidth capacity. The planned upgrade of the Central Region's cable
systems will reduce the number of headends from 34 to 31 by December 31, 2001.
We have begun a three-year project, scheduled for completion in 2001, to upgrade
the cable plant in St. Louis County, serving approximately 175,000 customers, to
870 megahertz bandwidth capability. We expect that by December 31, 2001,
approximately 89% of this region's customers will be served by cable systems
with at least 550 megahertz bandwidth capacity and two-way communication
capability.
 
     METROPLEX REGION.  The MetroPlex Region consists of cable systems serving
approximately 186,000 customers of which approximately 129,000 are served by the
Ft. Worth system. The systems in this region serve one of the fastest growing
areas of Texas. The anticipated population growth combined with the existing low
basic penetration rate of approximately 43% offers significant potential to
increase the total number of customers and the associated revenue and cash flow
in this region. According to National Decision Systems, the projected median
household growth in the counties currently served by this region's systems is
8.4% for the period ending 2003, versus the projected U.S. median household
growth of 5.2% for the same period.
 
     The MetroPlex Region's cable systems have been significantly upgraded with
approximately 72% of the region's customers served by cable systems with at
least 550 megahertz bandwidth capacity as of March 31, 1999. In 1997, we began
to upgrade the Ft. Worth system to 870 megahertz of bandwidth capacity. We
expect to complete this project during 1999. The planned upgrade of the
MetroPlex Region's cable systems will reduce the number of headends from 16 to
15 by December 31, 2001. We expect that by December 31, 2001, approximately 98%
of this
 
                                       82

<PAGE>   86
 
region's customers will be served by cable systems with at least 550 megahertz
bandwidth capacity and two-way communication capability.
 
     NORTH CENTRAL REGION.  The North Central Region consists of cable systems
serving approximately 399,000 customers. These customers are primarily located
throughout the state of Wisconsin, along with a small system of approximately
27,000 customers in Rosemont, Minnesota, a suburb of Minneapolis. Within the
state of Wisconsin, the four largest operating clusters are located in and
around Eau Claire, Fond du Lac, Janesville and Wausau. According to National
Decision Systems, the projected median household growth in the counties
currently served by this region's systems is 5.4% for the period ending 2003,
versus the projected U.S. median household growth of 5.2% for the same period.
 
     As of March 31, 1999, approximately 58% of the North Central Region's
customers were served by cable systems with at least 550 megahertz bandwidth
capacity. The planned upgrade of the North Central Region's cable systems will
reduce the number of headends from 86 to 56 by December 31, 2001. We plan to
rebuild much of the region's cable plant, and expect that by December 31, 2001,
approximately 93% of this region's customers will be served by cable systems
with capacity between 550 megahertz and 750 megahertz of bandwidth capacity and
two-way communication capability.
 
     NORTHEAST REGION.  The Northeast Region consists of cable systems serving
approximately 124,000 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, and are included
in the New York, Hartford, and Boston areas of demographic influence. According
to National Decision Systems, the projected median household growth in the
counties currently served by this region's systems is 3.7% for the period ending
2003, versus the projected U.S. median household growth of 5.2% for the same
period.
 
     As of March 31, 1999, approximately 49% of the Northeast Region's customers
were served by cable systems with at least 550 megahertz of bandwidth capacity.
We have begun to rebuild this region's cable plant, and expect that by December
31, 2001, all of this region's customers will be served by cable systems with at
least 750 megahertz bandwidth capacity and two-way communication capability.
 
     SOUTHEAST REGION.  The Southeast Region consists of cable systems serving
approximately 451,000 customers residing primarily in small to medium-sized
communities in North Carolina, South Carolina, Georgia and eastern Tennessee.
There are significant clusters of cable systems in and around the cities and
counties of Greenville/Spartanburg, South Carolina; Hickory and Asheville, North
Carolina; Henry County, Georgia, a suburb of Atlanta; and Johnson City,
Tennessee. These areas have experienced rapid population growth over the past
few years, contributing to the high rate of internal customer growth for these
systems. According to National Decision Systems, the projected median household
growth in the counties currently served by this region's systems is 6.9% for the
period ending 2003, versus the projected U.S. median household growth of 5.2%
for the same period. In addition, the Southeast Region will be responsible for
managing an aggregate of 541,000 customers associated with the InterMedia,
Rifkin and Cable Satellite acquisitions.
 
     As of March 31, 1999, approximately 62% of the Southeast Region's customers
were served by cable systems with at least 550 megahertz bandwidth capacity. The
planned upgrade of the Southeast Region's cable systems will reduce the number
of headends from 60 to 49 by December 31, 2001. The rebuild program for this
region is anticipated to result in approximately 94% of this region's customer
base being served by cable systems with at least 550 megahertz bandwidth
capacity and two-way communication capability by December 31, 2001.
 
     SOUTHERN REGION.  The Southern Region consists of cable systems serving
approximately 319,000 customers located primarily in the states of Louisiana,
Alabama, Kentucky, Mississippi
 
                                       83

<PAGE>   87
 
and central Tennessee. In addition, the Southern Region includes systems in
Kansas, Colorado, Utah and Montana. The Southern Region has significant clusters
of cable systems in and around the cities of Birmingham, Alabama; Nashville,
Tennessee; and New Orleans, Louisiana. According to National Decision Systems,
the projected median household growth in the counties currently served by this
region's systems is 6.3% for the period ending 2003, versus the projected U.S.
median household growth of 5.2% for the same period. In addition, the Southern
Region will be responsible for managing an aggregate of 335,000 customers
associated with the InterMedia and Rifkin acquisitions.
 
     As of March 31, 1999, approximately 42% of the Southern Region's customers
were served by cable systems with at least 550 megahertz bandwidth capacity. The
planned upgrade of the Southeast Region's cable systems will reduce the number
of headends from 59 to 51 by December 31, 2001. The rebuild program for this
region is anticipated to result in approximately 75% of this region's customer
base being served by cable systems with at least 550 megahertz bandwidth
capacity and with two-way communication capability by December 31, 2001.
 
     PLANT AND TECHNOLOGY OVERVIEW.  We have engaged in an aggressive program to
upgrade our existing cable plant over the next three years. As such, we intend
to invest approximately $5.5 billion from January 1, 2000 through December 31,
2002, with approximately $2.9 billion of that amount used to rebuild and upgrade
our existing cable plant. 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>
March 31, 1999..................      42.7%           16.9%           40.4%          35.1%
December 31, 1999...............      23.9%           20.1%           56.0%          65.2%
December 31, 2000...............      12.9%           22.2%           64.9%          81.4%
December 31, 2001...............       7.7%           21.5%           70.8%          91.8%
</TABLE>

 
     We have adopted the hybrid fiber optic/coaxial architecture, referred to as
the HFC architecture, as the standard for our ongoing systems upgrades. The 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 800 homes or
commercial 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.
Coaxial cable is then connected from each node to the individual homes or
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 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
       service and reducing the number of households affected by disruptions in
       the network; and
 
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     - sufficient dedicated bandwidth for two-way services, which avoids reverse
       signal interference problems that can otherwise occur with 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. 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. Our
on-time service call rate was 99.8% in 1997, and 99.7% in 1998.
 
     As of March 31, 1999, we maintained eight call centers located in our seven
regions, which handle customer call volume for more than 58% 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. We also maintain approximately 143 field
offices, and employ approximately 1,200 customer service representatives
throughout our 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. We have approximately
2,300 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 within the
towns and cities we 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
 
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<PAGE>   89
 
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 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 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;
 
     - utilize "tiered" packaging strategies to promote the sale of premium
       services and niche programming;
 
     - offer our customers more value through discounted bundling of products;
 
     - deepen the penetration of the advanced digital platform within the home;
 
     - 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
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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 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. We obtain approximately
50% of our programming through contracts entered into directly with a
programming supplier. We obtain 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. 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. For
home shopping channels, we may receive a percentage of the amount spent in home
shopping purchases by our customers on channels we carry. In 1998, these
revenues totalled approximately $5 million.
 
     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
 
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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.
 
     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.
 
     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 now contract through TeleSynergy for approximately 50% of our programming. We
believe our partnership in TeleSynergy limits increases in our programming costs
relative to what the increases would otherwise be, although given our increased
size and purchasing ability the effect may not be material. This is because some
programming suppliers offer advantageous pricing terms to cable operators whose
number of customers exceeds thresholds established by such programming
suppliers. Our increase in size in 1999 should provide increased bargaining
power resulting in an ability to limit increases in programming costs.
Management believes it will, as a general matter, be able to pass increases in
its programming costs through to customers, although we cannot assure you that
it will be possible.
 
RATES
 
     Pursuant to the FCC'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 March 31, 1999,
the average monthly fee was $11.07 for basic service and $18.80 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
 
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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 June 30, 1999, our systems operated pursuant to an aggregate of 1,247
franchises, permits and similar authorizations issued by local and state
governmental authorities. 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).
 
     Our franchises have terms which range from 4 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--Risks Related to Regulatory and Legislative Matters". Industry". The
following table summarizes our systems' franchises by year of expiration, and
approximate number of basic customers as of June 30, 1999 and does not reflect
acquisitions completed in 1999 or our pending acquisitions.
 

<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............      132           10%          349,000         13%
2000 to 2002..........................      234           19%          563,000         21%
2003 to 2005..........................      263           21%          536,000         20%
2006 or after.........................      618           50%        1,234,000         46%
                                          -----          ---         ---------        ---
     Total............................    1,247          100%        2,682,000        100%
</TABLE>

 
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<PAGE>   93
 
     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 Internet protocol
telephony, we will face competition from other providers of each type of
service. See "Risk Factors -- We operate in a very competitive business
environment which could 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 a traditional "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 cable system. DBS, however, is limited in the local
programming it can provide because of the current capacity limitations of
satellite technology. In addition, existing copyright rules restrict the ability
of DBS providers to offer local broadcast programming. Congress is now
considering legislation that would remove these legal obstacles. After recent
mergers, the two primary DBS providers are DIRECTV and
 
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EchoStar Communications Corporation. 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, Inc.'s parent company, and these
companies intend to jointly market America Online's prospective Internet
television service to DIRECTV's DBS customers.
 
     - 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. Although still relatively
uncommon, 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 the 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.
 
     We are aware of overbuild situations in six of our systems located in
Newnan, Columbus and West Point, Georgia; Barron, Wisconsin; and Lanett and
Valley, Alabama. Approximately 44,000 basic customers, approximately 1.9% 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 four of our systems located in Southlake, Roanoke and Keller,
Texas and Willimantic, Connecticut. These potential overbuild areas service an
aggregate of approximately 45,000 basic customers or approximately 1.9% 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.  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 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
 
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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.
 
     - 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. While no longer as significant a competitor, 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 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 owned 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.
 
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<PAGE>   96
 
     All of our properties and assets are subject to liens securing payment of
indebtedness under the existing credit facilities. We believe that our
properties are in good operating condition and are suitable and adequate for our
business operations.
 
EMPLOYEES
 
     As of the closing of the offering, CCI will have eight employees, all of
whom are senior management. Pursuant to a services agreement between CCI and
Charter Investment, Charter Investment will provide CCI with the necessary
personnel to manage Charter Holdco and its subsidiaries. As of June 30, 1999,
Charter Holdco's subsidiaries had approximately 4,980 full-time equivalent
employees of which 280 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.
 
WHERE YOU CAN FIND ADDITIONAL INFORMATION
 
     We have filed with the Securities and Exchange Commission a Registration
Statement on Form S-1 to register the Class A common stock offered by this
prospectus. This prospectus, which forms a part of the registration statement,
does not contain all the information included in that registration statement.
For further information about us and the Class A common stock offered in this
prospectus, you should refer to the registration statement and its exhibits.
After completion of the offering, we will be required to file annual, quarterly
and other information with the Securities and Exchange Commission. You may read
and copy any document we file with the Commission at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's regional offices at 3475 Lenox
Road, N.E., Suite 1000, Atlanta, Georgia 30326-1232. Copies of such material may
be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. You can also review
such material by accessing the Commission's Internet web site at
http:// www.sec.gov. This site contains reports, proxy and information
statements and other information regarding issuers that file electronically with
the Commission.
 
     We intend to furnish to each holder of our Class A common stock annual
reports containing audited financial statements and quarterly reports containing
unaudited financial information for the first three quarters of each fiscal
year. We will also furnish to each holder of our Class A common stock such other
reports as may be required by law.
 
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                           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 March 31, 1999, local franchising authorities covering approximately
42% of our systems' subscribers 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 itself directly administers rate
regulation of cable programming service tiers which typically contains
satellite-delivered programming. Under the 1996 Telecom Act, the Federal
Communications Commission can regulate cable programming service tier rates only
if a local franchising authority first receives at least two rate complaints
from local subscribers and then files a formal complaint with the Federal
Communications Commission. When new cable programming service tier rate
complaints are filed, the Federal Communications Commission considers only
whether the incremental increase is justified and it will not reduce the
previously established cable programming service tier rate. We currently have 45
rate complaints relating to approximately 400,000 subscribers pending at the
Federal Communications Commission. Significantly, the Federal Communications
Commission's authority to regulate cable programming service tier rates expired
on March 31, 1999. The Federal Communications Commission has taken the position
that it will still adjudicate cable programming
 
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<PAGE>   98
 
service tier complaints filed after this sunset date, but no later than 180 days
after the last cable programming service tier rate increase imposed prior to
March 31, 1999, and 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 our business. The elimination of cable programming service tier
regulation on a prospective basis affords us substantially greater pricing
flexibility.
 
     Under the Federal Communication Commission's rate regulations, 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. Premium cable services offered on a per-channel or
per-program basis remain unregulated, as do affirmatively marketed packages
consisting entirely of new programming product. 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 Communication 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. 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 telecommunication 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 telecommunication
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
 
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<PAGE>   99
 
Federal Communications Commission interconnection regulations. Although these
regulations should enable new telecommunications entrants to reach viable
interconnection agreements with incumbent carriers, many issues, including
whether the Federal Communications Commission ultimately can mandate that
incumbent carriers make available specific network elements, remains subject to
further Federal Communications Commission review. Aggressive regulation by the
Federal Communications Commission in this area, if upheld by the courts, 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 a report to Congress 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 commercial leased access
provisions 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 has been filed.
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, and certain local
exchange carriers have begun offering cable service.
 
     Various local exchange carriers currently are seeking to provide 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 recently reversed
certain of the Federal Communications Commission's open video system rules,
including its preemption of local franchising. That decision may be subject to
further appeal. 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, cable operator
buyouts of co-located local exchange carrier systems, and joint ventures between
cable operators and local exchange carriers in the same market. The 1996 Telecom
Act provides a few limited exceptions to this buyout prohibition, including a
carefully circumscribed "rural exemption". The 1996 Telecom Act also provides
the
 
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<PAGE>   100
 
Federal Communications Commission with the limited authority to grant waivers of
the buyout prohibition.
 
     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. Although the 1992 Cable Act also precluded any cable operator from
serving more than 30% of all U.S. domestic cable subscribers, this provision has
been stayed pending further judicial review and Federal Communications
Commission rulemaking.
 
     MUST CARRY/RETRANSMISSION CONSENT.  The 1992 Cable Act contains broadcast
signal carriage requirements that, among other things, allow local commercial
television broadcast stations to elect once every three years between "must
carry" status, which requires a cable system to carry the station, or
"retransmission consent" status, where such stations negotiate for payments for
granting permission to the cable operator to carry the station. Less popular
stations typically elect must carry, and more popular stations, such as those
affiliated with a national network, typically elect retransmission consent. 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 the governing statute, a contrary ruling
could lead to substantial leased activity by Internet service providers and
disrupt our own plans for Internet service.
 
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     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. Recently, there has
been increased interest 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. These
changes should not have a dramatic impact on us, but would limit potential
competitive advantages we now enjoy.
 
     INSIDE WIRING; SUBSCRIBER ACCESS.  In a 1997 Order, 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 FCC REGULATIONS.  In addition to the Federal Communications
Commission regulations noted above, there are other FCC regulations covering
such areas as:
 
     - equal employment opportunity,
 
     - subscriber privacy,
 
     - programming practices, including, among other things, syndicated program
       exclusivity, network program nonduplication, local sports blackouts,
       indecent programming, lottery programming, political programming,
       sponsorship identification, children's programming advertisements, and
       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, and 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
 
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<PAGE>   102
 
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 Association of Songwriters, Composers, Artists and Producers
and Broadcast Music, Inc.. The cable industry and Broadcast Music have reached a
standard licensing agreement, and negotiations with the Association of
Songwriters are ongoing. Although we cannot predict the ultimate outcome of
these industry negotiations 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.
 
     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
 
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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>   104
 

                                   MANAGEMENT
 
DIRECTORS AND EXECUTIVE OFFICERS
 
     As of the completion of the offering, the following will be the directors
and executive officers of CCI.
 

<TABLE>
<CAPTION>
EXECUTIVE OFFICERS AND DIRECTORS               AGE    POSITION
--------------------------------               ---    --------
<S>                                            <C>    <C>
Paul G. Allen................................  46     Chairman of the Board of Directors
William D. Savoy.............................  34     Director
Jerald L. Kent...............................  42     President, Chief Executive Officer and Director
Barry L. Babcock.............................  52     Vice Chairman
Howard L. Wood...............................  60     Vice Chairman
David G. Barford.............................  40     Senior Vice President of Operations -- Western
                                                      Division
Mary Pat Blake...............................  43     Senior Vice President -- Marketing and
                                                      Programming
Eric A. Freesmeier...........................  46     Senior Vice President -- Administration
Thomas R. Jokerst............................  49     Senior Vice President -- Advanced Technology
                                                      Development
Kent D. Kalkwarf.............................  39     Senior Vice President and Chief Financial
                                                      Officer
Ralph G. Kelly...............................  42     Senior Vice President -- Treasurer
David L. McCall..............................  43     Senior Vice President of Operations -- Eastern
                                                      Division
John C. Pietri...............................  49     Senior Vice President -- Engineering
Steven A. Schumm.............................  46     Executive Vice President, Assistant to the
                                                      President
Curtis S. Shaw...............................  50     Senior Vice President, General Counsel and
                                                      Secretary
</TABLE>

 
     The following sets forth certain biographical information with respect to
our directors and executive officers.
 
     PAUL G. ALLEN is the Chairman of the Board of Directors of CCI and of the
Board of Directors of Charter Investment. Mr. Allen has been a private investor
for over 10 years, with interests in a wide variety of companies, many of which
focus on multimedia digital communications. These 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, Vulcan Northwest, Inc., of which Mr. Allen is the Chairman of the Board,
and Vulcan Programming, Inc. In addition, Mr. Allen is the owner and the
Chairman of the Board of the Portland Trail Blazers of the National Basketball
Association, and is the owner and the Chairman of the Board 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 CC Holdings and Charter Investment. Mr.
Savoy has been Vice President of Vulcan Ventures Inc., President of Vulcan
Northwest and President and a director of Vulcan Programming since 1990. 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., Harbinger Corporation, High Speed
Access Corp., Metricom, Inc., Telescan, Inc., Ticketmaster Online -- CitySearch,
U.S. Satellite Broadcasting Co., Inc., and USA Networks, Inc. Mr. Savoy holds a
B.S. in Computer Science, Accounting and Finance from Atlantic Union College.
 
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<PAGE>   105
 
     JERALD L. KENT is the President and Chief Executive Officer of CCI and is
President and Chief Executive Officer and a director of CC Holdings and one of
CC Holdings' subsidiaries. Prior to joining CCI, Mr. Kent was President and
Chief Executive Officer and co-founder of Charter Investment. Prior to joining
Charter Investment, 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. Mr. Kent is a
member of the board of directors of High Speed Access Corp. and Cable Television
Laboratories. Prior to that time, Mr. Kent was employed by Arthur Andersen LLP,
where he attained the position of tax manager. Mr. Kent, a certified public
accountant, received his undergraduate and M.B.A. degrees with honors from
Washington University (St. Louis).
 
     BARRY L. BABCOCK is Vice Chairman of CCI and is a co-founder and Vice
Chairman of Charter Investment and has been involved in the cable industry since
1979. Prior to founding Charter Investment in 1994, Mr. Babcock was associated
with Cencom, where he served as the Executive Vice President from February 1986
to September 1991, and was named Chief Operating Officer in May 1986. Mr.
Babcock was one of the founders of Cencom Cable Associates, Inc. and, prior to
the duties he assumed in early 1986, was responsible for all of Cencom's
in-house legal work, contracts and governmental relations. Mr. Babcock serves as
the chairman of the board of directors of Community Telecommunications
Association. He also serves as a director of the National Cable Television
Association, Cable in the Classroom and Mercantile Bank -- St. Louis. Mr.
Babcock, an attorney, received his undergraduate and J.D. degrees from the
University of Oklahoma.
 
     HOWARD L. WOOD is Vice Chairman of CCI and is a co-founder and Vice
Chairman of Charter Investment. Prior to founding Charter Investment, Mr. Wood
was associated with Cencom. 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 Bank and Gaylord Entertainment Company. Mr. Wood also serves
as Commissioner for the Missouri Department of Conservation. He is also a past
chairman of the board 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 CCI, where he has primary responsibility for all cable operations in the
Central, Western, North Central and MetroPlex Regions. Prior to joining CCI, Mr.
Barford had the position of Senior Vice President of Operations with Charter
Investment since July 1995. Prior to joining Charter Investment, he served as
Vice President of Operations and New Business Development for Comcast Cable,
where he held various senior marketing and operating roles over an eight-year
period. Mr. Barford received a B.A. degree from California State University,
Fullerton and an M.B.A. from National University in La Jolla, California.
 
     MARY PAT BLAKE is Senior Vice President -- Marketing and Programming of CCI
and is responsible for all aspects of marketing, sales and programming and
advertising sales. Prior to joining CCI, Ms. Blake held the position of Senior
Vice President -- Marketing and Programming of Charter Investment. Prior to
joining Charter Investment 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,
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<PAGE>   106
 
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 CCI and is
responsible for human resources, public relations and communications, corporate
facilities and aviation. Prior to joining CCI, Mr. Freesmeier served as Senior
Vice President -- Administration of Charter Investment since April 1998. From
1986 until joining Charter Investment he served in various executive management
positions at Edison Brothers Stores, Inc., a specialty retail company. 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 CCI. Prior to joining CCI, Mr. Jokerst was Senior Vice
President -- Advanced Technology Development at Charter Investment. Prior to his
appointment to this position, Mr. Jokerst held the position of Senior Vice
President -- Engineering since December 1993 with Charter Investment. Prior to
joining Charter Investment, from March 1991 to March 1993, Mr. Jokerst served as
Vice President -- Office of Science and Technology for CableTelevision
Laboratories in Boulder, Colorado. From June 1976 to March 1993, Mr. Jokerst was
Director of Engineering for the midwest region of Continental Cablevision. Mr.
Jokerst participates in professional activities with the NCTA, 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
CCI. Mr. Kalkwarf also serves as Senior Vice President and Chief Financial
Officer of CC Holdings and its subsidiary Charter Communications Holdings
Capital Corp. Prior to joining CCI, Mr. Kalkwarf was Senior Vice President and
Chief Financial Officer of Charter Investment. Prior to joining Charter
Investment, Mr. Kalkwarf was a senior tax manager for Arthur Andersen LLP, from
1982 to July 1995. 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 CCI, and is Senior
Vice President -- Treasurer of CC Holdings and its subsidiary Charter
Communications Holdings Capital Corp. Prior to joining CCI, Mr. Kelly was Senior
Vice President -- Treasurer of Charter Investment. Mr. Kelly joined Charter
Investment 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 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 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 CCI. Prior to joining CCI, Mr. McCall was Senior Vice President of Operations
for Charter Investment. Mr. McCall joined Charter Investment in January 1995 as
Regional Vice President of Operations.
 
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<PAGE>   107
 
Prior to joining Charter Investment, Mr. McCall was associated with Crown Cable
and its predecessor company, Cencom, 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 CCI. Prior to
joining CCI, Mr. Pietri served as Senior Vice President -- Engineering with
Charter Investment since January 1999. Prior to joining Charter Investment, Mr.
Pietri was with Marcus 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.
 
     STEVEN A. SCHUMM is Executive Vice President, Assistant to the President of
CCI, CC Holdings and our subsidiary Charter Communications Holdings Capital
Corp. Mr. Schumm currently directs the MIS Regulatory and Financial Controls
Groups. Prior to joining CCI, Mr. Schumm was Executive Vice President, Assistant
to the President of Charter Investment since December 1998. Prior to joining
Charter Investment, 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 the 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
CCI, CC Holdings and Charter Capital and is responsible for all legal aspects of
their businesses, government relations and the duties of the corporate
secretary. Prior to joining CCI, Mr. Shaw served in the same capacities with
Charter Investment which he joined in February 1997. Prior to joining Charter
Investment, Mr. Shaw served as corporate counsel to NYNEX since 1988. 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 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.
 
COMMITTEES OF THE BOARD OF DIRECTORS
 
     At the same time CCI completes this offering, it will establish an audit
committee and a compensation committee, each composed of two outside directors.
The audit committee will recommend the annual appointment of CCI's auditors with
whom the audit committee will review the scope of audit and non-audit
assignments and related fees, accounting principles used in CCI's financial
reporting, internal auditing procedures and the adequacy of CCI's internal
control procedures. The compensation committee will make recommendations to the
board regarding compensation for CCI's executive officers.
 
DIRECTOR COMPENSATION
 
     Directors of CCI who are also employees will not receive any cash
compensation for service on the board of directors or on any board committee.
Non-employee directors will be
 
                                       104

<PAGE>   108
 
compensated in a manner to be determined. CCI will reimburse each director for
reasonable out-of-pocket expenses incurred in connection with attending board
and committee meetings.
 
     Officers are appointed by the board of directors and serve at its
discretion.
 
EMPLOYMENT AGREEMENTS
 
     Effective as of December 23, 1998, Jerald L. Kent entered into an
employment agreement with Charter Investment for a three-year term with
automatic one-year renewals. Under this agreement, Mr. Kent agrees to serve as
President and Chief Executive Officer of Charter Investment, with responsibility
for the nationwide general management, administration and operation of all
present and future business of Charter Investment and its subsidiaries. During
the initial term of the agreement, Mr. Kent will receive a base salary of
$1,250,000, or such higher rate as may from time to time be determined by the
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.
 
     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 Investment. Mr. Kent will be reimbursed by Charter
Investment for life insurance premiums up to $30,000 per year. Also under this
agreement and a related agreement, Mr. Kent received options to purchase three
percent (3%) of the net equity value of Charter Holdco. The options have a term
of ten years and vested twenty-five percent (25%) on December 23, 1998. The
remaining seventy-five percent (75%) will vest 1/36 on the first day of each of
36 months commencing on the first day of the thirteenth month following December
23, 1998.
 
     Charter Investment 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.
 
     In the event of the expiration of the agreement in accordance with its
terms as a result of Charter Investment giving Mr. Kent notice of its intention
not to extend the initial term, or a termination of the agreement by Mr. Kent
for good reason or by Charter Investment without cause, (a) Charter Investment
will pay to Mr. Kent an amount equal to the aggregate base salary due to Mr.
Kent and the board shall consider additional amounts, if any, to be paid to Mr.
Kent and (b) any unvested options of Mr. Kent shall immediately vest.
 
     CCI will assume all obligations of Charter Investment under Mr. Kent's
employment agreement except with respect to obligations relating to the grant of
options which will remain obligations of Charter Holdco.
 
     Effective as of December 23, 1998, Barry L. Babcock entered into an
employment agreement with Charter Investment for a one-year term with automatic
one-year renewals. Under this agreement, Mr. Babcock agrees to serve as Vice
Chairman of Charter Investment with responsibilities including the government
and public relations of Charter Investment. During the initial term of the
agreement, Mr. Babcock will receive a base salary of $625,000, or such higher
rate as may be determined by the Chief Executive Officer in his discretion. In
addition, Mr. Babcock will be eligible to receive an annual bonus to be
determined by the board of directors at its discretion. Mr. Babcock received a
one-time payment as part of his employment agreement of $500,000.
 
     Under the agreement, Mr. Babcock is entitled to participate in any
disability insurance, pension or other benefit plan afforded to employees
generally or executives of Charter Investment. Charter Investment agrees to
grant options to Mr. Babcock to purchase its stock as determined by the board of
directors in its discretion, pursuant to an option plan to be adopted by Charter
Investment.
                                       105

<PAGE>   109
 
     Charter Investment agrees to indemnify and hold harmless Mr. Babcock 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. Babcock of his duties.
 
     In the event of the termination of the agreement by Charter Investment
without cause or by Mr. Babcock for good reason, (a) Charter Investment will pay
to Mr. Babcock an amount equal to the aggregate base salary due to Mr. Babcock
for the remainder of the term of the agreement and (b) vested options, if any,
of Mr. Babcock, will be redeemed for cash for their then-current intrinsic
value. Unvested options will be treated as set forth in the option plan to be
adopted as discussed above.
 
     CCI will assume all obligations of Charter Investment under Mr. Babcock's
employment agreement except with respect to obligations relating to the grant of
options which will remain obligations of Charter Investment.
 
     Effective as of December 23, 1998, Howard L. Wood entered into an
employment agreement with Charter Investment for a one-year term with automatic
one-year renewals. Under this agreement, Mr. Wood agrees to be employed as an
officer of Charter Investment. During the initial term of the agreement, Mr.
Wood will receive a base salary of $312,500, or such higher rate as may be
determined by the Chief Executive Officer in his discretion. In addition, Mr.
Wood will be 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 is entitled
to participate in any disability insurance, pension or other benefit plan
afforded to employees generally or executives of Charter Investment.
 
     Charter Investment agrees 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 in connection with, or arising out of,
the performance by Mr. Wood of his duties.
 
     In the event of the termination of the agreement by Charter Investment
without cause or by Mr. Wood for good reason, Charter Investment will pay to Mr.
Wood an amount equal to the aggregate base salary due to Mr. Wood for the
remainder of the term of the agreement.
 
     CCI will assume all obligations of Charter Investment under Mr. Wood's
employment agreement.
 
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
 
     Upon completion of the offering, CCI will appoint two outside directors who
will form CCI's compensation committee.
 
                                       106

<PAGE>   110
 

EXECUTIVE COMPENSATION
 
     The following table sets forth information regarding the compensation paid
during the last completed fiscal year to CCI's President and Chief Executive
Officer and each of the other four most highly compensated executive officers as
of December 31, 1998. These persons are referred to as the "Named Executive
Officers". This compensation was paid to the Named Executive Officers by certain
of our subsidiaries and affiliates for the Named Executive Officers' services to
these entities.
 
                           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)       4,918(2)
  President and Chief
    Executive Officer
Barry L. Babcock.............   1998      575,000    925,000(3)           --               --          6,493(4)
  Vice Chairman
Howard L. Wood...............   1998      575,000    675,000(5)           --               --          8,050(6)
  Vice Chairman
David G. Barford.............   1998      220,000    225,000(7)           --               --          4,347(8)
  Senior Vice President of
    Operations -- Western
    Division
Curtis S. Shaw...............   1998      190,000     80,000              --               --          3,336(9)
  Senior Vice President,
    General Counsel and
    Secretary
</TABLE>

 
---------------
 (1) Options for Charter Holdco units granted pursuant to an employment
     agreement.
 
 (2) Includes $4,000 in 401(k) plan matching contribution and $918 in life
     insurance premiums.
 
 (3) Includes $500,000 earned as a one-time bonus upon signing of an employment
     agreement.
 
 (4) Includes $4,000 in 401(k) plan matching contributions and $2,493 in life
     insurance premiums.
 
 (5) Includes $250,000 earned as a one-time bonus upon signing of an employment
     agreement.
 
 (6) Includes $4,000 in 401(k) plan matching contributions and $4,050 in life
     insurance premiums.
 
 (7) Includes $150,000 received as a one-time bonus after completion of three
     years of employment.
 
 (8) Includes $4,000 in 401(k) plan matching contribution and $347 in life
     insurance premiums.
 
 (9) Includes $2,529 in 401(k) plan matching contribution and $807 in life
     insurance premiums.
 
                                       107

<PAGE>   111
 
OPTION GRANTS IN LAST FISCAL YEAR
 
     The following table shows individual grants of stock options made to each
of the Named Executive Officers during the fiscal year ended December 31, 1998.
These grants were made by certain of our subsidiaries and affiliates to the
Named Executive Officers.
 

<TABLE>
<CAPTION>
                                      % OF TOTAL                               POTENTIAL REALIZABLE VALUE AT
                       NUMBER OF       OPTIONS                                 ASSUMED ANNUAL RATES OF STOCK
                       SECURITIES     GRANTED TO                               PRICE APPRECIATION FOR OPTION
                       UNDERLYING     EMPLOYEES     EXERCISE OR                           TERM(1)
                        OPTIONS       IN FISCAL     BASE PRICE    EXPIRATION   ------------------------------
NAME                    GRANTED          YEAR         ($/SH)         DATE          5%($)           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 stock 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 CCI's estimate or projection of future
    prices of Class A common stock.
 
(2) Options for Charter Holdco units granted pursuant to an employment agreement
    and a related agreement. The options have a term of 10 years and vest
    one-fourth on December 23, 1998, with the remaining options vesting monthly
    at a rate of 1/36th on the first of each month for months 13 through 48.
 
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUE TABLE
 
     The following table sets forth for each of the Named Executive Officers
information concerning the value of unexercised options as of December 31, 1998.
No options were exercised by the Named Executive Officers during fiscal 1998.
The options were granted by certain of our subsidiaries and affiliates to the
Named Executive Officer.
 

<TABLE>
<CAPTION>
                                                                           VALUE OF UNEXERCISED
                                                NUMBER OF                      IN-THE-MONEY
                                          SECURITIES UNDERLYING                 OPTIONS AT
                                           UNEXERCISED OPTIONS                 DECEMBER 31,
                                           AT DECEMBER 31, 1998                 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.
 
OPTION PLAN
 
     Charter Holdco adopted a plan providing for the grant of options to
purchase up to        Charter Holdco membership units, which is equal to 10% of
the aggregate equity value of Charter Holdco on February 9, 1999, the date of
adoption of the plan. The plan provides for grants of options to employees,
officers and consultants of Charter Holdco and its affiliates. The plan is
intended to promote the long-term financial interest of Charter Holdco and its
affiliates by encouraging eligible individuals to acquire an ownership position
in Charter Holdco and its affiliates and providing incentives for performance.
As of June 30, 1999, there were a
 
                                       108

<PAGE>   112
 
total of        options granted under the plan. Of those,        options were
granted on February 9, 1999 with an exercise price of $     and        options
were granted on April 5, 1999 with an exercise price of $     . One-fourth of
the options granted on February 9, 1999 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. 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,
upon death or disability, or immediately prior to the expiration of an option.
The options expire after ten years from the date of grant. Under the terms of
the plan, following the consummation of the offering, each membership unit held
as a result of exercise of options will be exchanged automatically for shares of
Class A common stock on a one-for-one basis.
 
LIMITATION OF DIRECTORS' LIABILITY AND INDEMNIFICATION MATTERS
 
     CCI's certificate of incorporation will limit the liability of directors to
the maximum extent permitted by Delaware law. Delaware law provides that a
corporation's certificate of incorporation may contain a provision eliminating
or limiting the personal liability of a director for monetary damages for breach
of their fiduciary duties as directors, except for liability:
 
     (1) for any breach of their duty of loyalty to the corporation or its
stockholders,
 
     (2) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law,
 
     (3) for unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the Delaware General Corporation Law,
or
 
     (4) for any transaction from which the director derived an improper
personal benefit.
 
     CCI's bylaws provide that CCI shall indemnify all persons whom it may
indemnify pursuant thereto to the fullest extent permitted by law.
 
     CCI plans to enter into agreements to indemnify its directors and officers,
in addition to the indemnification provided for in CCI's bylaws. These
agreements, among other things, will provide for the indemnification of CCI's
directors and officers for certain expenses (including attorney's fees),
judgments, fines and settlement amounts incurred by any such person in any
action or proceeding, including any action by or in the right of CCI, arising
out of such person's services as CCI's director or officer, to any of CCI's
subsidiaries or to any other company or enterprise to which the person provides
services at CCI's request. CCI believes that these provisions and agreements
will be necessary to attract and retain qualified directors and officers.
 
     Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling CCI pursuant to
the foregoing provisions, CCI has been informed that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is therefore unenforceable.
 
SERVICES AGREEMENT WITH CHARTER INVESTMENT
 
     CCI intends to enter into a services agreement with Charter Investment. The
services agreement will provide that Charter Investment will provide to CCI the
personnel and services it requires to fulfill its obligations as the sole
manager of Charter Holdco and its subsidiaries pursuant to the management
agreements CCI intends to enter into with Charter Holdco and Charter Operating.
In consideration, Charter Investment will be entitled to reimbursement of its
expenses incurred in connection with its provision of personnel and services.
See "Certain Relationships and Related Transactions".
 
                                       109

<PAGE>   113
 
                             PRINCIPAL STOCKHOLDERS
 
     The following table sets forth certain information regarding beneficial
ownership of CCI's common stock as of             , 1999 by:
 
     - each person known by us to own beneficially 5% or more of the outstanding
       shares of common stock;
 
     - each of our directors;
 
     - each of our named executive officers; and
 
     - all current directors and executive officers as a group.
 

<TABLE>
<CAPTION>
                                    NUMBER OF           PERCENTAGE OF
                               SHARES BENEFICIALLY   SHARES BENEFICIALLY      PERCENTAGE OF
                                      OWNED               OWNED(1)         VOTING POWER(1)(2)
                               -------------------   -------------------   -------------------
NAME AND ADDRESS OF             BEFORE     AFTER      BEFORE     AFTER      BEFORE     AFTER
BENEFICIAL OWNER               OFFERING   OFFERING   OFFERING   OFFERING   OFFERING   OFFERING
-------------------            --------   --------   --------   --------   --------   --------
<S>                            <C>        <C>        <C>        <C>        <C>        <C>
Paul G. Allen(3)(4)..........
Charter Investment,
  Inc.(4)(5).................
Vulcan Cable III
  Inc.(4)(5).................
Jerald L. Kent(6)(7).........
Barry L. Babcock(6)(7).......
Howard L. Wood(6)(7).........
All directors and executive
  officers as a group (
  persons)...................
</TABLE>

 
---------------
(1) In calculating voting percentages, we have made the same assumptions
    described on page 2 above with respect to our organizational chart.
 
(2) Each holder of Class A common stock is entitled to one vote per share. Each
    holder of Class B common stock is entitled to the number of votes per share
    equal to:
    - ten multiplied by the sum of (1) the total number of shares of Class B
      common stock held by the holder and (2) the number of shares of Class B
      common stock for which the Charter Holdco membership units held, directly
      or indirectly, by the holder are exchangeable; divided by
     - the number of shares of Class B common stock held by the holder.
 
(3) Share numbers represent (1) shares of high vote Class B common stock owned
    directly by Mr. Allen, (2) shares of Class B common stock issuable upon
    exchange of Charter Holdco membership units attributable to Mr. Allen
    because of his equity interest in Charter Investment and (3) shares of Class
    B common stock issuable upon exchange of Charter Holdco membership units
    owned by Vulcan III.
 
(4) The address of these persons is 110 110th Street, NE, Suite 500, Bellevue,
    WA 98004.
 
(5) Share numbers represent Charter Holdco membership units owned by such
    holder.
 
(6) Share numbers represent (1) shares of high vote Class B common stock owned
    by the holder and (2) shares of Class B common stock issuable upon exchange
    of Charter Holdco membership units attributable to such holder because of
    his equity interest in Charter Investment.
 
(7) The address of these persons is c/o Charter Communications, Inc., 12444
    Powerscourt Drive, St. Louis, MO 63131.
 
                                       110

<PAGE>   114
 

                 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 Investment, 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.
 
MANAGEMENT AGREEMENTS
 
     PREVIOUS MANAGEMENT AGREEMENTS.  Prior to March 18, 1999, Charter
Investment provided management and consulting services to some of our
subsidiaries pursuant to a series of management agreements with each of those
subsidiaries. In exchange for these services, Charter Investment was entitled to
receive management fees of 3% to 5% of the gross revenues of all of our systems
plus reimbursement of expenses. However, Charter Operating's previous credit
facilities limited such management fees to 3% of gross revenues. The balance of
management fees payable under the previous management agreements were accrued.
As of March 31, 1999, $12.6 million remains unpaid. Payment is at the discretion
of Charter Investment. Following the closing of Charter Operating's current
credit facilities, the previous management agreements were replaced by a single
new management agreement with Charter Operating. The other material terms of our
previous management agreements are substantially similar to the material terms
of the Charter Operating management agreement described below.
 
     The total management fees, including expenses, earned by Charter Investment
under the previous management agreements during the last three years were as
follows:
 

<TABLE>
<CAPTION>
                                                                        TOTAL FEES
PERIOD                                                     FEES PAID      EARNED
------                                                     ---------    ----------
                                                               (IN THOUSANDS)
<S>                                                        <C>          <C>
Three Months Ended March 31, 1999........................   $ 5,323      $10,015
Year End December 31, 1998...............................   $17,073      $24,159
Year End December 31, 1997...............................    14,772       20,290
Year End December 31, 1996...............................    11,792       15,443
</TABLE>

 
     Deferred portions of certain management fees bore interest at the rate of
10% per annum and have been paid in full.
 
     PREVIOUS MANAGEMENT CONSULTING AGREEMENT WITH MARCUS HOLDINGS.  On October
6, 1998, Marcus Holdings entered into a management consulting agreement with
Charter Investment pursuant to which Charter Investment 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 incurred by Marcus Cable
during the period from October 1998 to December 31, 1998 were approximately $3.3
million, which were accrued and unpaid at December 31, 1998. Upon CC Holdings'
merger with Marcus Holdings and the closing of Charter Operating's credit
facilities, this agreement was terminated and the subsidiaries of Marcus Cable
now receive management and consulting services from Charter Investment under the
new management agreement.
 
     THE CHARTER OPERATING MANAGEMENT AGREEMENT.  On February 23, 1999, Charter
Investment entered into a new management agreement with Charter Operating, which
was amended and restated as of March 17, 1999. Upon the closing of Charter
Operating's credit facilities on March 18, 1999, the previous management
agreements and the management consulting agreement with Marcus Cable terminated
and the Charter Operating management agreement became operative. Pursuant to the
Charter Operating management agreement, Charter Investment agreed to manage and
operate the cable television systems owned by CC Holdings'
 
                                       111

<PAGE>   115
 
subsidiaries, as well as any cable television systems it may subsequently
acquire in the future. The term of the Charter Operating management agreement is
ten years.
 
     The Charter Operating management agreement provides that Charter Operating
will reimburse Charter Investment for all expenses, costs, losses, liabilities
or damages paid or incurred by it in connection with Charter Operating's
ownership and operation of its cable television systems. In addition to any
reimbursement of expenses, Charter Investment is paid a yearly management fee
equal to 3.5% of Charter Operating's 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 is permitted under
Charter Operating's credit facilities, but ranks below Charter Operating's
payment obligations under the 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 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. All deferred portions
of management fees have been paid in full.
 
     The management fee is payable to Charter Investment quarterly in arrears.
If the current management agreement is terminated, Charter Investment is
entitled to receive the fee payable for an entire quarter, even if termination
occurred before the end of that quarter. Additionally, Charter Investment is
entitled to receive payment of any deferred amount. Management fees totaled
approximately $5.3 million for the three months ended March 31, 1999.
 
     Pursuant to the terms of the Charter Operating management agreement,
Charter Operating has agreed to indemnify and hold harmless Charter Investment
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 us.
 
     Upon the closing of the offering, Charter Investment will assign to CCI all
of its rights and obligations under the Charter Operating management agreement.
In connection with the assignment, the Charter Operating management agreement
will be amended to eliminate the 3.5% management fee. Under the amended
agreement, CCI will be 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 obligations under the amended
agreement.
 
     CONSULTING AGREEMENT.  On March 10, 1999, CC Holdings entered into a
consulting agreement with Vulcan Northwest and Charter Investment. Under this
agreement, CC Holdings retained Vulcan Northwest and Charter Investment to
provide advisory, financial and other consulting services with respect to
acquisitions of the business, assets or stock of other companies by CC Holdings
or any of its subsidiaries, including participation in the evaluation,
negotiation and implementation of these acquisitions. This agreement expires on
December 31, 2001, and automatically renews for successive one-year terms unless
terminated.
 
     All reasonable out-of-pocket expenses incurred by Vulcan Northwest and
Charter Investment are the responsibility of CC Holdings and shall be reimbursed
by CC Holdings. CC Holdings may also pay Vulcan Northwest and Charter Investment
a fee for their services rendered for each acquisition made by CC Holdings or
any of its subsidiaries. This fee equals 1% of the aggregate enterprise value of
such acquisition. Neither Vulcan Northwest nor Charter Investment will receive a
fee in connection with the acquisitions of American Cable, Renaissance and the
Greater Media systems. CC Holdings has also agreed to indemnify and hold
harmless Vulcan Northwest and
 
                                       112

<PAGE>   116
 
Charter Investment, 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 CC
Holdings.
 
     Mr. Allen owns 100% of Vulcan Northwest and is Chairman of the board.
William D. Savoy, another of our directors, is the President and a director of
Vulcan Northwest.
 
     CCI MANAGEMENT AGREEMENT.  Upon the closing of the offering, CCI intends to
enter into a management agreement with Charter Holdco. The CCI management
agreement will provide that CCI will manage and operate the cable television
systems owned or to be acquired by Charter Holdco and its subsidiaries (other
than cable television systems covered by the Charter Operating management
agreement).
 
     The terms of the CCI management agreement will be substantially similar to
the terms of the Charter Operating management agreement, except that CCI will
not be paid a yearly 3.5% management fee. CCI will be entitled to reimbursement
from Charter Holdco for all expenses, costs, losses, liabilities and damages
incurred by CCI under the service agreement described below.
 
     SERVICES AGREEMENT WITH CHARTER INVESTMENT.  Upon the closing of the
offering, we intend to enter into a services agreement with Charter Investment.
The services agreement will provide that Charter Investment will provide to us
the personnel and services we require to fulfill our obligations as the sole
manager of Charter Holdco and its subsidiaries pursuant to the CCI management
agreement and the Charter Operating management agreement. Charter Investment
will not receive a fee for providing these personnel and services, but it will
be entitled to reimbursement of all of its expenses in connection with its
performance under the services agreement.
 
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 opportunities which both Mr. Allen or
his affiliates and we might otherwise wish to pursue, Charter Holdco and CCI
have agreed, until all of the shares of Class B common stock held by Mr. Allen
have automatically converted into shares of Class A common stock in accordance
with CCI's certificate of incorporation, not to engage in any business
transaction outside the cable transmission business and immaterial other
businesses engaged in by Charter Holdco currently or upon completion of our
pending acquisitions. We have also agreed with Mr. Allen that, should we wish to
pursue a business transaction outside of this scope, we must first offer Mr.
Allen the opportunity to pursue the particular business transaction and, if he
decides not to do so and consents to our engaging in the business transaction,
we could do so and CCI's certificate of incorporation and Charter Holdco's
operating agreement would be amended accordingly. The cable transmission
business means the business of transmitting video, audio (including telephony)
and data on cable television systems owned, operated or managed by us from time
to time. As long as Mr. Allen is a director of CCI, he will be required to
present to us any opportunity he may have to acquire, directly or indirectly, a
majority ownership interest in any cable television system or any company whose
principal business is the ownership, operation or management of cable television
systems. However, except for the foregoing, Charter Holdco and CCI have agreed
that Mr. Allen does not have an obligation to present to us business
opportunities in which both Mr. Allen and we might have an interest and that he
may exploit such opportunities for his own account. CCI's certificate of
incorporation and Charter Holdco's operating agreement will contain provisions
to this effect.
 
BUSINESS RELATIONSHIPS
 
     Mr. Allen or certain of his affiliates own equity interests or warrants to
purchase equity interests in various entities which provide a number of our
subsidiaries with services or programming. Among these entities are High Speed
Access, WorldGate, Wink, ZDTV, USA
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Networks and Oxygen Media, Inc. These affiliates of Mr. Allen include Charter
Investment and Vulcan Ventures, Inc., a company founded by Mr. Allen in 1986 to
research and implement his investments. Mr. Allen owns 100% of the equity of
Vulcan Ventures, and is the President, Chief Executive Officer and Chairman of
the Board. William D. Savoy, another of our directors, is also a Vice President
and a director of Vulcan Ventures.
 
     HIGH SPEED ACCESS.  High Speed Access is a provider of high-speed Internet
access over cable modems. In November 1998, Charter Investment 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. Under these agreements, High Speed Access will have exclusive
access to at least 750,000 homes which will either have or be eligible for an
installed cable drop from our cable system. 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 as to a
particular cable system is five years from the date revenue billing commences
and automatically renews itself on a year-to-year basis. Additionally, we can
terminate our exclusivity rights, on a system-by-system basis, if High Speed
Access fails to meet performance benchmarks or otherwise breaches the terms of
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, whether through cable or by alternative
transmission technologies such as DSL. 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 of the other's content and materials on a non-exclusive, royalty-free
basis.
 
     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, and received an
option to purchase on or before November 25, 2000 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 million shares of common stock at a purchase price of $5.00 per
share. Vulcan Ventures subsequently assigned the warrants to Charter Investment.
 
     In addition, Jerald L. Kent, our President and Chief Executive Officer and
one of our directors and a director of CC Holdings, Mr. Savoy, another of our
directors, and another individual, who performs management services for us, are
also directors of High Speed Access.
 
     WORLDGATE.  WorldGate is a provider of Internet access through cable
television systems. On November 7, 1997, Charter Investment signed an
affiliation agreement with WorldGate pursuant to which WorldGate's services will
be offered to some of our customers. 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. Pursuant to the agreement, we have agreed to use
our reasonable best efforts to deploy the WorldGate Internet access service
within a specified portion of our cable television systems and to install the
appropriate headend equipment in all of our major markets in those systems.
Major
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<PAGE>   118
 
markets for purposes of this agreement include those in which we have more than
25,000 customers. 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 that allows WorldGate's services to be deployed in systems that are
not two-way capable, we have agreed, if economically practical, to use all
reasonable efforts to install the appropriate headend equipment and deploy the
WorldGate service in our remaining markets. We incur the cost for the
installation of headend equipment. 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.
 
     On November 24, 1997, Charter Investment acquired 70,423 shares of
WorldGate's Series B Preferred Stock at a purchase price of $7.10 per share. On
February 3, 1999, a subsidiary of CC Holdings acquired 90,909 shares of
WorldGate's Series C Preferred Stock at a purchase price of $11.00 per share. As
a result of a stock split, each share of Series B Preferred Stock will convert
into two-thirds of a share of WorldGate's common stock, and each share of Series
C Preferred Stock will convert into two-thirds of a share of WorldGate's common
stock. Upon completion of WorldGate's initial public offering, each series of
Preferred Stock will automatically convert into 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 signed a cable affiliation agreement with
Wink to deploy this enhanced broadcasting technology in our systems. 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. 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. For the first year following
the launch of Wink service in an operating area, we pay a monthly license fee to
Wink part of which is fixed and part of which is based on the number of our
subscribers in the operating area. After the first year of the agreement we pay
a fixed monthly license fee to Wink regardless of the number of our subscribers
in our operating areas. 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. Under the cable affiliation agreement, we are
committed to launch Wink services in operating areas including at least 200,000
homes passed by the end of 2001. We share in the revenue Wink collects for
transactions involving our customers. The amount of revenue shared is based on
the number of transactions per month.
 
     On November 30, 1998, Vulcan Ventures acquired 1,162,500 shares of Wink's
Series C Preferred Stock for approximately $9.3 million. Additionally, Microsoft
Corporation, of which Mr. Allen is a director, also 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 Investment intends to enter into with ZDTV, ZDTV has agreed to provide
us with their programming for broadcast via our cable television systems.
 
     On February 5, 1999, Vulcan Programming, Inc., another affiliate of Mr.
Allen, acquired an approximate one-third interest in ZDTV. The remaining
approximate two-thirds is owned by Ziff-Davis Inc. Vulcan Ventures acquired
approximately 3% of the interests in Ziff-Davis. The total investment made by
Vulcan Programming and Vulcan Ventures was $54 million.
 
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<PAGE>   119
 
     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 signed an Affiliation Agreement with USA
Networks. 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. All of Charter
Investment's operations take place at the subsidiary level and it is through
Charter Investment that we derive our rights and obligations with respect to USA
Networks. 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.
 
     Mr. Allen and Mr. Savoy are also directors of USA Networks.
 
     OXYGEN MEDIA, INC.  Oxygen expects to begin providing content aimed at the
female audience for distribution over the Internet and cable television systems.
Vulcan Ventures has agreed to invest up to $100 million in Oxygen. In addition,
Charter Investment has agreed to enter into a carriage agreement with Oxygen
pursuant to which we intend to carry Oxygen programming content on our cable
systems.
 
     Mr. Allen and his affiliates have, and in the future likely will make,
numerous investments outside of CCI. 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, that 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 entered into an agreement
governing with Mr. Allen the allocations of corporate opportunities as they
arise.
 
     We have not instituted any formal plan or arrangement to address potential
conflicts of interest.
 
TRANSACTIONS WITH MANAGEMENT AND OTHERS
 
     ALLEN INVESTMENT AND CHARTER HOLDCO.  On December 21, 1998, Mr. Allen
contributed $431 million to Charter Investment and received non-voting common
stock of Charter Investment. Such non-voting common stock was converted to
voting common stock on December 23, 1998.
 
     On December 23, 1998, Mr. Allen contributed $1.33 billion to Charter
Investment and received voting common stock of Charter Investment. Additionally,
Charter Investment borrowed $6.24 million in the form of a bridge loan from Mr.
Allen. This bridge loan was contributed by Mr. Allen to Charter Investment in
March 1999. No interest on the bridge loan was accrued or paid by Charter
Investment. On the same date, Mr. Allen also contributed $223.5 million to
Vulcan Cable II, Inc., a company owned by Mr. Allen. Vulcan II was merged with
and into Charter Investment.
 
     On January 5, 1999, Charter Investment borrowed $132.2 million in the form
of a bridge loan from Mr. Allen. This bridge loan was contributed by Mr. Allen
to Charter Investment in March 1999. No interest on the bridge loan was accrued
or paid by Charter Investment. On the same date, Mr. Allen also acquired
additional voting common stock of Charter Investment from Jerald L. Kent, Howard
L. Wood and Barry L. Babcock for an aggregate purchase price of $176.7 million.
 
     On January 11, 1999, Charter Investment borrowed $25 million in the form of
a bridge loan from Mr. Allen. This bridge loan was contributed by Mr. Allen to
Charter Investment in March 1999. No interest on the bridge loan was accrued or
paid by Charter Investment.
 
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<PAGE>   120
 
     On March 16, 1999, Charter Investment borrowed $124.8 million in the form
of a bridge loan from Mr. Allen. This bridge loan was contributed by Mr. Allen
to Charter Investment in March 1999. No interest on the bridge loan was accrued
or paid by Charter Investment.
 
     In July, 1999, Charter Holdco and Mr. Allen entered into a membership
interests purchase agreement pursuant to which Mr. Allen has committed to
purchase membership units of Charter Holdco for a total of $1.325 billion. Mr.
Allen will contribute $500 million on or before July 31, 1999, and $825 million
on or before September 1, 1999, in exchange for membership interests. In the
membership interests purchase agreement, we agreed to give Mr. Allen the right
to program up to eight digital channels in each of our cable systems at terms
not less favorable to us than Mr. Allen would agree upon with other cable
companies. The exact number of channels per system depends on the bandwidth of
that particular system.
 
     MERGER WITH MARCUS.  On April 23, 1998, Mr. Allen and an entity he
controlled acquired approximately 99% of the non-voting economic interests in
Marcus, and agreed to acquire the remaining interests in Marcus Cable and assume
voting control. The aggregate purchase price was approximately $1.4 billion,
excluding $1.8 billion in debt assumed. On March 31, 1999, Mr. Allen completed
the acquisition of all remaining interests and assumed voting control of Marcus
Cable. On February 22, 1999, Marcus Holdings was formed and all of Mr. Allen's
interests in Marcus Cable were transferred to Marcus Holdings.
 
     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, CC
Holdings was formed as a wholly owned subsidiary of Charter Investment. On
February 10, 1999, Charter Operating was formed as a wholly owned subsidiary of
CC Holdings. All of Charter Investment's equity interests in its operating
subsidiaries were subsequently transferred to Charter Operating. On May 25,
1999, Charter Holdco was formed as a wholly owned subsidiary of Charter
Investment. All of Charter Investment's equity interests in CC Holdings were
transferred to Charter Holdco.
 
     In March 1999, CC Holdings paid an affiliate of Mr. Allen $20 million for
reimbursement of direct costs incurred in connection with his 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 CC Holdings. CC
Holdings survived the merger, and the operating subsidiaries of Marcus Holdings
became subsidiaries of CC Holdings. Immediately following the merger, Mr. Allen
owned   % of the equity interests in Charter Investment.
 
     When CC Holdings and its subsidiary issued notes in a private placement,
this merger had not yet occurred. Consequently, Marcus Holdings was a party to
the indentures governing the notes as a guarantor of our obligations. CC
Holdings loaned some of the proceeds from the sale of the original notes to
Marcus Holdings, which amounts were used to complete the cash tender offers for
certain outstanding notes of subsidiaries of Marcus Holdings. Marcus Holdings
issued a promissory note in favor of CC Holdings, secured by a pledge of the
equity interests in Marcus Cable as collateral. CC Holdings pledged this
promissory note to the trustee under the indentures as collateral for the equal
and ratable benefit of the holders of the notes. Upon the closing of the merger,
and in accordance with the terms of the notes and the indentures:
 
     - the guarantee issued by Marcus Holdings was automatically terminated;
 
     - the promissory note issued by Marcus Holdings was automatically
       extinguished; and
 
     - the pledge in favor of CC 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 notes were
       automatically released.
 
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                      DESCRIPTION OF CERTAIN INDEBTEDNESS
 
     The following description of our indebtedness is qualified in its entirety
by reference to the relevant credit facility, or indenture, and related
documents governing the debt.
 
EXISTING CREDIT FACILITIES
 
CHARTER OPERATING CREDIT FACILITIES
 
     On March 18, 1999, all of our then-existing senior debt, consisting of
seven separate credit facilities, was refinanced with proceeds of the sale of
the original CC Holdings notes and proceeds of our initial senior secured credit
facilities. The borrower under our initial senior secured credit facilities is
Charter Operating. These facilities were arranged by Chase Securities Inc., Bank
of America, Toronto Dominion (Texas), Inc., Fleet Bank, N.A. and Credit Lyonnais
New York Branch. The initial Charter Operating senior secured credit facilities
provided for borrowings of up to $2.75 billion.
 
     The initial Charter Operating senior secured credit facilities were
increased on April 30, 1999 by $1.35 billion. Obligations under the Charter
Operating credit facilities are guaranteed by Charter Operating's parent, CC
Holdings, and by Charter Operating's subsidiaries. The obligations under the
Charter Operating credit facilities are secured by pledges by Charter Operating
of inter-company obligations and the ownership interests of Charter Operating in
its subsidiaries, but are not secured by the other assets of Charter Operating
or its subsidiaries. The CC Holdings guarantees are secured by pledges of
inter-company obligations and the ownership interests of CC Holdings in Charter
Operating, but are not secured by the other assets of CC Holdings or Charter
Operating.
 
     The total amount of borrowing availability under the Charter Operating
senior secured credit facilities is $4.1 billion and consists 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 of September 18, 2007. The amortization of the
principal amount of the Tranche B term loan facility is substantially
"back-ended," with more than ninety percent of the principal balance due in the
year of maturity. 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 the Tranche B term loan.
Interest rate margins for the Charter Operating credit facilities depend upon
performance measured by a "leverage ratio," or, the ratio of debt to annualized
operating cash flow. Annualized operating cash flow is defined as the
immediately preceding quarter's operating cash flow, before management fees,
multiplied by four. This leverage ratio is based on the debt of Charter
Operating and its subsidiaries, exclusive of the outstanding notes and other
debt for money borrowed, including guarantees by Charter Operating and its
subsidiaries by CC Holdings.
 
     The Charter Operating credit facilities provide Charter Operating with two
interest rate options, to which a margin is added: a base rate, generally the
"prime rate" of interest option, and an interest rate option based on the London
InterBank Offered Rate. The Charter Operating credit facilities contain
representations and warranties, affirmative and negative covenants,
 
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<PAGE>   122
 
information requirements, events of default and financial 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.
 
     Under most circumstances, acquisitions and investments may be made by CC
Holdings, Charter Operating or their subsidiaries without the consent of the
lenders as long as Charter Operating's operating cash flow for the four complete
quarters preceding the acquisition or investment equals or exceeds 1.75 times
the sum of its cash interest expense plus any restricted payments, on a pro
forma basis after giving effect to the acquisition or investment.
 
     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:
 
          (1) Mr. Allen, including his estate, heirs and other related entities,
     fails to maintain a 51% direct or indirect voting and economic interest in
     Charter Operating, provided that after the consummation of an initial
     public offering by CC Holdings or an affiliate of CC Holdings, the economic
     interest percentage may be reduced to 35%, or
 
          (2) a change of control occurs under the indentures governing the CC
     Holdings notes.
 
     The various negative covenants place limitations on the ability of CC
Holdings, Charter Operating and their subsidiaries to, among other things, incur
debt, pay dividends, incur liens, make acquisitions, investments or asset sales,
or enter into transactions with affiliates. Distributions by Charter Operating
under the credit facilities to CC Holdings to pay interest on the notes are
generally permitted, except during the existence of a default under the credit
facilities. If the 8.250% CC Holdings notes are not refinanced prior to six
months before their maturity date, the entire amount outstanding of the Charter
Operating credit facilities will become due and payable. This summary is
qualified in its entirety by reference to the Charter Operating credit agreement
and the related documents pertaining to the Charter Operating credit facilities.
 
CREDIT FACILITIES TO BE ASSUMED IN CONNECTION WITH OUR PENDING ACQUISITIONS
 
FALCON CABLE COMMUNICATIONS CREDIT FACILITIES
 
     On May 26, 1999, CCI entered into an agreement to purchase cable systems
from Falcon Holding Group, L.P. for approximately $2 billion in cash and
membership units in Charter Holdco and $1.6 billion in assumed debt. The assumed
debt includes the $1.15 billion senior credit facilities of Falcon Cable
Communications, LLC (the Falcon borrower). In anticipation of the closing of
this acquisition by Charter, Charter has arranged with the lenders to the Falcon
borrower to enter into an amendment and restatement of the existing credit
facilities. Unless otherwise noted, the description below gives effect to this
amendment and restatement, which becomes effective at the time of the
acquisition.
 
     On July 21, 1999, a required percentage of the lenders under the Falcon
borrower credit agreement dated June 30, 1998 agreed to amend and restate the
credit agreement, effective on the date that we close our acquisition of Falcon.
The current amount of the credit facilities is approximately $1.14 billion,
consisting of:
 
     - A revolving facility in the amount of approximately $646 million;
 
     - A term loan B in the amount of approximately $199 million; and
 
     - A term loan C in the amount of approximately $299 million.
 
     We are in the process of raising additional commitments for a permitted
supplemental revolving credit facility in the maximum amount of $350 million.
Each of the foregoing facilities amortizes beginning in the year 2003 and ending
on December 31, 2007. The obligations under these facilities are guaranteed by
the subsidiaries of Falcon borrower. The obligations under the Falcon borrower
credit facilities are secured by pledges of the ownership interests and inter-
 
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<PAGE>   123
 
company obligations of the Falcon borrower and its subsidiaries, but are not
secured by other assets of the Falcon borrower or its subsidiaries.
 
     The Falcon borrower credit facilities currently in effect provide for the
$350 million incremental availability referred to above, which we are currently
in the process of soliciting from the existing lenders. This facility is in the
form of an additional revolving loan. Upon the effectiveness of the amendment
and restatement of the Falcon borrower credit facilities at the time of the
acquisition of Falcon borrower by Charter Holdco, up to an additional $350
million supplemental facility will be available.
 
     The Falcon borrower 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 borrower. Interest rates for the Falcon
Operating credit facilities, as well as a fee payable on unborrowed amounts
available under these facilities, will depend upon performance measured by a
"leverage ratio," or, the ratio of indebtedness to annualized operating cash
flow. Annualized operating cash flow is defined as the immediately preceding
quarter's operating cash flow, before management fees, multiplied by four. This
leverage ratio is based on the debt of Falcon borrower and its subsidiaries,
exclusive of the Falcon debentures described below.
 
     The Falcon borrower credit facilities provide the Falcon borrower 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 rate based on the
London InterBank Offered Rate. The Falcon borrower credit facilities contain
representations and warranties, affirmative and negative covenants, information
requirements, events of default and financial 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.
 
     Under most circumstances, acquisitions and investments may be made by CC
Holdings, Charter Operating or their subsidiaries without the consent of the
lenders as long as Charter Operating's operating cash flow for the four complete
quarters preceding the acquisition or investment equals or exceeds 1.75 times
the sum of the Falcon borrower's cash interest expense plus any restricted
payments, on a pro forma basis after giving effect to the acquisition or
investment.
 
     The Falcon borrower 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:
 
          (1) Mr. Allen, including his estate, heirs and other related entities,
     fails to maintain a 51% direct or indirect voting and economic interest in
     Falcon borrower, provided that after the consummation of an initial public
     offering by CC Holdings or an affiliate of CC Holdings, the economic
     interest percentage may be reduced to 25%, or
 
          (2) A change of control occurs under the indentures governing the CC
     Holdings notes.
 
     The various negative covenants place limitations on the Falcon borrower's
ability of CC Holdings, Charter Operating and their subsidiaries to, among other
things, incur debt, pay dividends, incur liens, make acquisitions, investments
or assets sales, or enter into transactions with affiliates. Distributions by
Falcon borrower under its credit facilities to pay interest on the Falcon
debentures are generally permitted, except during the existence of a default
under the credit facilities. This summary is qualified in its entirety by
reference to the Falcon borrower credit agreement and the related documents
pertaining to these credit facilities.
 
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<PAGE>   124
 
OTHER SENIOR CREDIT FACILITIES
 
     In connection with its acquisitions of Bresnan, Fanch and Avalon, Charter
Holdco will assume or refinance the existing credit facilities of those
companies. In the event it assumes such credit facilities, it will attempt, as
it has succeeded with respect to Falcon, to renegotiate the terms of such
indebtedness on terms substantially similar or identical to the terms of the
senior credit facilities for Charter Operating. In the event it is unable to do
so, it will assume such indebtedness on its existing terms, if permitted, or
refinance such indebtedness. However, there can be no assurances that Charter
Holdco will be successful in its effort to assume and renegotiate, or to
refinance, any of such existing senior indebtedness.
 
     BRESNAN.  Bresnan's existing credit facilities, under a loan agreement
dated February 2, 1999, include a revolving loan facility in the amount of $150
million maturing June 30, 2007, a term loan A facility, in the amount of $328
million, maturing June 30, 2007, and a term loan B facility in the amount of
$172 million, maturing February 2, 2008. These facilities are secured in similar
fashion to Charter Operating, by guaranties from subsidiaries and pledges of
ownership interests and inter-company indebtedness, but not by other real or
personal property. Also similar to Charter Operating, interest rates and fees
are based on a pricing grid depending upon Bresnan's leverage ratio.
 
     AVALON.  Avalon's existing credit facilities, under a loan agreement dated
November 5, 1998, include a revolving loan facility, maturing October 31, 2005,
a term loan A facility, maturing on October 31, 2005, and a term loan B
facility, with a total commitment of approximately $195 million, maturing
October 31, 2006. Unlike Charter Operating, Bresnan, Fanch and Falcon, these
facilities are secured by all assets of the Avalon borrower and its
subsidiaries, real and personal, including ownership interests and inter-company
indebtedness. Similar to Charter Operating, interest rates and fees on the
Avalon credit facilities are based on a pricing grid depending upon Avalon's
leverage ratio.
 
EXISTING PUBLIC DEBT
 
THE CC HOLDINGS NOTES.  The original CC Holdings notes and the new CC Holdings
notes were issued under three separate indentures, each dated as of March 17,
1999, among CC Holdings and Charter Communications Holdings Capital Corporation,
as the issuers, Marcus Cable Holdings, LLC, as guarantor and Harris Trust and
Savings Bank, as trustee. The form and terms of the new CC Holdings notes are
the same in all material respects to the form and terms of the original CC
Holdings notes, except that the new CC Holdings notes have been registered under
the Securities Act of 1933 and, therefore, will not bear legends restricting the
transfer thereof. The original CC Holdings notes have not been registered under
the Securities Act of 1933 and are subject to certain transfer restrictions. At
the time of the sale of the original CC Holdings notes, Marcus Holdings
guaranteed the CC Holdings notes and issued a promissory note to CC Holdings for
certain amounts loaned by CC Holdings to subsidiaries of Marcus Holdings. At the
time of the merger of CC Holdings with Marcus Holdings, both the guarantee and
the promissory note automatically became ineffective under the terms of the CC
Holdings indentures. Consequently, all references in the CC Holdings indentures
and the CC Holdings notes to the guarantor, the guarantee or the promissory
note, and all related matters, such as the pledges of any collateral, became
inapplicable. The CC Holdings notes are general unsecured obligations of the
issuers. The 8.250% CC Holdings notes mature on April 1, 2007 and there is $600
million in total principal amount currently outstanding. The 8.625% CC Holdings
notes will mature on April 1, 2009 and there is $1.5 billion in total principal
amount currently outstanding. The 9.920% CC Holdings discount notes mature on
April 1, 2011 and there is $1.475 billion in total principal amount currently
outstanding. Net proceeds from the sale of senior discount notes were $905.6
million. Cash interest on the 9.920% CC Holdings notes will not accrue prior to
April 1, 2004.
 
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<PAGE>   125
 
     The CC Holdings notes are senior debts of the issuers. They rank equally
with the current and future unsecured and unsubordinated debt, including trade
payables, of CC Holdings, which is a holding company.
 
     The issuers will not have the right to redeem the 8.250% CC Holdings notes
prior to their maturity date on April 1, 2007. However, before April 1, 2002,
the issuers may redeem up to 35% of the 8.625% CC Holdings notes and the 9.920%
CC Holdings notes 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 8.625% CC Holdings notes and the 9.920% CC Holdings notes at any time.
 
     In the event of a specified change of control event, the issuers must offer
to repurchase any then-outstanding CC Holdings notes at 101% of their principal
amount or accreted value, as applicable, plus accrued and unpaid interest.
 
     The indentures governing the CC Holdings notes also contain certain events
of default, affirmative covenants and negative covenants. Subject to certain
important exceptions, the indentures governing the CC Holdings notes, among
other things, restrict the ability of the issuers and certain of their
subsidiaries to:
 
     - incur additional debt;
 
     - create specified liens;
 
     - pay dividends on stock or repurchase stock;
 
     - make investments;
 
     - 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.
 
RENAISSANCE NOTES.  The original Renaissance notes and new Renaissance notes
were issued by Renaissance Media (Louisiana) LLC, Renaissance Media (Tennessee)
LLC and Renaissance Media Capital Corporation, with Renaissance Media Group LLC
as the Guarantor, and the United States Trust Company of New York as the
Trustee. In October 1998, the issuers exchanged $163.2 million of the original
issued and outstanding 10% senior discount notes due 2008 for an equivalent
value of 10% senior discount notes due October 2008 which have been registered
under the Securities Act of 1933. Renaissance Media Group LLC, which is the
direct or indirect parent company of each other issuer, is a subsidiary of
Charter Operating.
 
     The form and terms of the new Renaissance notes are the same in all
material respects as the form and terms of the original Renaissance notes except
that the issuance of the new Renaissance notes was registered under the
Securities Act. The new Renaissance notes evidence the same debt as the original
Renaissance notes and are issued under and are entitled to the benefits of the
same indenture. The Renaissance notes and the Renaissance guaranty are
unsecured, unsubordinated debt of the issuers and the guarantor, respectively.
 
     There will not be any payment of interest in respect of the Renaissance
notes prior to October 15, 2003. Interest on the Renaissance notes is paid
semi-annually in cash at a rate of 10% per annum beginning on October 15, 2003.
The Renaissance 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 their
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
 
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<PAGE>   126
 
maturity of the Renaissance notes with the proceeds of one or more sales of
capital stock 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 notes remains outstanding.
 
     Upon a change of control, the issuers are required to make an offer to
purchase the new Renaissance notes at a purchase price equal to 101% of their
accreted value on the date of the purchase, plus accrued interest, if any. Our
acquisition of Renaissance triggered this requirement. In May 1999, we made an
offer to repurchase the Renaissance notes, and holders of Renaissance notes
representing 30% of the total principal amount outstanding tendered their
Renaissance notes for repurchase.
 
     The indenture contains certain covenants that restrict the ability of the
issuers and their subsidiaries to:
 
     - incur additional debt;
 
     - create liens;
 
     - engage in sale-leaseback transactions;
 
     - pay dividends or make contributions in respect of their capital stock;
 
     - redeem capital stock;
 
     - make investments or certain other restricted payments;
 
     - sell assets;
 
     - issue or sell stock of restricted subsidiaries;
 
     - enter into transactions with stockholders or affiliates; or
 
     - effect a consolidation or merger.
 
     As of March 31, 1999, there was $110.5 million total principal amount of
Renaissance notes outstanding.
 
PUBLIC DEBT TO BE ASSUMED IN CONNECTION WITH OUR PENDING ACQUISITIONS
 
  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 Falcon Holding Group, L.P. and Falcon Funding Corporation
on April 3, 1998. On August 5, 1998, the issuers proposed an exchange offer
whereby the outstanding $375 million Series A senior debentures and $435.25
million Series A senior discount 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 debentures are the same as the form and terms of the
corresponding original Falcon debentures except that the issuance of the
exchange debentures was registered under the Securities Act of 1933 and,
therefore, the exchange debentures do not bear legends restricting the transfer
thereof.
 
     The Falcon debentures will 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 provided for, payable semiannually on
April 15 and October 15 of each year. No interest on the Series B senior
discount 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 Series B senior
discount debenture will be reduced to the accreted value of such Series B senior
discount debenture as of such interest payment date and the interest will be
payable semiannually in cash on each interest payment date thereafter.
 
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<PAGE>   127
 
     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.
This premium 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 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 at a premium, 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
senior discount debentures and $195 million of the total principal amount of
Falcon senior debentures must remain outstanding.
 
     In the event of specified change of control events, the holders of the
Falcon debentures will 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, plus accrued and unpaid interest, if any, to the date of purchase. The
Falcon acquisition will give rise to this right. As of March 31, 1999, there was
$675.1 million total principal and accrued interest outstanding on the Falcon
debentures.
 
     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;
 
     - create certain liens;
 
     - sell all or substantially all of their assets or merge with or into other
       companies;
 
     - invest in unrestricted subsidiaries and affiliates;
 
     - pay dividends or make any other distributions on any capital stock; and
 
     - guarantee any debt which is equal or subordinate in right of payment to
       the Falcon debentures.
 
HELICON NOTES
 
     On November 3, 1993, Helicon Group, L.P. and Helicon Capital Corp. jointly
issued $115,000,000 total principal amount of 11% senior secured notes due 2003.
On February 3, 1994, the issuers exchanged the original Helicon notes for an
equivalent value of new Helicon notes. The form and term of the new Helicon
notes are the same as the form and terms of the corresponding original Helicon
notes except that the issuance of the new Helicon notes was registered under the
Securities Act of 1933, and, therefore the new Helicon notes do not bear legends
restricting their transfer. The Helicon notes bear interest at a rate of 11% per
annum.
 
     The Helicon notes are senior obligations of the issuers and are secured by
substantially all of the cable assets, subject to a number of exceptions. The
Helicon notes may be redeemed at the option of the issuers specified in whole or
in part at any time, at specified redemption prices plus accrued interest to the
date of redemption. The Helicon notes were issued with original issue discount.
 
     The issuers will be required to redeem $25 million principal amount of the
Helicon notes on each of November 1, 2001 and November 1, 2002. Upon specified
change of control events, the
 
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<PAGE>   128
 
issuers will be required to make an offer to purchase all of the Helicon notes
at a price equal to 101% of their principal amount plus accrued interest to the
date of purchase. Our acquisition of Helicon will trigger this obligation. We
are also required under the terms of the Charter Operating credit facility to
repurchase the total amount of principal and interest outstanding under the
Rifkin and Helicon notes which is in excess of $250 million.
 
     Among other restrictions, the indenture governing the Helicon notes
restricts the ability of the issuers and some of their subsidiaries to:
 
     - incur additional debt;
 
     - make specified distributions;
 
     - redeem equity interests;
 
     - enter into transactions with affiliates; and
 
     - merge or consolidate with or sell substantially all of the assets of the
       issuers.
 
     As of March 31, 1999, there was $115.0 million total principal amount
outstanding on the Helicon notes.
 
THE AVALON 11 7/8% NOTES
 
     Avalon Cable LLC, Avalon Cable of Michigan Holdings, Inc. and Avalon Cable
Holdings Finance Inc. are currently in the process of offering to exchange $196
million total principal amount at maturity of 11 7/8% senior discount notes for
$196 million total principal amount at maturity of their outstanding 11 7/8%
senior discount notes due December 1, 2008 which were issued in December 1998.
The new Avalon 11 7/8% notes will be guaranteed by Avalon Cable of Michigan,
Inc., an equity holder in Avalon Cable LLC, and its sole stockholder, Avalon
Cable of Michigan Holdings, Inc. The exchange offer is subject to customary
conditions that the issuers may waive. The new Avalon 11 7/8% notes are
substantially identical to the original Avalon 11 7/8% notes except that will be
registered under the Securities Act of 1933 and, therefore, are not subject to
the same transfer restrictions.
 
     The issuers will receive no proceeds from the exchange offer.
 
     Before December 1, 2003, there will be no current payments of cash interest
on the Avalon 11 7/8% notes. The 11 7/8% Avalon notes will accrete in value at a
rate of 11 7/8% per annum, 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 7/8% notes:
 
     - will accrue at the rate of 11 7/8% per year on the principal amount at
       maturity of the new notes, 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 principal amount at maturity of each Avalon 11 7/8% note,
on a pro rata basis at a redemption price of 100% of the principal amount at
maturity of the Avalon 11 7/8% notes so redeemed.
 
     On or after December 1, 2003, the issuers may redeem the Avalon 11 7/8%
notes, in whole or in part. Before December 1, 2001, the issuers may redeem up
to 35% of the total principal amount at maturity of the Avalon 11 7/8% notes
with the proceeds of one or more equity offerings and/or strategic equity
investments; and
 
     In the event of specified change of control events, holders of the Avalon
11 7/8% notes will have the right to sell their Avalon 11 7/8% notes to the
issuers at 101% of (a) the accreted value of the Avalon 11 7/8% notes in the
case of repurchases of Avalon notes prior to December 1, 2003
 
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<PAGE>   129
 
or (b) the total principal amount of the Avalon 11 7/8% notes in the case of
repurchases of Avalon 11 7/8% 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 will trigger this right.
 
     Among other restrictions, the indenture governing the Avalon 11 7/8% 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;
 
     - sell assets or subsidiary stock;
 
     - create liens;
 
     - restrict dividends or other payments from restricted subsidiaries;
 
     - merge, consolidate or sell all or substantially all of their combined
       assets; and
 
     - with respect to restricted subsidiaries, issue capital stock.
 
     As of March 31, 1999, the total accreted value of the outstanding Avalon
11 7/8% notes was $113.7 million.
 
THE AVALON 9 3/8% NOTES
 
     Avalon Cable LLC, Avalon Cable of New England, LLC, Avalon Cable Finance,
Inc. and Avalon Cable of Michigan, Inc. will be offering to exchange $150
million principal amount of new 9 3/8% senior subordinated notes due 2008 for
$150 million total principal amount of their outstanding original 9 3/8% senior
subordinated notes due 2008 which were issued in December 1998. Avalon Cable of
Michigan, Inc. will guarantee the obligations of Avalon Cable LLC with respect
to the Avalon 9 3/8% notes. Avalon Cable of Michigan, Inc., however, does not
have any significant assets other than its interest in Avalon Cable LLC. The
form and terms of the new Avalon 9 3/8% notes are substantially the same as the
form of the original Avalon 9 3/8% notes except that the new Avalon 9 3/8% notes
have been registered under the federal securities laws and will not bear a
legend restricting the transfer thereof. The exchange offer will be subject to
customary conditions which the issuers may waive.
 
     Interest on the Avalon 9 3/8% notes accrues at a rate of 9.375% per annum
from the date of issuance and will be payable semiannually in arrears on June 1
and December 1, commencing on June 1, 1999.
 
     On or after December 1, 2003, the issuers may redeem the Avalon 9 3/8%
notes in whole or in part. Until December 1, 2001, the issuers may redeem up to
35% of the total principal amount of the Avalon 9 3/8% 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 strategic equity investment and/or an equity offering. Following the
redemption, at least 65% of the total principal amount of the Avalon 9 3/8%
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 3/8% notes will have the opportunity to
sell their Avalon 9 3/8% 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 will trigger this right.
 
     The Avalon 9 3/8% 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 3/8% notes
 
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<PAGE>   130
 
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 new Avalon 9 3/8%
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;
 
          - sell assets or subsidiary stock;
 
          - create liens;
 
          - merge, consolidate or sell all or substantially all or their
            combined assets;
 
          - incur debt that is senior to the Avalon 9 3/8% notes but junior to
            senior debt; and
 
          - issue capital stock.
 
     As of March 31, 1999, there was $154.7 million total principal and accrued
interest outstanding on the Avalon 9 3/8% notes.
 
THE BRESNAN NOTES
 
     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 of 9 1/4% Series A
senior discount notes due 2009.
 
     The Bresnan notes have not been registered under the Securities Act of 1933
and, therefore, bear legends restricting their transfer. To avoid penalty
interest or an increased rate of accretion on the Bresnan notes, the issuers are
required to:
 
     - file a registration statement under the Securities Act of 1933 for the
exchange of the original Bresnan notes for new Bresnan notes within 120 days of
the issue date;
 
     - cause the registration statement to be declared effective within 180 days
of the issue date; and
 
     - exchange all of the Bresnan notes validly tendered within 210 days of the
issue date.
 
     The Bresnan senior 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 senior discount notes bear interest at
9 1/4% 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
senior discount notes will accrue at a rate of 9 1/4% per year and will be
payable in cash semiannually in arrears on February 1 and August 1.
 
     The Bresnan senior notes are not redeemable prior to February 1, 2004.
During the year 2004, the Bresnan senior notes are redeemable at 104.00% of the
principal amount plus accrued and unpaid interest. The premium decreases to
102.667% in 2005, 101.33% in 2006 and 100% on or after February 1, 2007.
 
     The Bresnan senior discount notes are not redeemable prior to February 1,
2004. During the year 2004, the Bresnan senior discount notes will be redeemable
at 104.625% of the principal amount plus accrued and unpaid interest. The
premium decreases to 103.083% in 2005, 101.542% in 2006 and 100% in 2007.
 
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<PAGE>   131
 
     At any time prior to February 1, 2002, the issuers may redeem up to 35% of
the total principal amount of the Bresnan senior 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 senior 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 senior discount
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 the net
cash proceeds of one or more equity offerings. Following such redemption, at
least 65% of the total principal amount of the Bresnan senior discount notes
must remain outstanding.
 
     The Bresnan notes will be senior unsecured obligations of the issuers and
will rank equal in right of payment with all existing and future senior debt of
and will be senior in right of payment to all its existing and future
subordinated debt. Bresnan Capital Corporation has no, and the terms of the
indenture governing the Bresnan notes prohibit it from having any, obligations
other than the Bresnan notes.
 
     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
in the case of the Bresnan senior notes, and 101% of the accreted value thereof
in the case of the Bresnan senior discount notes, plus accrued and unpaid
interest, if any, to the purchase date.
 
     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;
 
          - make specified restricted payments;
 
          - create liens;
 
          - create or permit any restrictions on the payment of dividends or
            other distributions to Bresnan Communications Group LLC;
 
          - guarantee debt;
 
          - consolidate with, merge into or transfer all or substantially all of
            their assets;
 
          - sell assets; and
 
          - transact business with their affiliates.
 
     As of March 31, 1999, there was $347.7 million in total principal and
interest outstanding on the Bresnan notes.
 
RIFKIN NOTES
 
     The Rifkin notes were issued by Rifkin Acquisition Partners, L.L.L.P. and
Rifkin Acquisition Capital Corp. as issuers, subsidiaries of Rifkin Acquisitions
Partners, L.L.L.P. other than Rifkin Acquisition Capital Corp. as guarantors,
and Marine Midland Bank as trustee. In March 1996, the issuers exchanged $125
million total principal amount of the originally issued and outstanding 11 1/8%
senior subordinated notes due 2006 for an equivalent amount of new 11 1/8%
senior subordinated notes due 2006. The form and terms of the new Rifkin notes
are substantially identical to the form and terms of the original Rifkin notes
except that the new Rifkin notes have been registered under the Securities Act
and, therefore, do not bear legends restricting the transfer thereof. Interest
on the Rifkin notes accrues at the rate of 11 1/8% per annum and is
 
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<PAGE>   132
 
payable in cash semi-annually in arrears on January 15 and July 15 of each year,
commencing July 15, 1996.
 
     The Rifkin notes are redeemable at the issuers' option, in whole or in
part, at any time on or after January 15, 2001, at 105.563% of the principal
amount together with accrued and unpaid interest, if any, to the date of the
redemption. This redemption premium declines over time to 100% of the principal
amount, plus accrued and unpaid interest, if any, on or after January 15, 2005.
 
     Upon the occurrence of a change of control, each holder of Rifkin notes
will have the right to require the issuers to purchase all or a portion of such
holder's notes at 101% of the principal amount thereof, together with accrued
and unpaid interest, to the date of purchase. Our acquisition of Rifkin will
trigger this right. We are also required by the terms of the Charter Operating
credit facilities to repurchase the total amount of principal and interest
outstanding under the Rifkin and Helicon notes which is in excess of $250
million.
 
     The Rifkin notes are jointly and severally guaranteed on a senior
subordinated basis by specified subsidiaries of the issuers. The guarantees of
the Rifkin notes will be general unsecured obligations of the guarantors and
will be subordinated in right of to all existing and future senior debt of the
guarantors.
 
     Among other restrictions, the indentures governing the Rifkin notes contain
covenants which limit the ability of the issuers and specified subsidiaries to:
 
     - assume additional debt and issue specified additional equity interests;
 
     - make restricted payments;
 
     - enter into transactions with affiliates;
 
     - incur liens;
 
     - make specified contributions and payments to Rifkin Acquisition Partners,
       L.L.L.P.;
 
     - transfer specified assets to subsidiaries; and
 
     - merge, consolidate, and transfer all or substantially all of the assets
       of Rifkin Acquisition Partners, L.L.L.P. to another person.
 
     As of March 31, 1999, there was $229.5 million total principal and accrued
interest outstanding on the Rifkin notes.
 
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<PAGE>   133
 
               DESCRIPTION OF CAPITAL STOCK AND MEMBERSHIP UNITS
 
GENERAL
 
     Upon the completion of the offering, the capital stock of CCI and the
provisions of CCI's certificate of incorporation and bylaws will be as described
below. Such summaries are qualified by reference to the certificate of
incorporation and the bylaws, copies of which will be filed with the SEC as
exhibits to our registration statement, of which this prospectus forms a part.
 
     Our authorized capital stock will consist of 1,500,000,000 shares of Class
A common stock, par value $.001 per share, 1,000,000,000 shares of Class B
common stock, par value $.001 per share and 250,000,000 shares of preferred
stock, par value $.001 per share.
 
COMMON STOCK
 
     As of the completion of the offering, there will be           shares of
Class A common stock issued and outstanding and           shares of Class B
common stock issued and outstanding.
 
     VOTING RIGHTS.  The holders of Class A common stock and Class B common
stock generally have identical rights, except (A) 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 the number of votes per share equal to: (i) ten, multiplied by
the sum of (a) the number of shares of Class B common stock held by the holder
and (b) the number of shares of Class B common stock into which the Charter
Holdco membership units held as of the applicable record date, directly or
indirectly, by the holder are exchangeable pursuant to an agreement between the
corporation and the holder; divided by (ii) the number of shares of Class B
common stock held by such holder; and (B) the holders of Class B common stock
have the sole power to amend the provisions of CCI's certificate of
incorporation relating to the activities in which CCI may engage. See "Certain
Relationships and Related Transactions -- Allocation of Business Opportunities
with Mr. Allen". The Class B common stockholders are entitled to elect all but
one member of CCI's board of directors. Class A and Class B common stockholders,
voting together as one class, are entitled to elect the members of CCI's board
of directors that are not elected by the holders of the Class B common stock or
by the holders of any series of preferred stock which is entitled to elect
directors. Holders of shares of Class A common stock and Class B common stock
are not entitled to cumulate their votes in the election of directors. Other
than the election of directors and any matters where Delaware law or CCI's
certificate of incorporation requires otherwise, all matters to be voted on by
stockholders must be approved by a majority of the votes entitled to be cast by
the shares of Class A common stock and Class B common stock present in person or
represented by proxy, voting together as a single class, subject to any voting
rights granted to holders of any preferred stock. Amendments to CCI's
certificate of incorporation that would alter or change the powers, preferences
or special rights of the Class A common stock or the Class B common stock so as
to affect them adversely also must be approved by a majority of the votes
entitled to be cast by the holders of the outstanding shares affected by the
amendment, voting as a separate class. In addition, any amendment to CCI's
certificate of incorporation (1) to issue any Class B common stock other than in
exchange for Charter Holdco membership units and other than pursuant to
specified stock splits and dividends, (2) to issue stock having more than one
vote per share or (3) affecting the voting powers of the Class B common stock,
shall be approved upon the affirmative vote of the holders of at least a
majority of the voting power of the outstanding Class B common stock, voting as
a separate class. If for any reason the Class B common stock no longer is high
vote stock, then CCI will assign to Charter Investment its rights and
obligations as sole manager of Charter Holdco under the CCI management agreement
and of Charter Operating under the Charter Operating management agreement.
 
     DIVIDENDS.  Holders of Class A common stock and Class B common stock will
share ratably (based on the number of shares of common stock held) in any
dividend declared by CCI's board
 
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of directors, subject to any preferential rights of any outstanding preferred
stock. Dividends consisting of shares of Class A common stock and Class B common
stock may be paid only as follows: (i) shares of Class A common stock may be
paid only to holders of shares of Class A common stock, and shares of Class B
common stock may be paid only to holders of Class B common stock; and (ii) the
number of shares of each class of common stock payable per share of such class
of common stock shall be equal in number.
 
     Conversion of Class B Common Stock.  All of the outstanding shares of Class
B common stock will automatically convert into shares of Class A common stock if
(1) Mr. Allen and his affiliates sell or dispose of shares of CCI common stock
or Charter Holdco membership units such that after such dispositions they own
less than 20% of their combined investment in CCI and Charter Holdco measured as
of the closing date of this offering and (2) at any time following this event,
his and his affiliates' percentage ownership of CCI and its subsidiaries on a
combined basis is less than 5% of the total combined equity of CCI and its
subsidiaries. Each holder of a share of Class B common stock has the right to
convert such shares into one share of Class A common stock at any time on a
one-for-one basis. Only approved Class B common stockholders may own shares of
Class B common stock. Approved Class B common stockholders are Paul G. Allen,
Jerald L. Kent, Barry L. Babcock, Howard L. Wood and entities controlled by
Messrs. Allen, Kent, Babcock and Wood. If an approved Class B common stockholder
transfers any shares of Class B common stock to a person other than an approved
Class B common stockholder, these shares of Class B common stock will
automatically convert into shares of shares of Class A common stock.
 
     OTHER RIGHTS.  In the event of any merger or consolidation by CCI with or
into another company in connection with which shares of CCI's common stock are
converted into or exchanged for shares of stock, other securities or property
(including cash), all holders of CCI's common stock, regardless of class, will
be entitled to receive the same kind and amount of shares of stock and other
securities and property (including cash), provided that if the shares of CCI's
common stock are converted into or exchanged for shares of capital stock, such
shares received so exchanged for or converted into may differ to the extent and
only to the extent that the Class A common stock and the Class B common stock
differ as provided in the certificate of incorporation.
 
     Upon CCI's liquidation, dissolution or winding up, after payment in full of
the amounts required to be paid to holders of preferred stock, if any, all
holders of common stock, regardless of class, are entitled to share ratably in
any assets and funds available for distribution to holders of shares of common
stock.
 
     No shares of any class of common stock are subject to redemption or have
preemptive rights to purchase additional shares of common stock.
 
     Upon consummation of the offering, all the outstanding shares of Class A
common stock and Class B common stock will be legally issued, fully paid and
nonassessable.
 
PREFERRED STOCK
 
     Upon the closing of the offering, CCI's board of directors will be
authorized, without further stockholder approval, to issue from time to time up
to an aggregate of 250,000,000 shares of preferred stock in one or more series
and to fix the numbers, powers, designations, preferences, and any special
rights of the shares of each such series thereof, including the dividend rights,
dividend rates, conversion rights, voting rights (subject, if applicable, to the
approval of holders of the Class B common stock), terms of redemption (including
sinking fund provisions), redemption price or prices, liquidation preferences
and the number of shares constituting any series or designations of such series.
Upon the closing of the offering, there will be no shares of preferred stock
outstanding. CCI has no present plans to issue any shares of preferred stock.
 
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OPTIONS
 
     As of June 30, 1999, options to purchase a total of      units in Charter
Holdco were outstanding pursuant to the Charter Holdco 1999 option plan. None of
these options will vest before April 2000. In addition,           options to
purchase units in Charter Holdco were outstanding pursuant to an employment
agreement and a related agreement. Of these options,           vested on
December 23, 1998 with the remainder vesting at a rate of 1/36th on the first of
each month for months 13 through 48.
 
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF CCI'S CERTIFICATE OF INCORPORATION AND
BYLAWS
 
     Provisions of CCI's certificate of incorporation and bylaws will be deemed
to have an anti-takeover effect and may delay, defer or prevent a tender offer
or takeover attempt that a stockholder might consider in its best interest,
including those attempts that might result in a premium over the market price
for the shares held by stockholders.
 
     SPECIAL MEETING OF STOCKHOLDERS.  Our bylaws provide that special meetings
of our stockholders may be called only by the chairman of our board of directors
or a majority of our board of directors.
 
     ADVANCE NOTICE REQUIREMENTS FOR STOCKHOLDER PROPOSALS AND DIRECTOR
NOMINATIONS.  Our bylaws provide that stockholders seeking to bring business
before an annual meeting of stockholders, or to nominate candidates for election
as directors at an annual meeting of stockholders, must provide timely notice
thereof in writing. To be timely, a stockholder's notice must be delivered to or
mailed and received at our principal executive offices, not less than 90 days
nor more than 120 days prior to the annual meeting; provided, that in the event
that less than 100 days' notice or prior public disclosure of the date of the
annual meeting is given or made to stockholders, notice by the stockholder to be
timely must be received by the close of business on the 10th day following the
date on which notice of the date of the meeting is given to stockholders or made
public, whichever first occurs. Our bylaws also specify certain requirements as
to the form and content of a stockholder's notice. These provisions may preclude
stockholders from bringing matters before an annual meeting of stockholders or
from making nominations for directors at an annual meeting of stockholders.
 
     AUTHORIZED BUT UNISSUED SHARES.  The authorized but unissued shares of
common stock and preferred stock are available for future issuance without
stockholder approval. These additional shares may be utilized for a variety of
corporate purposes, including future public offerings to raise additional
capital, corporate acquisitions and employee benefit plans. The existence of
authorized but unissued shares of common stock and preferred stock could render
more difficult or discourage an attempt to obtain control of us by means of a
proxy contest, tender offer, merger or otherwise.
 
MEMBERSHIP UNITS
 
     Immediately following the offering, there will be             Charter
Holdco membership units issued and outstanding,                of which will be
held by Charter Investment,                of which will be held by Vulcan III,
and                of which will be held by CCI.
 
     The number of outstanding Charter Holdco membership units that CCI owns
will at all times, to the extent practicable, equal the number of shares of
CCI's outstanding common stock. CCI's Charter Holdco membership units will be a
separate series of membership units entitling CCI to have at least a majority of
the voting power of all membership units of Charter Holdco. However, if for any
reason our Class B common stock no longer is high vote stock, then the Charter
Holdco operating agreement provides that the Charter Holdco membership units
held by CCI will no longer have special voting privileges and the Charter Holdco
membership units held by Charter Investment, Vulcan III and Mr. Allen will
control Charter Holdco.
 
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<PAGE>   136
 
     The net cash proceeds that CCI receives from any issuance of shares of
common stock will be concurrently transferred to Charter Holdco in exchange for
membership units equal in number to the number of shares of common stock issued
by CCI.
 
     As part of the consideration for the Rifkin acquisition, specified sellers
may elect to receive preferred membership units in Charter Holdco. The value of
these units will accrete at an annual rate of 8.0% and will be mandatorily
redeemable by Charter Holdco after 15 years. The holders of these preferred
units will have the right to cause Charter Holdco to redeem these units for five
years from the acquisition closing. If the acquisition closes prior to this
offering, the preferred units will be exchangeable for shares of Class A common
stock in CCI.
 
EXCHANGE AGREEMENT
 
     Upon the closing of the offering, we will have entered into an agreement
permitting Vulcan III and Charter Investment to exchange at any time any or all
of their Charter Holdco membership units for shares of Class B common stock. The
agreement will also permit all holders of Charter Holdco membership units other
than CCI, Vulcan III and Charter Investment to exchange at any time any or all
of their membership units for shares of Class A common stock. Any exchange will
be made on a one-for-one basis.
 
SPECIAL ALLOCATION OF LOSSES
 
     Charter Holdco's operating agreement will provide that through the end of
2003, losses of Charter Holdco that would otherwise have been allocated to CCI
(generally based on the percentage of membership units in Charter Holdco held by
it) will instead be allocated, on a per unit basis, to the membership units held
by Vulcan III and Charter Investment at the time of the closing of the offering.
At the time that Charter Holdco first has profits that would otherwise have been
allocated to CCI (generally based on the percentage of membership units in
Charter Holdco held by it), such profits will instead be allocated to the
membership units held (at the time of the closing of the offering) by Vulcan III
and Charter Investment until such time as the amount of profits specially
allocated to each such membership unit is equal to the amount of losses
specially allocated to each such membership unit pursuant to the previous
sentence. These provisions are collectively referred to as the special tax
allocations.
 
     In certain situations, the special tax allocations could result in CCI
having to pay taxes in an amount that is more or less than if Charter Holdco had
allocated profits and losses to CCI in proportion to the number of membership
units it owns. For example, if Vulcan III exchanged some or all of its
membership units with CCI for Class A common stock prior to the date that
special allocations of profits to Vulcan III were sufficient to reverse all
prior special allocations of losses, it is possible that CCI could be required
to pay higher taxes in years following such an exchange than if the special tax
allocations had not been adopted. However, CCI does not anticipate that the
special tax allocations would result in CCI having to pay taxes in an amount
that is materially different on a present value basis than the taxes that would
be payable had the special tax allocations not been adopted, although there is
no assurance that a material difference will not result.
 
REGISTRATION RIGHTS
 
     HOLDERS OF CLASS B COMMON STOCK.  Pursuant to a registration rights
agreement CCI has entered into with the holders of its Class B common stock,
these holders have the right to cause us to register the shares of Class A
common stock issued to them upon conversion of their shares of Class B common
stock into or the exchange of their Charter Holdco membership units for Class A
common stock.
 
     This registration rights agreement provides that each eligible holder is
entitled to unlimited "piggyback" registration rights permitting them to include
their shares of Class A common stock
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<PAGE>   137
 
in registration statements filed by us. These holders may also exercise their
demand rights causing us, subject to certain limitations, to register their
Class A shares, provided that the amount of shares subject to each demand
constitutes at least      % of CCI's outstanding common stock on the date of
such demand or has a market value in excess of $     million. We are obligated
to pay the costs associated with all such registrations.
 
     Immediately following the offering,                shares of Class A common
stock to be issued upon conversion of Class B common stock into or exchange of
Charter Holdco membership units for Class A common stock will have the
registration rights described above.
 
     RIFKIN SELLERS.  Pursuant to the registration rights agreement CCI will
enter into with specified sellers in the Rifkin acquisition, these sellers are
entitled to registration rights with respect to the shares of Class A common
stock issuable upon exchange of the membership units in Charter Holdco which
were issued as part of the purchase price for the Rifkin acquisition.
 
     The registration rights agreement will provide that these Rifkin holders
are entitled to unlimited "piggyback" registration rights. These holders will
also have the right, subject to certain limitations, to make two "demands" that
we register the Class A common shares they own, provided that the amount of
Class A common shares subject to such demand constitutes a minimum market value.
We will most likely pay the costs associated with all such registrations.
 
     FALCON SELLERS.  Pursuant to the registration rights agreement CCI will
enter into with specified sellers in the Falcon acquisition, these sellers are
entitled to registration rights with respect to the shares of Class A common
stock issuable upon exchange of Charter Holdco membership units to be issued to
them as part of the consideration for the Falcon acquisition
 
     These Falcon sellers or their permitted transferees will have "piggyback"
registration rights and, beginning 180 days after the offering, up to four
"demand" registration rights with respect to the Class A common stock issued
upon exchange of the Charter Holdco membership units. The demand registration
rights must be exercised with respect to tranches of Class A common stock worth
at least $40 million at the time of notice of demand or at least $60 million at
the initial public offering price. A majority of the holders of Class A common
stock making a demand may also require us to satisfy our registration
obligations by filing a shelf registration statement. The selling holders of
Class A common stock may also exercise their piggyback rights with respect to
the offering, to the extent this offering occurs concurrently with the closing
of the Falcon acquisition.
 
     BRESNAN SELLERS.  Pursuant to the registration rights agreement CCI will
enter into with specified sellers under the Bresnan acquisition, these sellers
are entitled to registration rights with respect to the shares of Class A common
stock issuable upon exchange of the Charter Holdco membership units to be issued
in the Bresnan acquisition.
 
     The Bresnan sellers collectively will have unlimited "piggyback"
registration rights and, beginning 180 days after this offering, up to four
"demand" registration rights with respect to the Class A common stock issued in
exchange for the membership units in Charter Holdco. The demand registration
rights must be exercised with respect to tranches of Class A common stock worth
at least $40 million at the time of notice of demand or at least $60 million at
the initial public offering price.
 
TRANSFER AGENT AND REGISTRAR
 
     The transfer agent and registrar for our common stock is                ,
New York, New York.
 
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<PAGE>   138
 
                        SHARES ELIGIBLE FOR FUTURE SALE
 
     Prior to the offering, there has been no public market for our shares of
Class A common stock. Upon the completion of the offering, we will have
          shares of Class A common stock issued and outstanding. In addition,
the following shares of Class A common stock will be issuable in the future:
 
     -      shares of Class A common stock will be issuable upon conversion of
Class B common stock issuable upon exchange of Charter Holdco membership units
held by Vulcan III and Charter Investment. These membership units are
exchangeable for shares of Class B common stock at any time following the
closing of the offering on a one-for-one basis. Shares of Class B common stock
are convertible into Class A common stock at any time following the closing of
the offering on a one-for-one basis;
 
     -      shares of Class A common stock will be issuable upon the exchange of
Charter Holdco membership units issued to specified sellers in our pending
acquisitions, assuming the relevant sellers will elect to receive the maximum
number of Charter Holdco membership units that they are entitled to receive;
 
     -      shares of Class A common stock will be issuable upon the exchange of
membership units in Charter Holdco that are received upon the exercise of
options granted under the Charter Holdco option plan and to CCI's chief
executive officer. Upon issuance, these membership units will be immediately
exchanged for shares of Class A common stock, without any further action by the
optionholder. None of the options under the plan will be exercisable before
April 2000; and
 
     -      shares of Class A common stock will be issuable upon conversion of
CCI's outstanding Class B Common Stock on a one-for-one basis.
 
     Of the total number of our shares of Class A common stock issued or
issuable as described above,           shares will be eligible for immediate
resale following the later of their issuance and the completion of this
offering. CCI, all of its directors and executive officers, Charter Investment
and Vulcan III have agreed not to dispose of or hedge any of their Class A
common stock or their Charter Holdco membership units or securities convertible
into or exchangeable for Class A common stock or membership units during the
period from the date of this prospectus continuing through the date 180 days
after the date of this prospectus, except with the prior written consent of
Goldman, Sachs & Co.
 
     In addition, of the total number of shares of Class A common stock issued
or issuable as described above,                shares may only be sold in
compliance with Rule 144 under the Securities Act of 1933, unless registered
under the Securities Act of 1933 pursuant to demand or piggyback registration
rights. Substantially all of the shares of Class A common stock issuable upon
exchange of Charter Holdco membership units and all shares of Class A common
stock issuable upon conversion of shares of our Class B common stock will have
demand and piggyback registration rights attached to them.
 
     The sale of a substantial number of shares of Class A common stock, or the
perception that such sales could occur, could adversely affect prevailing market
prices for the Class A common stock. In addition, any such sale or perception
could make it more difficult for us to sell equity securities or equity-related
securities in the future at a time and price that we deem appropriate.
 
     We anticipate that a registration statement on Form S-8 covering the Class
A common stock that may be issued pursuant to the exercise of options under the
Charter Holdco option plan will be filed promptly after completion of the
offering. The shares of Class A common stock covered by the Form S-8
registration statement generally may be resold in the public market without
restriction or limitation, except in the case of our affiliates who generally
may only resell such shares in accordance with the provisions of Rule 144 of the
Securities Act of 1933, other than the holding period requirement.
 
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<PAGE>   139
 
                    CERTAIN UNITED STATES TAX CONSIDERATIONS
                         FOR NON-UNITED STATES HOLDERS
 
GENERAL
 
     The following is a general discussion of the material United States federal
income and estate tax consequences of the ownership and disposition of our Class
A common stock by a Non-U.S. Holder. As used in this prospectus, the term
"non-U.S. holder" is any person or entity that, for United States federal income
tax purposes, is either a nonresident alien individual, a foreign corporation, a
foreign partnership or a foreign trust, in each case not subject to United
States federal income tax on a net basis in respect of income or gain with
respect to our common stock.
 
     This discussion does not address all aspects of United States federal
income and estate taxes that may be relevant to a particular non-U.S. holder in
light of the holder's particular circumstances. This discussion is not intended
to be applicable in all respects to all categories of non-U.S. holders, some of
whom may be subject to special treatment under United States federal income tax
laws, including "controlled foreign corporations," "passive foreign investment
companies," and "foreign personal holding companies". Moreover, this discussion
does not address United States state or local or foreign tax consequences. This
discussion is based on provisions of the Internal Revenue Code of 1986, as
amended, existing and proposed regulations promulgated under, and administrative
and judicial interpretations of, the Internal Revenue Code in effect on the date
of this prospectus. All of these authorities may change, possibly with
retroactive effect or different interpretations. The following summary is
included in this prospectus for general information. Accordingly, prospective
investors are urged to consult their tax advisors regarding the United States
federal, state, local and non-United States income and other tax consequences of
acquiring, holding and disposing of shares of our common stock.
 
     An individual may be deemed to be a resident alien, as opposed to a
nonresident alien, by virtue of being present in the United States for at least
31 days in the calendar year and for an aggregate of at least 183 days during a
three-year period ending in the current calendar year. In determining whether an
individual is present in the United States for at least 183 days, all of the
days present in the current year, one-third of the days present in the
immediately preceding year and one-sixth of the days present in the second
preceding year are counted. Resident aliens are subject to United States federal
income and estate tax in the same manner as United States citizens and
residents.
 
DIVIDENDS
 
     We do not anticipate paying cash dividends on our capital stock in the
foreseeable future. See "Dividend Policy". In the event, however, that dividends
are paid on shares of our Class A common stock, dividends paid to a non-U.S.
holder of our Class A common stock generally will be subject to United States
withholding tax at a 30% rate, unless an applicable income tax treaty provides
for a lower withholding rate. Non-U.S. holders should consult their tax advisors
regarding their entitlement to benefits under a relevant income tax treaty.
 
     Currently, the applicable United States Treasury regulations presume,
absent actual knowledge to the contrary, that dividends paid to an address in a
foreign country are paid to a resident of such country for purposes of the 30%
withholding tax discussed above. However, recently finalized United States
Treasury regulations provide that in the case of dividends paid after December
31, 2000, United States backup withholding tax at a 31% rate will be imposed on
dividends paid to non-U.S. holders if the certification or documentary evidence
procedures and requirements set forth in such regulations are not satisfied
directly or through an intermediary. Further, in order to claim the benefit of
an applicable income tax treaty rate for dividends paid after December 31, 2000,
a non-U.S. holder must comply with certification requirements set forth
 
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<PAGE>   140
 
in the recently finalized United States Treasury regulations. The final United
States Treasury regulations also provide special rules for dividend payments
made to foreign intermediaries, United States or foreign wholly owned entities
that are disregarded for United States federal income tax purposes and entities
that are treated as fiscally transparent in the United States, the applicable
income tax treaty jurisdiction, or both. Prospective investors should consult
with their own tax advisors concerning the effect, if any, of these tax
regulations and the recent legislation on an investment in the Class A common
stock.
 
     A non-U.S. holder of Class A common stock that is eligible for a reduced
rate of United States withholding tax pursuant to an income tax treaty may
obtain a refund of any excess amounts withheld by filing an appropriate claim
for a refund with the Internal Revenue Service.
 
     Dividends paid to a non-U.S. holder are taxed generally on a net income
basis at regular graduated rates where such dividends are either:
 
          (1) effectively connected with the conduct of a trade or business of
     such holder in the United States or
 
          (2) attributable to a permanent establishment of such holder in the
     United States.
 
The 30% withholding tax is not applicable to the payment of dividends if the
Non-U.S. Holder files Form 4224 or any successor form with the payor, or, in the
case of dividends paid after December 31, 2000, such holder provides its United
States taxpayer identification number to the payor. In the case of a non-U.S.
holder that is a corporation, such income may also be subject to an additional
"branch profits tax" at a 30% rate or such lower rate as may be specified by an
applicable income tax treaty.
 
GAIN ON DISPOSITION OF CLASS A COMMON STOCK
 
     A non-U.S. holder generally will not have to comply with United States
federal income or withholding tax requirements in respect of gain recognized on
a disposition of Class A common stock unless:
 
          (1) the gain is effectively connected with the conduct of a trade or
     business of the non-U.S. holder within the United States or of a
     partnership, trust or estate in which the non-U.S. holder is a partner or
     beneficiary within the United States,
 
          (2) the gain is attributable to a permanent establishment of the
     non-U.S. holder within the United States,
 
          (3) the non-U.S. holder is an individual who holds the Class A common
     stock as a capital asset within the meaning of Section 1221 of the Internal
     Revenue Code, is present in the United States for 183 or more days in the
     taxable year of the disposition and meets certain other tax law
     requirements,
 
          (4) the non-U.S. holder is a United States expatriate required to pay
     tax pursuant to the provisions of United States tax law, or
 
          (5) We are or have been a "United States real property holding
     corporation" for federal income tax purposes at any time during the shorter
     of the five-year period preceding such disposition or the period that the
     non-U.S. holder holds the common stock.
 
     Generally, a corporation is a United States real property holding
corporation if the fair market value of its United States real property
interests equals or exceeds 50% of the sum of the fair market value of its
worldwide real property interests plus its other assets used or held for use in
a trade or business.
 
     We believe that we are not, have not been and do not anticipate becoming, a
United States real property holding corporation for United States federal income
tax purposes. However, even if we were to become a United States real property
holding corporation, any gain realized by a non-U.S. holder still would not be
subject to United States federal income tax if our shares are regularly traded
on an established securities market and the non-U.S. holder did not own,
directly or indirectly, at any time during the five-year period ending on the
date of sale or other
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<PAGE>   141
 
disposition, more than 5% of our Class A common stock. If, however, our stock is
not so treated, on a sale or disposition by a non-U.S. holder of our Class A
common stock, the transferee of such stock will be required to withhold 10% of
the proceeds unless we certify that either we are not and have not been a United
States real property holding company or another exemption from withholding
applies.
 
     A non-U.S. holder who is an individual and meets the requirements of clause
(1), (2) or (4) above will be required to pay tax on the net gain derived from a
sale of Class A common stock at regular graduated United States federal income
tax rates. Further, a non-U.S. holder who is an individual and who meets the
requirements of clause (3) above generally will be subject to a flat 30% tax on
the gain derived from a sale. Thus, individual non-U.S. holders who have spent
or expect to spend a short period of time in the United States should consult
their tax advisors prior to the sale of Class A common stock to determine the
United States federal income tax consequences of the sale. A non-U.S. holder who
is a corporation and who meets the requirements of clause (1) or (2) above
generally will be required to pay tax on its net gain at regular graduated
United States federal income tax rates. Such non-U.S. holder may also have to
pay a branch profits tax.
 
FEDERAL ESTATE TAX
 
     For United States federal estate tax purposes, an individual's gross estate
will include the Class A common stock owned, or treated as owned, by an
individual. Generally, this will be the case regardless of whether such
individual was a United States citizen or a United States resident. This general
rule of inclusion may be limited by an applicable estate tax or other treaty.
 
INFORMATION REPORTING AND BACKUP WITHHOLDING TAX
 
     Under United States Treasury regulations, we must report annually to the
Internal Revenue Service and to each non-U.S. holder the amount of dividends
paid to such holder and the tax withheld with respect to such dividends. These
information reporting requirements apply regardless of whether withholding is
required. Copies of the information returns reporting such dividends and
withholding may also be made available to the tax authorities in the country in
which the non-U.S. holder is a resident under the provisions of an applicable
income tax treaty or agreement.
 
     Currently, the 31% United States backup withholding tax generally will not
apply:
 
     (1) to dividends which are paid to non-U.S. holders and are taxed at the
         regular 30% withholding tax rate as discussed above, or
 
     (2) before January 1, 2001, to dividends paid to a non-U.S. holder at an
         address outside of the United States unless the payor has actual
         knowledge that the payee is a U.S. holder.
 
     Backup withholding and information reporting generally will apply to
dividends paid to addresses inside the United States on shares of Class A common
stock to beneficial owners that are not "exempt recipients" and that fail to
provide identifying information in the manner required.
 
     The recently finalized United States Treasury regulations provide that in
the case of dividends paid after December 31, 2000, a non-U.S. holder generally
would be subject to backup withholding tax at the rate of 31% unless
 
     (1) certification procedures, or
 
     (2) documentary evidence procedures, in the case of payments made outside
         the United States with respect to an offshore account
 
are satisfied. These regulations generally presume a non-U.S. holder is subject
to backup withholding at the rate of 31% and information reporting requirements
unless we receive
 
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certification of the holder's non-United States status. Depending on the
circumstances, this certification will need to be provided either:
 
     (1) directly by the non-U.S. holder,
 
     (2) in the case of a non-U.S. holder that is treated as a partnership or
         other fiscally transparent entity, by the partners, shareholders or
         other beneficiaries of such entity, or
 
     (3) by qualified financial institutions or other qualified entities on
         behalf of the non-U.S. holder.
 
     Information reporting and backup withholding at the rate of 31% generally
will not apply to the payment of the proceeds of the disposition of Class A
common stock by a holder to or through the United States office of a broker or
through a non-United States branch of a United States broker unless the holder
either certifies its status as a non-U.S. holder under penalties of perjury or
otherwise establishes an exemption. The payment of the proceeds of the
disposition by a non-U.S. holder of Class A common stock to or through a
non-United States office of a non-United States broker will not be subject to
backup withholding or information reporting unless the non-United States broker
has a connection to the United States as specified by United States federal tax
law.
 
     In the case of the payment of proceeds from the disposition of Class A
common stock effected by a foreign office of a broker that is a United States
person or a "United States related person," existing regulations require
information reporting on the payment unless:
 
     (1)(A) the broker receives a statement from the owner, signed under penalty
            of perjury, certifying its non-United States status or (B) the
            broker has documentary evidence in its files as to the non-U.S.
            holder's foreign status and the broker has no actual knowledge to
            the contrary, and other United States federal tax law conditions are
            met or
 
     (2)     the beneficial owner otherwise establishes an exemption.
 
     For this purpose, a "U.S. related person" is either:
 
          (1) a "controlled foreign corporation" for United States federal
              income tax purposes or
 
          (2) a foreign person 50% or more of whose gross income from all
              sources for the three-year period ending with the close of its
              taxable year preceding the payment is derived from activities that
              are effectively connected with the conduct of a United States
              trade or business.
 
     After December 31, 2000, the regulations under the Internal Revenue Code
will impose information reporting and backup withholding on payments of the
gross proceeds from the sale or redemption of Class A common stock that is
effected through foreign offices of brokers having any of a broader class of
specified connections with the United States. Such information reporting and
backup withholding may be avoided, however, if the applicable Internal Revenue
Service certification requirements are complied with. Prospective investors
should consult with their own tax advisors regarding the regulations under the
Internal Revenue Code and in particular with respect to whether the use of a
particular broker would subject the investor to these rules.
 
     Any amounts withheld under the backup withholding rules from a payment to a
non-U.S. holder will be either refunded or credited against the holder's United
States federal tax liability, provided sufficient information is furnished to
the Internal Revenue Service.
 
                                       139

<PAGE>   143
 

                                 LEGAL MATTERS
 
     The validity of the shares of Class A common stock offered in this
prospectus will be passed upon for CCI by Paul, Hastings, Janofsky & Walker LLP,
New York, New York. Certain legal matters in connection with the Class A common
stock offered in this prospectus will be passed upon for the underwriters by
Debevoise & Plimpton, New York, New York.
 

                                    EXPERTS
 
     The financial statements of Charter Communications, Inc., Charter
Communications Holdings Company, LLC and subsidiaries, CCA Group, CharterComm
Holdings, L.P. and subsidiaries, the Greater Media Cablevision Systems, the
Sonic Communications Cable Television Systems and Long Beach Acquisition Corp.,
included in this offering, 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 herein in reliance upon the authority of said firm as experts in giving
said report.
 
     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
Company, L.L.C. as of December 31, 1998 (not presented separately herein) and
1997, and for the periods from April 23, 1998 to December 23, 1998 and from
January 1, 1998 to April 22, 1998, and for each of the years in the two-year
period ended December 31, 1997, 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, and the financial
statements of Taconic CATV (a component of Taconic Technology Corp.) as of
December 31, 1997 and 1998 and for each of the years then ended, 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 systems, the
financial statements of Indiana Cable Associates, LTD., the 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., included 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
herein 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 prospectus have been audited by
PricewaterhouseCoopers LLP, independent accountants. The entities and periods
covered by these
                                       140

<PAGE>   144
 
audits are indicated in their reports. Such financial statements have been so
included in reliance on the reports of PricewaterhouseCoopers LLP, given on the
authority of such 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.
 
                                       141

<PAGE>   145
 
                  INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
 

<TABLE>
<CAPTION>
                                                              PAGE
                                                              -----
<S>                                                           <C>
CHARTER COMMUNICATIONS, INC.
Report of Independent Public Accountants....................    F-8
Balance Sheet as of July 22, 1999...........................    F-9
Notes to Financial Statement................................   F-10
CHARTER COMMUNICATIONS HOLDING COMPANY, LLC AND SUBSIDIARIES
Report of Independent Public Accountants....................   F-11
Consolidated Balance Sheet as of December 31, 1998..........   F-12
Consolidated Statement of Operations for the period from
  December 24, 1998 through December 31, 1998...............   F-13
Consolidated Statement of Cash Flows for the period from
  December 24, 1998 through December 31, 1998...............   F-14
Notes to Consolidated Financial Statements..................   F-15
Report of Independent Public Accountants....................   F-28
Consolidated Balance Sheet as of December 31, 1997..........   F-29
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-30
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-31
Consolidated Statement 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-32
Notes to Consolidated Financial Statements..................   F-33
 
MARCUS CABLE COMPANY, L.L.C. AND SUBSIDIARIES:
  Independent Auditors' Report..............................   F-42
  Consolidated Balance Sheet as of December 31, 1997........   F-43
  Consolidated Statements of Operations for the Periods From
    April 23 to December 23, 1998 and January 1 to April 22,
    1998 and for the Years in the Two-Year Period Ended
    December 31, 1997.......................................   F-44
  Consolidated Statements of Partners' Capital (Deficit) for
    the Period From January 1, 1998 to April 22, 1998 and
    for Each of the Years in the Two-Year Period Ended
    December 31, 1997.......................................   F-45
  Consolidated Statement of Members' Equity from April 23,
    1998 to December 23, 1998...............................   F-46
  Consolidated Statements of Cash Flows for the Period from
    April 23, 1998 to December 23, 1998, From January 1,
    1998 to April 22, 1998 and for the Years Ended December
    31, 1997 and 1996.......................................   F-47
  Notes to Consolidated Financial Statements................   F-48
 
CCA GROUP:
  Report of Independent Public Accountants..................   F-60
  Combined Balance Sheet as of December 31, 1997............   F-61
  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-62
  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-63
  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-64
  Notes to Combined Financial Statements....................   F-65
 
CHARTERCOMM HOLDINGS, L.P.:
  Report of Independent Public Accountants..................   F-79
  Consolidated Balance Sheet as of December 31, 1997........   F-80
  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-81
  Consolidated Statements of Partner's Capital for the
    Period From January 1, 1998 Through December 23, 1998
    and for the Years Ended December 31, 1997 and 1996......   F-82
  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-83
  Notes to Consolidated Financial Statements................   F-84
</TABLE>

 
                                       F-1

<PAGE>   146
 

<TABLE>
<CAPTION>
                                                              PAGE
                                                              -----
<S>                                                           <C>
GREATER MEDIA CABLEVISION SYSTEMS:
  Report of Independent Public Accountants..................   F-97
  Combined Balance Sheets as of March 31, 1999 (unaudited),
    September 30, 1998 and 1997.............................   F-98
  Combined Statements of Income for the Six Months Ended
    March 31, 1999 and 1998 (unaudited) and for the Years
    Ended September 30, 1998, 1997 and 1996.................   F-99
  Combined Statements of Changes in Net Assets for the Six
    Months Ended March 31, 1999 (unaudited) and for the
    Years Ended September 30, 1996, 1997 and 1998...........  F-100
  Combined Statements of Cash Flows for the Six Months Ended
    March 31, 1999 and 1998 (unaudited) and for the Years
    Ended September 30, 1998, 1997 and 1996.................  F-101
  Notes to Combined Financial Statements....................  F-102
 
RENAISSANCE MEDIA GROUP LLC:
  Report of Independent Auditors............................  F-108
  Consolidated Balance Sheet as of December 31, 1998........  F-109
  Consolidated Statement of Operations for the Year Ended
    December 31, 1998.......................................  F-110
  Consolidated Statement of Changes in Members' Equity for
    the Year Ended December 31, 1998........................  F-111
  Consolidated Statement of Cash Flows for the Year Ended
    December 31, 1998.......................................  F-112
  Notes to Consolidated Financial Statements for the Year
    Ended December 31, 1998.................................  F-113
 
PICAYUNE MS, LAFOURCHE, LA, ST. TAMMANY, LA, ST. LANDRY, LA,
  POINTE COUPEE, LA AND JACKSON, TN CABLE TELEVISION
  SYSTEMS:
  Report of Independent Auditors............................  F-122
  Combined Balance Sheet as of April 8, 1998................  F-123
  Combined Statement of Operations for the Period from
    January 1, 1998 through April 8, 1998...................  F-124
  Combined Statement of Changes in Net Assets for the Period
    from January 1, 1998 through April 8, 1998..............  F-125
  Combined Statement of Cash Flows for the Period from
    January 1, 1998 through April 8, 1998...................  F-126
  Notes to Combined Financial Statements....................  F-127
  Report of Independent Auditors............................  F-134
  Combined Balance Sheets as of December 31, 1996 and
    1997....................................................  F-135
  Combined Statements of Operations for the Years Ended
    December 31, 1995, 1996 and 1997........................  F-136
  Combined Statements of Changes in Net Assets for the Years
    Ended December 31, 1996 and 1997........................  F-137
  Combined Statements of Cash Flows for the Years Ended
    1995, 1996 and 1997.....................................  F-138
  Notes to Combined Financial Statements....................  F-139
 
HELICON PARTNERS I, L.P. AND AFFILIATES:
  Independent Auditors' Report..............................  F-146
  Combined Balance Sheets as of December 31, 1997 and
    1998....................................................  F-147
  Combined Statements of Operations for Each of the Years in
    the Three-Year Period Ended December 31, 1998...........  F-148
  Combined Statements of Changes in Partners' Deficit for
    Each of the Years in the Three-Year Period Ended
    December 31, 1998.......................................  F-149
  Combined Statements of Cash Flows for Each of the Years in
    the Three-Year Period Ended December 31, 1998...........  F-150
  Notes to Combined Financial Statements....................  F-151
 
INTERMEDIA CABLE SYSTEMS (COMPRISED OF COMPONENTS OF
  INTERMEDIA PARTNERS AND INTERMEDIA CAPITAL PARTNERS IV,
  L.P.):
  Report of Independent Accountants.........................  F-163
  Combined Balance Sheets at December 31, 1998 and 1997.....  F-164
  Combined Statements of Operations for the Years Ended
    December 31, 1998 and 1997..............................  F-165
  Combined Statement of Changes in Equity for the Years
    Ended December 31, 1998 and 1997........................  F-166
  Combined Statements of Cash Flows for the Years Ended
    December 31, 1998 and 1997..............................  F-167
  Notes to Combined Financial Statements....................  F-168
</TABLE>

 
                                       F-2

<PAGE>   147
 

<TABLE>
<CAPTION>
                                                              PAGE
                                                              -----
<S>                                                           <C>
RIFKIN CABLE INCOME PARTNERS L.P.:
  Report of Independent Accountants.........................  F-180
  Balance Sheet at December 31, 1997 and 1998...............  F-181
  Statement of Operations for Each of the Three Years in the
    Period Ended December 31, 1998..........................  F-182
  Statement of Partners' Equity (Deficit) for Each of the
    Three Years in the Period Ended December 31, 1998.......  F-183
  Statement of Cash Flows for Each of the Three Years in the
    Period Ended December 31, 1998..........................  F-184
  Notes to Financial Statements.............................  F-185
 
RIFKIN ACQUISITION PARTNERS, L.L.L.P.:
  Report of Independent Accountants.........................  F-189
  Consolidated Balance Sheet at December 31, 1998 and
    1997....................................................  F-190
  Consolidated Statement of Operations for Each of the Three
    Years in the Period Ended December 31, 1998.............  F-191
  Consolidated Statement of Cash Flows for Each of the Three
    Years in the Period Ended December 31, 1998.............  F-192
  Consolidated Statement of Partners' Capital (Deficit) for
    Each of the Three Years in the Period Ended December 31,
    1998....................................................  F-193
  Notes to Consolidated Financial Statements................  F-194
 
INDIANA CABLE ASSOCIATES, LTD.:
  Report of Independent Auditors............................  F-208
  Balance Sheet as December 31, 1997 and 1998...............  F-209
  Statement of Operations for the Years Ended December 31,
    1996, 1997 and 1998.....................................  F-210
  Statement of Partners' Deficit for the Years Ended
    December 31, 1996, 1997 and 1998........................  F-211
  Statement of Cash Flows for the Years Ended December 31,
    1996, 1997 and 1998.....................................  F-212
  Notes to Financial Statements.............................  F-213
 
R/N SOUTH FLORIDA CABLE MANAGEMENT LIMITED PARTNERSHIP:
  Report of Independent Auditors............................  F-217
  Consolidated Balance Sheet as of December 31, 1997 and
    1998....................................................  F-218
  Consolidated Statement of Operations for the Years Ended
    December 31, 1996, 1997 and 1998........................  F-219
  Consolidated Statement of Partners' Equity (Deficit) for
    the Years Ended December 31, 1996, 1997 and 1998........  F-220
  Consolidated Statement of Cash Flows for the Years Ended
    December 31, 1996, 1997 and 1998........................  F-221
  Notes to Consolidated Financial Statements................  F-222
 
SONIC COMMUNICATIONS CABLE TELEVISION SYSTEMS:
  Report of Independent Public Accountants..................  F-226
  Statement of Operations and Changes in Net Assets for the
    Period from April 1, 1998, through May 20, 1998.........  F-227
  Statement of Cash Flows for the Period from April 1, 1998,
    through May 20, 1998....................................  F-228
  Notes to Financial Statements.............................  F-229
 
LONG BEACH ACQUISITION CORP.:
  Report of Independent Public Accountants..................  F-232
  Statement of Operations for the Period from April 1, 1997,
    through May 23, 1997....................................  F-233
  Statement of Stockholder's Equity for the Period from
    April 1, 1997, through May 23, 1997.....................  F-234
  Statement of Cash Flows for the Period from April 1, 1997,
    through May 23, 1997....................................  F-235
  Notes to Financial Statements.............................  F-236
CHARTER COMMUNICATIONS HOLDING COMPANY, LLC AND SUBSIDIARIES
Condensed Consolidated Balance Sheets as of March 31, 1999
  (unaudited) and December 31, 1998.........................  F-240
Condensed Consolidated Statements of Operations for the
  three months ended March 31, 1999 and 1998 (unaudited)....  F-241
Condensed Consolidated Statements of Cash Flows for the
  three months ended March 31, 1999 and 1998 (unaudited)....  F-242
Notes to Condensed Consolidated Financial Statements........  F-243
</TABLE>

 
                                       F-3

<PAGE>   148
 

<TABLE>
<CAPTION>
                                                              PAGE
                                                              -----
<S>                                                           <C>
RENAISSANCE MEDIA GROUP LLC:
  Consolidated Balance Sheets as of March 31, 1999
    (unaudited) and December 31, 1998.......................  F-248
  Consolidated Statement of Operations for the Three Months
    Ended March 31, 1999 (unaudited)........................  F-249
  Consolidated Statement of Changes in Members' Equity for
    the Three Months Ended March 31, 1999 (unaudited).......  F-250
  Consolidated Statement of Cash Flows for the Three Months
    Ended March 31, 1999 (unaudited)........................  F-251
  Notes to Consolidated Financial Statements................  F-252
 
HELICON PARTNERS I, L.P. AND AFFILIATES:
  Unaudited Condensed Combined Balance Sheet as of March 31,
    1999....................................................  F-255
  Unaudited Condensed Combined Statements of Operations for
    the Three-Month Periods Ended March 31, 1998 and 1999...  F-256
  Unaudited Condensed Combined Statements of Changes in
    Partners' Deficit for the Three-Month Period Ended March
    31, 1999................................................  F-257
  Unaudited Condensed Combined Statements of Cash Flows for
    the Three-Month Periods Ended March 31, 1998 and 1999...  F-258
  Notes to Unaudited Condensed Combined Financial

    Statements..............................................  F-259
 
INTERMEDIA CABLE SYSTEMS (COMPRISED OF COMPONENTS OF
  INTERMEDIA PARTNERS AND INTERMEDIA CAPITAL PARTNERS IV,
  L.P.):
  Combined Balance Sheets as of March 31, 1999 (unaudited)
    and December 31, 1998...................................  F-261
  Combined Statements of Operations for the Three Months
    Ended March 31, 1999 and 1998 (unaudited)...............  F-262
  Combined Statement of Changes in Equity for the Three
    Months Ended March 31, 1999 (unaudited) and for the Year
    Ended December 31, 1998.................................  F-263
  Combined Statements of Cash Flows for the Three Months
    Ended March 31, 1999 and 1998 (unaudited)...............  F-264
  Notes to Condensed Combined Financial Statements
    (unaudited).............................................  F-265
 
RIFKIN CABLE INCOME PARTNERS L.P.:
  Balance Sheet at December 31, 1998 and March 31, 1999
    (unaudited).............................................  F-271
  Statement of Operations for the Quarters Ended March 31,
    1998 and 1999 (unaudited)...............................  F-272
  Statement of Partners' Equity for the Quarters Ended March
    31, 1998 and 1999 (unaudited)...........................  F-273
  Statement of Cash Flows for the Quarters Ended March 31,
    1998 and 1999 (unaudited)...............................  F-274
  Notes to Financial Statements.............................  F-275
 
RIFKIN ACQUISITION PARTNERS, L.L.L.P.:
  Consolidated Balance Sheet at March 31, 1999 (unaudited)
    and December 31, 1998...................................  F-277
  Consolidated Statement Of Operations for the Three Months
    Ended March 31, 1999 and 1998 (unaudited)...............  F-278
  Consolidated Statement of Cash Flow for the Three Months
    Ended March 31, 1999 and 1998 (unaudited)...............  F-279
  Consolidated Statements of Partners' Capital (Deficit) for
    the Three Months Ended March 31, 1999 and 1998
    (unaudited).............................................  F-280
  Notes to Consolidated Financial Statements................  F-281
 
INDIANA CABLE ASSOCIATES, LTD.:
  Balance Sheet as of March 31, 1999 (unaudited)............  F-283
  Statement of Operations for the Three Months Ended March
    31, 1998 and 1999 (unaudited)...........................  F-284
  Statement of Cash Flows for the Three Months Ended March
    31, 1998 and 1999 (unaudited)...........................  F-285
  Notes to Financial Statement (unaudited)..................  F-286
 
R/N SOUTH FLORIDA CABLE MANAGEMENT LIMITED PARTNERSHIP
  Consolidated Balance Sheet as of March 31, 1999
    (unaudited).............................................  F-287
  Consolidated Statement of Operations for the Three Months
    Ended March 31, 1998 and 1999 (unaudited)...............  F-288
  Consolidated Statement of Cash Flows for the Three Months
    Ended March 31, 1998 and 1999 (unaudited)...............  F-289
  Notes to Consolidated Financial Statement (unaudited).....  F-290
</TABLE>

 
                                       F-4

<PAGE>   149
 

<TABLE>
<CAPTION>
                                                              PAGE
                                                              -----
<S>                                                           <C>
AVALON CABLE LLC AND SUBSIDIARIES
 
 Report of Independent Accountants.........................  F-291
  Consolidated Balance Sheet as of December 31, 1998 and
    1997....................................................  F-292
  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-293
  Consolidated Statements of Changes in Members' Interest
    from September 4, 1997 (inception) through December 31,
    1998....................................................  F-294
  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-295
  Notes to the Consolidated Financial Statements............  F-296
 
AVALON CABLE LLC AND SUBSIDIARIES
  Consolidated Balance Sheet as of March 31, 1999
    (unaudited).............................................  F-310
  Consolidated Statement of Operations for the quarter ended
    March 31, 1999 (unaudited)..............................  F-311
  Consolidated Statement of Changes in Members' Interest for
    the quarter ended March 31, 1999 (unaudited)............  F-312
  Consolidated Statement of Cash Flows for the quarter ended
    March 31, 1999 (unaudited)..............................  F-313
  Notes to Consolidated Financial Statements (unaudited)....  F-314
 
AVALON CABLE OF MICHIGAN HOLDINGS, INC. AND SUBSIDIARIES
  Report of Independent Accountants.........................  F-319
  Consolidated Balance Sheets as of December 31, 1998 and
    1997....................................................  F-320
  Consolidated Statement of Operations and Changes in
    Accumulated Deficit for the year ended December 31, 1998
    and for the period from September 4, 1997 (inception)
    through December 31, 1998...............................  F-321
  Consolidated Statement of Shareholder's Equity for the
    period from September 4, 1997 (inception) through
    December 31, 1998.......................................  F-322
  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-323
  Notes to the Consolidated Financial Statements............  F-324
 
AVALON CABLE OF MICHIGAN HOLDINGS, INC. AND SUBSIDIARIES
  Consolidated Balance Sheet as of March 31, 1999
    (unaudited).............................................  F-338
  Consolidated Statement of Operations for the quarter ended
    March 31, 1999 (unaudited)..............................  F-339
  Consolidated Statement of Changes in Shareholders' Equity
    for the quarter ended March 31, 1999 (unaudited)........  F-340
  Consolidated Statement of Cash Flows for the quarter ended
    March 31, 1999 (unaudited)..............................  F-341
  Notes to Consolidated Financial Statements (unaudited)....  F-342
 
CABLE MICHIGAN, INC. AND SUBSIDIARIES
  Report of Independent Accountants.........................  F-347
  Consolidated Balance Sheets as of December 31, 1997 and
    November 5, 1998........................................  F-348
  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-349
  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-350
  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-351
  Notes to Consolidated Financial Statements................  F-352
 
AMRAC CLEAR VIEW, A LIMITED PARTNERSHIP
  Report of Independent Accountants.........................  F-367
  Balance Sheet as of May 28, 1998..........................  F-368
  Statement of Operations for the period from January 1,
    1998 through May 28, 1998...............................  F-369
  Statement of Changes in Partners' Equity (Deficit) for the
    period from January 1, 1998 through May 28, 1998........  F-370
  Statement of Cash Flows for the period from January 1,
    1998 through May 28, 1998...............................  F-371
  Notes to Financial Statements.............................  F-372
</TABLE>

 
                                       F-5

<PAGE>   150
 

<TABLE>
<CAPTION>
                                                              PAGE
                                                              -----
<S>                                                           <C>
AMRAC CLEAR VIEW, A LIMITED PARTNERSHIP
  Independent Auditors' Report..............................  F-376
  Balance Sheets as of December 31, 1996 and 1997...........  F-377
  Statements of Net Earnings for the years ended December
    31, 1995, 1996 and 1997.................................  F-378
  Statements of Changes in Partners' Equity (Deficit) for
    the years ended December 31, 1995, 1996 and 1997........  F-379
  Statements of Cash Flows for the years ended December 31,
    1995, 1996 and 1997.....................................  F-380
  Notes to Financial Statements.............................  F-381
 
PEGASUS CABLE TELEVISION, INC.
  Report of Independent Accountants.........................  F-385
  Combined Balance Sheets at December 31, 1996 and 1997 and
    June 30, 1998...........................................  F-386
  Combined Statement of Operations for the years ended
    December 31, 1995, 1996 and 1997 and the six months
    ended June 30, 1998.....................................  F-387
  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-388
  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-389
  Notes to Combined Financial Statements....................  F-390
 
TACONIC TECHNOLOGY CORP.
  Independent Auditors' Report..............................  F-396
  Balance Sheets at December 31, 1997 and 1998 and March 31,
    1999 (unaudited)........................................  F-397
  Statements of Operations and Component Equity for the two
    years ended December 31, 1997 and 1998 and three months
    ended March 31, 1998 and 1999 (unaudited)...............  F-398
  Statements of Cash Flows for the years ended December 31,
    1997 and 1998 and three months ended March 31, 1998 and
    1999 (unaudited)........................................  F-399
  Notes to Financial Statements.............................  F-400
 
FALCON COMMUNICATIONS, L.P.
Report of Independent Auditors..............................  F-405
Consolidated Balance Sheets at December 31, 1997 and 1998...  F-406
Consolidated Statements of Operations for each of the three
  years in the period ended December 31, 1998...............  F-407
Consolidated Statements of Partners' Deficit for each of the
  three years in the period ended December 31, 1998.........  F-408
Consolidated Statements of Cash Flows for each of the three
  years in the period ended December 31, 1998...............  F-409
Notes to Consolidated Financial Statements..................  F-410
Condensed Consolidated Balance Sheets at December 31, 1998
  and March 31, 1999 (unaudited)............................  F-431
Condensed Consolidated Statements of Operations for the
  three months ended March 31, 1998 and 1999 (unaudited)....  F-432
Condensed Consolidated Statements of Cash Flows for the
  three months ended March 31, 1998 and 1999 (unaudited)....  F-433
Notes to Condensed Consolidated Financial Statements........  F-434
 
TCI FALCON SYSTEMS
Independent Auditors' Report................................  F-437
Combined Balance Sheets at September 30, 1998 and December
  31, 1997..................................................  F-438
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-439
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-440
Notes to the 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-441
</TABLE>

 
                                       F-6

<PAGE>   151
 

<TABLE>
<CAPTION>
                                                              PAGE
                                                              -----
<S>                                                           <C>
FANCH CABLE SYSTEM (comprised of components of TWFanch-one
  Co. and TWFanch-two Co.)
Report of Independent Auditors..............................  F-448
Combined Balance Sheets as of December 31, 1998 and 1997....  F-449
Combined Statements of Operations for the years ended
  December 31, 1998 and 1997................................  F-450
Combined Statements of Net Assets for the years ended
  December 31, 1998 and 1997................................  F-451
Combined Statements of Cash Flows for the years ended
  December 31, 1998 and 1997................................  F-452
Notes to Combined Financial Statements......................  F-453
Combined Balance Sheets as of March 31, 1998 (unaudited) and
  December 31, 1998.........................................  F-458
Combined Statements of Operations for the three months ended
  March 31, 1999 and 1998 (unaudited).......................  F-459
Combined Statements of Net Assets for the three months ended
  March 31, 1999 and 1998 (unaudited).......................  F-460
Combined Statements of Cash Flows for the three months ended
  March 31, 1999 and 1998 (unaudited).......................  F-461
Notes to Combined Financial Statements at March 31, 1999
  (unaudited)...............................................  F-462
 
BRESNAN COMMUNICATIONS GROUP LLC
Consolidated Balance Sheets at December 31, 1998 and March
  31, 1999 (unaudited)......................................  F-465
Consolidated Statements of Operations and Member's Equity
  (Deficit) for the three months ended March 31, 1998 and
  1999 (unaudited)..........................................  F-466
Consolidated Statements of Cash Flows for the three months
  ended March 31, 1998 and 1999 (unaudited).................  F-467
Notes to Consolidated Financial Statements at March 31, 1999
  (unaudited)...............................................  F-468
 
BRESNAN COMMUNICATIONS GROUP SYSTEMS
Independent Auditors' Report................................  F-474
Combined Balance Sheets at December 31, 1997 and 1998.......  F-475
Combined Statements of Operations and Parents' Investment
  for the years ended December 31, 1996, 1997 and 1998......  F-476
Combined Statements of Cash Flows for the years ended
  December 31, 1996, 1997 and 1998..........................  F-477
Notes to Combined Financial Statements at December 31, 1996,
  1997 and 1998.............................................  F-478
</TABLE>

 
                                       F-7

<PAGE>   152
 

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
 
To Charter Communications, Inc.:
 
     We have audited the accompanying balance sheet of Charter Communications,
Inc. as of July 22, 1999. This financial statement is the responsibility of the
Company's management. Our responsibility is to express an opinion on this
financial statement 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 balance sheet referred to above presents fairly, in all
material respects, the financial position of Charter Communications, Inc. as of
July 22, 1999, in conformity with generally accepted accounting principles.
 
/s/ ARTHUR ANDERSEN LLP
 
St. Louis, Missouri,
  July 22, 1999

 
                                       F-8

<PAGE>   153
 
                          CHARTER COMMUNICATIONS, INC.
 
                                 BALANCE SHEET
 

<TABLE>
<CAPTION>
                                                              JULY 22, 1999
                                                              -------------
<S>                                                           <C>
                           ASSETS
CASH........................................................      $100
                                                                  ====
 
                    STOCKHOLDER'S EQUITY
COMMON STOCK -- $.001 par value, 100 shares authorized,
  issued and outstanding....................................      $ --
ADDITIONAL PAID-IN CAPITAL..................................       100
                                                                  ----
          Total stockholder's equity........................      $100
                                                                  ====
</TABLE>

 
       The accompanying notes are an integral part of the balance sheet.
                                       F-9

<PAGE>   154
 
                          CHARTER COMMUNICATIONS, INC.
 
                             NOTES TO BALANCE SHEET

                                 JULY 22, 1999
 
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
 
ORGANIZATION AND BASIS OF PRESENTATION
 
     On July 22, 1999, Charter Investment, Inc. (Charter Investment), a company
controlled by Paul G. Allen, formed a wholly owned subsidiary, Charter
Communications, Inc. (CCI or the Company), a Delaware corporation with an
initial investment of $100. The Company has no operations or cash flows other
than the initial investment made by Charter Investment. Accordingly, statements
of operations and cash flows are not presented.
 
     In July 1999, the Company plans to file a registration statement with the
SEC for the issuance of common stock to the public (IPO). CCI will be a holding
company whose sole asset will be a controlling equity interest in Charter
Communications Holding Company, LLC (Charter Holdco), a direct and indirect
owner of cable systems. CCI will purchase the controlling equity interest in
Charter Holdco using the net proceeds from the IPO.
 
                                      F-10

<PAGE>   155
 

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
 
To Charter Communications Holding Company, LLC:
 
     We have audited the accompanying consolidated balance sheet of Charter
Communications Holding Company, 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. We did not audit the
balance sheet of Marcus Cable Company, L.L.C. and subsidiaries as of December
31, 1998, that is included in the consolidated balance sheet of Charter
Communications Holding Company, LLC and subsidiaries and reflects total assets
of 40% of the consolidated totals. This balance sheet was audited by other
auditors whose report has been furnished to us, and our opinion, insofar as it
relates to the amounts included for Marcus Cable Company, L.L.C. and
subsidiaries, is based solely on the report of the other auditors. 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 and the report of other auditors provide a reasonable
basis for our opinion.
 
     In our opinion, based on our audit and the report of other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of Charter Communications Holding Company, 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 12,
  as to which the date is April 19, 1999)
 
                                      F-11

<PAGE>   156
 
          CHARTER COMMUNICATIONS HOLDING COMPANY, LLC AND SUBSIDIARIES
 
                           CONSOLIDATED BALANCE SHEET
                             (DOLLARS IN THOUSANDS)
 

<TABLE>
<CAPTION>
                                                              DECEMBER 31, 1998
                                                              -----------------
<S>                                                           <C>
                                    ASSETS
CURRENT ASSETS:
  Cash and cash equivalents.................................     $   10,386
  Accounts receivable, net of allowance for doubtful
     accounts of $3,528.....................................         31,163
  Prepaid expenses and other................................          8,613
                                                                 ----------
     Total current assets...................................         50,162
                                                                 ----------
INVESTMENT IN CABLE TELEVISION PROPERTIES:
  Property, plant and equipment.............................      1,473,727
  Franchises, net of accumulated amortization of $112,122...      5,705,420
                                                                 ----------
                                                                  7,179,147
                                                                 ----------
OTHER ASSETS................................................          6,347
                                                                 ----------
                                                                 $7,235,656
                                                                 ==========
 
                        LIABILITIES AND MEMBERS' EQUITY
CURRENT LIABILITIES:
  Current maturities of long-term debt......................     $   87,950
  Accounts payable and accrued expenses.....................        199,831
  Payable to related party..................................         20,000
  Payables to manager of cable television systems -- related
     party..................................................          7,675
                                                                 ----------
     Total current liabilities..............................        315,456
                                                                 ----------
LONG-TERM DEBT..............................................      3,435,251
                                                                 ----------
DEFERRED MANAGEMENT FEES -- RELATED PARTY...................         15,561
                                                                 ----------
OTHER LONG-TERM LIABILITIES.................................         40,097
                                                                 ----------
MEMBERS' EQUITY -- 100 UNITS ISSUED AND OUTSTANDING.........      3,429,291
                                                                 ----------
                                                                 $7,235,656
                                                                 ==========
</TABLE>

 
  The accompanying notes are an integral part of this consolidated statement.
                                      F-12

<PAGE>   157
 
          CHARTER COMMUNICATIONS HOLDING COMPANY, LLC AND SUBSIDIARIES
 
                      CONSOLIDATED STATEMENT OF OPERATIONS
                             (DOLLARS IN THOUSANDS)
 

<TABLE>
<CAPTION>
                                                               PERIOD FROM
                                                              DECEMBER 24,
                                                              1998, THROUGH
                                                              DECEMBER 31,
                                                                  1998
                                                              -------------
<S>                                                           <C>
REVENUES....................................................     $23,450
                                                                 -------
OPERATING EXPENSES:
  Operating costs...........................................       9,957
  General and administrative................................       2,722
  Depreciation and amortization.............................      13,811
  Corporate expense charges -- related party................         766
                                                                 -------
                                                                  27,256
                                                                 -------
     Loss from operations...................................      (3,806)
                                                                 -------
OTHER INCOME (EXPENSE):
  Interest income...........................................         133
  Interest expense..........................................      (5,051)
                                                                 -------
                                                                  (4,918)
                                                                 -------
     Net loss...............................................     $(8,724)
                                                                 =======
</TABLE>

 
  The accompanying notes are an integral part of this consolidated statement.
                                      F-13

<PAGE>   158
 
          CHARTER COMMUNICATIONS HOLDING COMPANY, 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..................................................    $   (8,724)
  Adjustments to reconcile net loss to net cash provided by
     operating activities --
     Depreciation and amortization..........................        13,811
     Changes in assets and liabilities --
       Receivables, net.....................................        (8,753)
       Prepaid expenses and other...........................          (587)
       Accounts payable and accrued expenses................         4,961
       Payables to manager of cable television systems......           473
       Other operating activities...........................         2,021
                                                                ----------
          Net cash provided by operating activities.........         3,202
                                                                ----------
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..............................        15,620
                                                                ----------
          Net cash provided by financing activities.........        15,620
                                                                ----------
NET INCREASE IN CASH AND CASH EQUIVALENTS...................         5,150
CASH AND CASH EQUIVALENTS, beginning of period..............         5,236
                                                                ----------
CASH AND CASH EQUIVALENTS, end of period....................    $   10,386
                                                                ==========
CASH PAID FOR INTEREST......................................    $    6,155
                                                                ==========
NONCASH TRANSACTION -- Transfer of cable television
  operating subsidiaries from the parent company (see Note
  1)........................................................    $3,438,015
                                                                ==========
</TABLE>

 
  The accompanying notes are an integral part of this consolidated statement.
                                      F-14

<PAGE>   159
 
          CHARTER COMMUNICATIONS HOLDING COMPANY, LLC AND SUBSIDIARIES
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             (DOLLARS IN THOUSANDS)
 
1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
  Organization and Basis of Presentation
 
     Charter Communications Holding Company, LLC (CCHC), a Delaware limited
liability company, was formed in 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 Communications Holdings, LLC (Charter Holdings), Charter
Communications Operating, LLC (Charter Operating). Charter Holdings is a wholly
owned subsidiary of CCHC. 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, CCHC has applied push-down accounting in the preparation of the
consolidated financial statements. Accordingly, CCHC 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 third 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 CCHC.
 
     On April 7, 1999, the cable television operating subsidiaries of Marcus
Cable Company, L.L.C. (Marcus) were transferred to Charter Operating. The
transfer was accounted for as a reorganization of entities under common control
similar to a pooling of interests since Paul G. Allen and a company controlled
by Paul G. Allen purchased substantially all of the outstanding partnership
interests in Marcus in April 1998, and purchased the remaining interest in
Marcus on April 7, 1999.
 
     The consolidated financial statements of CCHC 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
the accounts of Marcus since December 23, 1998 (date Paul G. Allen controlled
both Charter and Marcus), 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
 
                                      F-15

<PAGE>   160
          CHARTER COMMUNICATIONS HOLDING COMPANY, LLC AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
residential and business customers. As of December 31, 1998, the Company
provided cable television services to customers in 22 states in the U.S.
 
     The consolidated financial statements of CCHC 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.
 
     The accompanying financial statements have been retroactively restated to
include the accounts of Marcus beginning December 24, 1998, using historical
carrying amounts. Previously reported revenues and net loss of the Company,
excluding Marcus, was $13,713 and $4,432, respectively, for the period from
December 24, 1998, through December 31, 1998. Revenues and net loss of Marcus
for the period from December 24, 1998 through December 31, 1998, included in the
accompanying financial statements, was $9,737 and $4,292, respectively.
Previously reported members' equity of the Company, excluding Marcus, was $2.1
billion as of December 31, 1998.
 
  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.
 
  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-16

<PAGE>   161
          CHARTER COMMUNICATIONS HOLDING COMPANY, 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, CCHC 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-17

<PAGE>   162
          CHARTER COMMUNICATIONS HOLDING COMPANY, 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, and completed the sale of certain former Marcus cable television
systems for an aggregate sales price of $405,000 in 1998, all prior to December
24, 1998. The Company also refinanced substantially all of its long-term debt in
March 1999 (see Note 12).
 
     Unaudited pro forma operating results as though the acquisitions and
refinancing discussed above, including the Paul Allen Transaction and the
combination with Marcus, 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..................................................  $1,059,882    $ 971,924
Loss from operations......................................    (143,557)    (185,051)
Net loss..................................................    (599,953)    (631,592)
</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..................................  $3,438,015
Net loss....................................................      (8,724)
                                                              ----------
Balance, December 31, 1998..................................  $3,429,291
                                                              ==========
</TABLE>

 
4.  PROPERTY, PLANT AND EQUIPMENT:
 
     Property, plant and equipment consists of the following at December 31,
1998:
 

<TABLE>
<S>                                                           <C>
Cable distribution systems..................................  $1,439,182
Land, buildings and leasehold improvements..................      41,321
Vehicles and equipment......................................      61,237
                                                              ----------
                                                               1,541,740
Less -- Accumulated depreciation............................     (68,013)
                                                              ----------
                                                              $1,473,727
                                                              ==========
</TABLE>

 
                                      F-18

<PAGE>   163
          CHARTER COMMUNICATIONS HOLDING COMPANY, LLC AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     For the period from December 24, 1998, through December 31, 1998,
depreciation expense was $5,029.
 
5.  ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
 
     Accounts payable and accrued expenses consist of the following at December
31, 1998:
 

<TABLE>
<S>                                                           <C>
Accrued interest............................................  $ 34,561
Franchise fees..............................................    21,441
Programming costs...........................................    21,395
Capital expenditures........................................    17,343
Accrued income taxes........................................    15,205
Accounts payable............................................     7,439
Other accrued liabilities...................................    82,447
                                                              --------
                                                              $199,831
                                                              ========
</TABLE>

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

<TABLE>
<S>                                                           <C>
Charter:
  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
Marcus:
  Senior Credit Facility....................................     808,000
  13 1/2% Senior Subordinated Discount Notes................     383,236
  14 1/4% Senior Discount Notes.............................     241,183
                                                              ----------
                                                               3,393,071
  Current maturities........................................     (87,950)
  Unamortized net premium...................................     130,130
                                                              ----------
                                                              $3,435,251
                                                              ==========
</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, 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
 
                                      F-19

<PAGE>   164
          CHARTER COMMUNICATIONS HOLDING COMPANY, LLC AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
$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 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.
 
                                      F-20

<PAGE>   165
          CHARTER COMMUNICATIONS HOLDING COMPANY, LLC AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
  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%.
 
  Marcus -- Senior Credit Facility
 
     Marcus maintains a senior credit facility (the "Senior Credit Facility"),
which provides for two term loan facilities, one with a principal amount of
$490,000 that matures on December 31, 2002 (Tranche A) and the other with a
principal amount of $300,000 that matures on April 30, 2004 (Tranche B). The
Senior Credit Facility provides for scheduled amortization of the two term loan
facilities which began in September 1997. The Senior Credit Facility also
provides for a $360,000 revolving credit facility ("Revolving Credit Facility"),
with a maturity date of December 31, 2002. Amounts outstanding under the Senior
Credit Facility bear interest at either the (i) Eurodollar rate, (ii) prime rate
or (iii) CD base rate or Federal Funds rate, plus a margin up to 2.25%, which is
subject to certain quarterly adjustments based on the ratio of the issuer's
total debt to annualized operating cash flow, as defined. The variable interest
rates ranged from 6.23% to 7.75% at December 31, 1998. A quarterly commitment
fee ranging from 0.250% to 0.375% per annum is payable on the unused commitment
under the Senior Credit Facility.
 
  Marcus -- 13 1/2% Senior Subordinated Discount Notes
 
     Marcus issued $413,461 face amount of 13 1/2% Senior Subordinated Discount
Notes due August 1, 2004 (the "13 1/2% Notes") for net proceeds of $215,000. The
13 1/2% Notes are unsecured, are guaranteed by Marcus and are redeemable, at the
option of Marcus, at amounts decreasing from 105% to 100% of par beginning on
August 1, 1999. No interest is payable on the 13 1/2% Notes until February 1,
2000. Thereafter, interest is payable semiannually until maturity. The discount
on the 13 1/2% Notes is being accreted using the effective interest method and
the
                                      F-21

<PAGE>   166
          CHARTER COMMUNICATIONS HOLDING COMPANY, LLC AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
effective interest rate as of December 31, 1998 was 10.0%. The unamortized
discount was $30,225 at December 31, 1998.
 
  Marcus -- 14 1/4% Senior Discount Notes
 
     Marcus issued $299,228 of 14 1/4% Senior Discount Notes due December 15,
2005 (the "14 1/4% Notes") for net proceeds of $150,003. The 14 1/4% Notes are
unsecured and are redeemable at the option of Marcus at amounts decreasing from
107% to 100% of par beginning on June 15, 2000. No interest is payable until
December 15, 2000. Thereafter, interest is payable semiannually until maturity.
The discount on the 14 1/4% Notes is being accreted using the effective interest
method and the effective interest rate as of December 31, 1998 was 14.1%. The
unamortized discount was $53,545 at December 31, 1998.
 
     The debt agreements require the Company and/or its subsidiaries to comply
with various financial and other covenants, including the maintenance of certain
operating and financial ratios. These debt instruments also contain substantial
limitations on, or prohibitions of, distributions, additional indebtedness,
liens, asset sales and certain other items.
 
     As a result of limitations on and prohibitions of distributions,
substantially all of the net assets of the consolidated subsidiaries are
restricted for distribution to CCHC, the parent company. The parent company's
balance sheet consists solely of an investment in Charter Holdings totaling $3.4
billion and membership equity of $3.4 billion. Equity in losses for the period
from December 24, 1998 through December 31, 1998 consists of $8.7 million.
 
     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........................................................  $   87,950
2000........................................................     110,245
2001........................................................     148,950
2002........................................................     393,838
2003........................................................     295,833
Thereafter..................................................   2,482,193
                                                              ----------
                                                              $3,519,009
                                                              ==========
</TABLE>

 
                                      F-22

<PAGE>   167
          CHARTER COMMUNICATIONS HOLDING COMPANY, 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>
Charter:
  Charter 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
Marcus:
  Senior Credit Facility...................     808,000            --       808,000
  13 1/2% Senior Subordinated Discount
     Notes.................................     425,812            --       418,629
  14 1/4% Senior Discount Notes............     287,183            --       279,992
INTEREST RATE HEDGE AGREEMENTS
Swaps......................................     (22,092)    1,505,000       (28,977)
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, the Debentures, the 13 1/2% Notes
and the 14 1/2% Notes are based on quoted market prices.
 
     The weighted average interest pay rate for the Company's interest rate swap
agreements was 7.1% at December 31, 1998. The weighted average interest rate for
the Company's interest rate cap agreements was 8.45% at December 31, 1998. The
weighted average interest rates for the Company's interest rate collar
agreements were 8.63% 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.
 
                                      F-23

<PAGE>   168
          CHARTER COMMUNICATIONS HOLDING COMPANY, LLC AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
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. Actual costs of
certain services are charged directly to the Company and are included in
operating costs. Such costs totaled $128 for the period from December 24, 1998,
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 $7,675
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 12).
 
     The payable to related party represents the reimbursement of costs incurred
by Paul G. Allen in connection with the acquisition of Marcus by Paul G. Allen.
 
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 $144. Future minimum lease
payments are as follows:
 

<TABLE>
<S>                                                           <C>
1999........................................................  $5,898
2000........................................................   4,070
2001........................................................   3,298
2002........................................................   1,305
2003........................................................     705
Thereafter..................................................   3,395
</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
 
                                      F-24

<PAGE>   169
          CHARTER COMMUNICATIONS HOLDING COMPANY, LLC AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
for pole rental attachments for the period from December 24, 1998, through
December 31, 1998, was $226.
 
  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 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
 
                                      F-25

<PAGE>   170
          CHARTER COMMUNICATIONS HOLDING COMPANY, LLC AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
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 $30 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).
 
12.  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, 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. CCHC expects to
record an extraordinary loss of approximately $4 million in conjunction with the
extinguishment of substantially all long-term debt and the refinancing of its
credit agreements.
 
                                      F-26

<PAGE>   171
          CHARTER COMMUNICATIONS HOLDING COMPANY, LLC AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     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.
 
     In accordance with an employment agreement between Charter and the
President and Chief Executive Officer of Charter options to purchase 3% of the
net equity value of CCHC were issued to the President and Chief Executive
Officer of Charter. The option exercise price is equal to the fair market value
at the date of grant. The options vest over a four year period 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 aggregate of 10% of the equity value of
the Company. The option plan provides for grants of options to employees,
officers and directors of CCHC and its affiliates and consultants who provide
services to CCHC. The option exercise price is equal to the fair market value at
the date of grant. Options granted vest over five years. However, if there has
not been a public offering of the equity interests of CCHC 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.
 
     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>

 
     The Company follows Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" to account for the option plans. No compensation
expense is recognized because the option exercise price is equal to the fair
value of the underlying membership interests on the date of grant. Had
compensation expense for the option plans been determined based on the fair
value at the grant dates under the provisions of SFAS No. 123, the Company's net
loss would have been $10.8 million for the period from December 24, 1998,
through December 31, 1998. The fair value of each option grant is estimated on
the date of grant using the Black-Scholes option pricing model with the
following assumptions: no dividend yield, expected volatility of 44.00%, risk
free rate of 5.00%, and expected option lives of 10 years.
 
                                      F-27

<PAGE>   172
 
 
                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
 
To Charter Communications Holding Company, LLC:
 
     We have audited the accompanying consolidated balance sheet of Charter
Communications Holding Company, LLC and subsidiaries as of December 31, 1997,
and the related consolidated statements of operations, shareholder's investment
and cash flows for the period from January 1, 1998, through December 23, 1998,
and for the years ended December 31, 1997 and 1996. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
 
     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Charter Communications
Holding Company, LLC and subsidiaries as of December 31, 1997, and the results
of their operations and their cash flows for the period from January 1, 1998,
through December 23, 1998, and for the years ended December 31, 1997 and 1996,
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 Note 1, as to
  which the date is April 7, 1999)
 
                                      F-28

<PAGE>   173
 
          CHARTER COMMUNICATIONS HOLDING COMPANY, LLC AND SUBSIDIARIES
 
                           CONSOLIDATED BALANCE SHEET
                             (DOLLARS IN THOUSANDS)
 

<TABLE>
<CAPTION>
                                                              DECEMBER 31,
                                                                  1997
                                                              ------------
<S>                                                           <C>
                                  ASSETS
CURRENT ASSETS:
  Cash and cash equivalents.................................    $   626
  Accounts receivable, net of allowance for doubtful
     accounts of $52........................................        579
  Prepaid expenses and other................................         32
                                                                -------
     Total current assets...................................      1,237
                                                                -------
INVESTMENT IN CABLE TELEVISION PROPERTIES:
  Property, plant and equipment.............................     25,530
  Franchises, net of accumulated amortization of $3,829.....     28,195
                                                                -------
                                                                 53,725
                                                                -------
OTHER ASSETS................................................        849
                                                                -------
                                                                $55,811
                                                                =======
 
                 LIABILITIES AND SHAREHOLDER'S INVESTMENT
CURRENT LIABILITIES:
  Accounts payable and accrued expenses.....................    $ 3,082
  Payables to manager of cable television systems -- related
     party..................................................        114
                                                                -------
     Total current liabilities..............................      3,196
                                                                -------
LONG-TERM DEBT..............................................     41,500
                                                                -------
NOTE PAYABLE TO RELATED PARTY, including accrued interest...     13,090
                                                                -------
SHAREHOLDER'S INVESTMENT:
  Common stock, $.01 par value, 100 shares authorized, one
     issued and outstanding.................................         --
  Paid-in capital...........................................      5,900
  Accumulated deficit.......................................     (7,875)
                                                                -------
     Total shareholder's investment.........................     (1,975)
                                                                -------
                                                                $55,811
                                                                =======
</TABLE>

 
 The accompanying notes are an integral part of these consolidated statements.
                                      F-29

<PAGE>   174
 
          CHARTER COMMUNICATIONS HOLDING COMPANY, LLC AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                             (DOLLARS IN THOUSANDS)
 

<TABLE>
<CAPTION>
                                                              PERIOD FROM
                                                              JANUARY 1,         YEAR ENDED
                                                             1998, THROUGH      DECEMBER 31
                                                             DECEMBER 23,    ------------------
                                                                 1998         1997       1996
                                                             -------------   -------    -------
<S>                                                          <C>             <C>        <C>
REVENUES...................................................    $ 49,731      $18,867    $14,881
                                                               --------      -------    -------
OPERATING EXPENSES:
  Operating costs..........................................      18,751        9,157      5,888
  General and administrative...............................       7,201        2,610      2,235
  Depreciation and amortization............................      16,864        6,103      4,593
  Corporate expense allocation -- related party............       6,176          566        446
                                                               --------      -------    -------
                                                                 48,992       18,436     13,162
                                                               --------      -------    -------
     Income from operations................................         739          431      1,719
                                                               --------      -------    -------
OTHER INCOME (EXPENSE):
  Interest income..........................................          44           41         20
  Interest expense.........................................     (17,277)      (5,120)    (4,415)
  Other, net...............................................        (728)          25        (47)
                                                               --------      -------    -------
                                                                (17,961)      (5,054)    (4,442)
                                                               --------      -------    -------
     Net loss..............................................    $(17,222)     $(4,623)   $(2,723)
                                                               ========      =======    =======
</TABLE>

 
 The accompanying notes are an integral part of these consolidated statements.
                                      F-30

<PAGE>   175
 
          CHARTER COMMUNICATIONS HOLDING COMPANY, LLC AND SUBSIDIARIES
 
              CONSOLIDATED STATEMENTS OF SHAREHOLDER'S INVESTMENT
                             (DOLLARS IN THOUSANDS)
 

<TABLE>
<CAPTION>
                                               COMMON    PAID-IN    ACCUMULATED
                                               STOCK     CAPITAL      DEFICIT       TOTAL
                                               ------    -------    -----------    --------
<S>                                            <C>       <C>        <C>            <C>
BALANCE, December 31, 1995...................    $--     $ 1,500     $   (529)     $    971
  Capital contributions......................    --        4,400           --         4,400
  Net loss...................................    --           --       (2,723)       (2,723)
                                                 --      -------     --------      --------
BALANCE, December 31, 1996...................    --        5,900       (3,252)        2,648
  Net loss...................................    --           --       (4,623)       (4,623)
                                                 --      -------     --------      --------
BALANCE, December 31, 1997...................    --        5,900       (7,875)       (1,975)
  Capital contributions......................    --       10,800           --        10,800
  Net loss...................................    --           --      (17,222)      (17,222)
                                                 --      -------     --------      --------
BALANCE, December 23, 1998...................    $--     $16,700     $(25,097)     $ (8,397)
                                                 ==      =======     ========      ========
</TABLE>

 
 The accompanying notes are an integral part of these consolidated statements.
                                      F-31

<PAGE>   176
 
          CHARTER COMMUNICATIONS HOLDING COMPANY, LLC AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (DOLLARS IN THOUSANDS)
 

<TABLE>
<CAPTION>
                                                           PERIOD FROM
                                                           JANUARY 1,          YEAR ENDED
                                                          1998, THROUGH        DECEMBER 31
                                                          DECEMBER 23,     -------------------
                                                              1998          1997        1996
                                                          -------------    -------    --------
<S>                                                       <C>              <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss..............................................    $ (17,222)     $(4,623)   $ (2,723)
  Adjustments to reconcile net loss to net cash provided
     by operating activities --
     Depreciation and amortization......................       16,864        6,103       4,593
     Loss on sale of cable television system............           --        1,363          --
     Amortization of debt issuance costs, debt discount
       and interest rate cap agreements.................          267          123          --
     (Gain) loss on disposal of property, plant and
       equipment........................................          (14)         130          --
     Changes in assets and liabilities, net of effects
       from acquisitions --
       Receivables, net.................................           10         (227)          6
       Prepaid expenses and other.......................         (125)          18         312
       Accounts payable and accrued expenses............       16,927          894       3,615
       Payables to manager of cable television
          systems.......................................        5,288         (153)        160
       Other operating activities.......................          569           --          --
                                                            ---------      -------    --------
       Net cash provided by operating activities........       22,564        3,628       5,963
                                                            ---------      -------    --------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of property, plant and equipment............      (15,364)      (7,880)     (5,894)
  Payments for acquisitions, net of cash acquired.......     (167,484)          --     (34,069)
  Proceeds from sale of cable television system.........           --       12,528          --
  Other investing activities............................         (486)          --          64
                                                            ---------      -------    --------
       Net cash provided by (used in) investing
          activities....................................     (183,334)       4,648     (39,899)
                                                            ---------      -------    --------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Borrowings of long-term debt..........................      217,500        5,100      31,375
  Repayments of long-term debt..........................      (60,200)     (13,375)     (1,000)
  Capital contributions.................................        7,000           --       4,400
  Payment of debt issuance costs........................       (3,487)         (12)       (638)
                                                            ---------      -------    --------
       Net cash provided by (used in) financing
          activities....................................      160,813       (8,287)     34,137
                                                            ---------      -------    --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS....           43          (11)        201
CASH AND CASH EQUIVALENTS, beginning of period..........          626          637         436
                                                            ---------      -------    --------
CASH AND CASH EQUIVALENTS, end of period................    $     669      $   626    $    637
                                                            =========      =======    ========
CASH PAID FOR INTEREST..................................    $   7,679      $ 3,303    $  2,798
                                                            =========      =======    ========
</TABLE>

 
 The accompanying notes are an integral part of these consolidated statements.
                                      F-32

<PAGE>   177
 
          CHARTER COMMUNICATIONS HOLDING COMPANY, LLC AND SUBSIDIARIES
 

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             (DOLLARS IN THOUSANDS)
 
1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
 
  Organization and Basis of Presentation
 
     Charter Communications Holding Company, LLC (CCHC), a Delaware limited
liability company, was formed in 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 interest 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 CarterComm Holdings and CCA Group are included in the financial
statements of Charter Holdings from the date of acquisition. In February 1999,
Charter transferred all of its cable television operating subsidiaries to a
wholly owned subsidiary of Charter Communications Holdings, LLC, Charter
Communications Operating, LLC (Charter Operating). Charter Holdings is a wholly
owned subsidiary of CCHC. The transfer was accounted for as a reorganization of
entities under common control similar to a pooling of interests.
 
     On April 7, 1999, the cable television operating subsidiaries of Marcus
Cable Company, L.L.C. (Marcus) were transferred to Charter Operating. The
transfer was accounted for as a reorganization of entities under common control
similar to a pooling of interests, since Paul G. Allen and a company controlled
by Paul G. Allen purchased substantially all of the outstanding partnership
interests in Marcus in April 1998, and purchased the remaining interests in
Marcus on April 7, 1999.
 
     The accompanying financial statements include the accounts of CCP,
Charter's wholly owned cable operating subsidiary, representing the financial
statements of CCHC and subsidiaries (the Company) for all periods presented. The
accounts of CharterComm Holdings and CCA Group are not included since these
companies were not owned and controlled by Charter prior to December 23, 1998.
The accounts of Marcus are not included since both Charter and Marcus were not
owned and controlled by the same party prior to December 23, 1998.
 
     As a result of the change in ownership of CCP, CharterComm Holdings and CCA
Group, CCHC has applied push-down accounting in the preparation of the
consolidated financial statements effective December 23, 1998. Accordingly, the
financial statements of CCHC for periods ended on or before December 23, 1998,
are presented on a different cost basis than the financial statements for the
periods after December 23, 1998 (not presented herein), and are 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, 1997,
cash equivalents consist primarily of repurchase agreements. These investments
are carried at cost that approximates market value.
 
                                      F-33

<PAGE>   178
          CHARTER COMMUNICATIONS HOLDING COMPANY, LLC AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
  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>

 
     In 1997, the Company shortened the useful lives from 10 years to 5 years of
certain plant and equipment included in cable distribution systems associated
with costs of new customer installations. As a result, additional depreciation
of $550 was recorded during 1997. The estimated useful lives were shortened to
be more reflective of average customer lives.
 
  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.
 
  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 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, 1997, 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.
 
                                      F-34

<PAGE>   179
          CHARTER COMMUNICATIONS HOLDING COMPANY, LLC AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
  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
 
     The Company files a consolidated income tax return with Charter. Income
taxes are allocated to the Company in accordance with the tax-sharing agreement
between the Company and Charter.
 
  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 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.  ACQUISITIONS:
 
     In 1998, the Company acquired cable television systems for an aggregate
purchase price, net of cash acquired, of $228,400, comprising $167,500 in cash
and $60,900 in a note payable to Seller. The excess of cost of properties
acquired over the amounts assigned to net tangible assets at the date of
acquisition was $207,600 and is included in franchises.
 
     In 1996, the Company acquired cable television systems for an aggregate
purchase price, net of cash acquired, of $34,100. The excess of the cost of
properties acquired over the amounts assigned to net tangible assets at the date
of acquisition was $24,300 and is included in franchises.
 
     The above acquisitions were accounted for using the purchase method of
accounting, and accordingly, results of operations of the acquired assets have
been included in the financial statements from the dates of acquisition. The
purchase prices were allocated to tangible and intangible assets based on
estimated fair values at the acquisition dates.
 
                                      F-35

<PAGE>   180
          CHARTER COMMUNICATIONS HOLDING COMPANY, LLC AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     Unaudited pro forma operating results as though the acquisition discussed
above, excluding 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>
                                                           PERIOD FROM
                                                        JANUARY 1, 1998,
                                                             THROUGH         YEAR ENDED
                                                        DECEMBER 23, 1998       1997
                                                        -----------------    ----------
                                                                  (UNAUDITED)
<S>                                                     <C>                  <C>
Revenues..............................................      $ 67,007          $ 63,909
Loss from operations..................................        (7,097)           (7,382)
Net loss..............................................       (24,058)          (26,099)
</TABLE>

 
     The unaudited pro forma information has been presented for comparative
purposes and does not purport to be indicative of the results of operations had
these transactions been completed as of the assumed date or which may be
obtained in the future.
 
3.  SALE OF FT. HOOD SYSTEM:
 
     In February 1997, the Company sold the net assets of the Ft. Hood system,
which served customers in Texas, for an aggregate sales price of approximately
$12,500. The sale of the Ft. Hood system resulted in a loss of $1,363, which is
included in operating costs in the accompanying statement of operations for the
year ended December 31, 1997.
 
4.  PROPERTY, PLANT AND EQUIPMENT:
 
     Property, plant and equipment consists of the following at December 31,
1997:
 

<TABLE>
<S>                                                           <C>
Cable distribution systems..................................  $29,061
Land, buildings and leasehold improvements..................      447
Vehicles and equipment......................................    1,744
                                                              -------
                                                               31,252
Less- Accumulated depreciation..............................   (5,722)
                                                              -------
                                                              $25,530
                                                              =======
</TABLE>

 
     For the period from January 1, 1998, through December 23, 1998, and for the
years ended December 31, 1997 and 1996, depreciation expense was $6,249, $3,898
and $2,371, respectively.
 
5.  ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
 
     Accounts payable and accrued expenses consist of the following at December
31, 1997:
 

<TABLE>
<S>                                                           <C>
Accrued interest............................................  $  292
Capital expenditures........................................     562
Franchise fees..............................................     426
Programming costs...........................................     398
Accounts payable............................................     298
Other.......................................................   1,012
                                                              ------
                                                              $2,988
                                                              ======
</TABLE>

 
                                      F-36

<PAGE>   181
          CHARTER COMMUNICATIONS HOLDING COMPANY, LLC AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
6.  LONG-TERM DEBT:
 
     The Company maintained a revolving credit agreement (the "Old Credit
Agreement") with a consortium of banks for borrowings up to $47,500, of which
$41,500 was outstanding at December 31, 1997. In 1997, the Credit Agreement was
amended to reflect the impact of the sale of a cable television system. The debt
bears interest, at the Company's option, at rates based on the prime rate of the
Bank of Montreal (the agent bank), or LIBOR, plus the applicable margin based
upon the Company's leverage ratio at the time of the borrowings. The variable
interest rates ranged from 7.44% to 7.63% at December 31, 1997.
 
     In May 1998, the Company entered into 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, as defined, plus a margin of up to 2.88%.
 
     Commencing March 31, 1999, and at the end of each quarter thereafter,
available borrowings under the revolving credit facility shall be reduced on an
annual basis by 3.5% in 1999, 7.0% in 2000, 9.0% in 2001, 10.5% in 2002 and
16.5% in 2003. Commencing March 31, 2000, and at the end of each quarter
thereafter, available borrowings under the term loan shall be reduced on an
annual basis by 6.0% in 2000, 8.0% in 2001, 11.0% in 2002 and 16.5% in 2003.
Commencing March 31, 2000, and at the end of each quarter thereafter, available
borrowings under the other term loan shall be reduced on an annual basis by 1.0%
in 2000, 1.0% in 2001, 1.0% in 2002 and 1.0% in 2003.
 
     The credit agreement requires the Company and/or its subsidiaries to comply
with various financial and other covenants, including the maintenance of certain
operating and financial ratios. This agreement also contains substantial
limitations on, or prohibitions of, distributions, additional indebtedness,
liens, asset sales and certain other items.
 
     The parent company's balance sheet as of December 31, 1997, consists solely
of an investment in its consolidated subsidiaries totaling $(1,975) and
membership equity of $(1,975). Equity in losses for the period from January 1,
1998 through December 23, 1998 and for the years ended December 31, 1997 and
1996 consist of $(17,222), $(4,623) and $(2,723), respectively.
 
7.  NOTE PAYABLE TO RELATED PARTY:
 
     As of December 31, 1997, the Company holds a promissory note payable to CCT
Holdings Corp., a company managed by Charter and acquired by Charter effective
December 23, 1998. The promissory note bears interest at the rates paid by CCT
Holdings Corp. on a note payable to a third party. Principal and interest are
due on September 29, 2005.
 
                                      F-37

<PAGE>   182
          CHARTER COMMUNICATIONS HOLDING COMPANY, LLC AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
8.  FAIR VALUE OF FINANCIAL INSTRUMENTS:
 
     A summary of debt and the related interest rate hedge agreements at
December 31, 1997, is as follows:
 

<TABLE>
<CAPTION>
                                                      CARRYING    NOTIONAL     FAIR
                                                       VALUE       AMOUNT      VALUE
                                                      --------    --------    -------
<S>                                                   <C>         <C>         <C>
Debt
CCP Credit Agreement................................  $41,500     $    --     $41,500
Interest Rate Hedge Agreements
Caps................................................       --      15,000          --
Collars.............................................       --      20,000         (74)
</TABLE>

 
     As the long-term debt under the credit agreements bears interest at current
market rates, its carrying amount approximates market value at December 31,
1997.
 
     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. 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 financial position or
results of operations.
 
9.  INCOME TAXES:
 
     At December 31, 1997, the Company had net operating loss carryforwards of
$9,594, which if not used to reduce taxable income in future periods, expire in
the years 2010 through 2012. As of December 31, 1997, the Company's deferred
income tax assets were offset by valuation allowances and deferred income tax
liabilities resulting primarily from differences in accounting for depreciation
and amortization.
 
10.  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. Actual costs of
certain services are charged directly to the Company and are included in
operating costs. Such costs totaled $437, $220 and $131, respectively for the
period from January 1, 1998, through December 23, 1998, and the years ended
December 31, 1997 and 1996. All other costs incurred by Charter on behalf of the
Company are expensed in the accompanying financial statements and are included
in corporate expense allocations -- related party. The cost of these services is
allocated based on the number of basic customers. Management considers this
allocation to be reasonable for the operations of the Company.
 
                                      F-38

<PAGE>   183
          CHARTER COMMUNICATIONS HOLDING COMPANY, LLC AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     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 as
stipulated in the management agreement between Charter and the Company. For the
period from January 1, 1998, through December 23, 1998, and the years ended
December 31, 1997 and 1996, the management fee charged to the Company
approximated the corporate expenses incurred by Charter on behalf of the
Company. Management fees currently payable of $114 are included in payables to
manager of cable television systems -- related party as of December 31, 1997.
 
11.  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
January 1, 1998, through December 23, 1998, and for the years ended December 31,
1997 and 1996, were $278, $130 and $91, respectively.
 
     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 January 1, 1998, through December 23, 1998, and for the years ended
December 31, 1997 and 1996, was $421, $271 and $174, respectively.
 
  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 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.
 
                                      F-39

<PAGE>   184
          CHARTER COMMUNICATIONS HOLDING COMPANY, LLC AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     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 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 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 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.
 
12.  EMPLOYEE BENEFIT PLAN:
 
  401(k) Plan
 
     The Company's employees may participate in the Charter Communications, Inc.
401(k) Plan (the "401(k) Plan"). 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 contributes an amount equal to 50% of the first 5% of contributions by
each employee. The Company contributed $74, $29 and $22 for the period from
January 1, 1998, through December 23, 1998, and for the years ended December 31,
1997 and 1996, respectively.
 
  Appreciation Rights Plan
 
     Certain employees of Charter participate in the 1995 Charter
Communications, Inc. Appreciation Rights Plan (the "Plan"). The Plan permits
Charter to grant 1,500,000 units to certain key employees, of which 1,251,500
were outstanding at December 31, 1997. Units received by an employee vest at a
rate of 20% per year, unless otherwise provided in the participant's
Appreciation Rights Unit Agreement. The appreciation rights entitle the
participants to receive payment, upon termination or change in control of
Charter, of the excess of the unit
 
                                      F-40

<PAGE>   185
          CHARTER COMMUNICATIONS HOLDING COMPANY, LLC AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
value over the base value (defined as the appreciation value) for each vested
unit. The unit value is based on Charter's adjusted equity, as defined in the
Plan. Deferred compensation expense recorded by Charter is based on the
appreciation value since the grant date and is being amortized over the vesting
period.
 
     As a result of the acquisition of Charter by Paul G. Allen, the Plan was
terminated, all outstanding units became 100% vested and all amounts were paid
by Charter in 1999. The cost of this plan was allocated to the Company based on
the number of basic customers. Management considers this allocation to be
reasonable for the operations of the Company. For the period January 1, 1998,
through December 23, 1998, the Company expensed $3,800, included in corporate
expense allocation, for the cost of this plan.
 
13.  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-41

<PAGE>   186
 

                          INDEPENDENT AUDITORS' REPORT
 
The Members
Marcus Cable Company, L.L.C.:
 
     We have audited the accompanying consolidated balance sheets of Marcus
Cable Company, L.L.C. and subsidiaries as of December 31, 1998 and 1997 (which
December 31, 1998 balance sheet is not presented separately herein) and the
related consolidated statements of operations, members' equity and cash flows
for the period from April 23, 1998 to December 23, 1998 and the consolidated
statements of operations, partners' capital (deficit), and cash flows for the
period from January 1, 1998 to April 22, 1998 and for each of the years in the
two-year period ended December 31, 1997. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
 
     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Marcus Cable
Company, L.L.C. and subsidiaries as of December 31, 1998 and 1997, and the
results of their operations and their cash flows for the periods from April 23,
1998 to December 23, 1998 and from January 1, 1998 to April 22, 1998 and for
each of the years in the two-year period ended December 31, 1997, in conformity
with generally accepted accounting principles.
 
     As discussed in note 1 to the consolidated financial statements,
substantially all of Marcus Cable Company, L.L.C. was acquired by Vulcan Cable,
Inc. and Paul G. Allen as of April 22, 1998 in a business combination accounted
for as a purchase. As a result of the application of purchase accounting, the
consolidated financial statements of Marcus Cable Company, L.L.C. and
subsidiaries for the period from April 23, 1998 to December 23, 1998 are
presented on a different cost basis than those for periods prior to April 23,
1998, and accordingly, are not directly comparable.
 
                                          /s/ KPMG LLP
 
Dallas, Texas
February 19, 1999

  (except for the tenth paragraph of Note 1
  which is as of April 7, 1999)
 
                                      F-42

<PAGE>   187
 
                 MARCUS CABLE COMPANY, L.L.C. AND SUBSIDIARIES
 
                           CONSOLIDATED BALANCE SHEET
 
                               DECEMBER 31, 1997
                                 (IN THOUSANDS)
 

<TABLE>
<CAPTION>
                                                              PREDECESSOR (NOTE 1)
                                                              --------------------
                                                                      1997
                                                                      ----
<S>                                                           <C>
ASSETS
----------------------------------------------------------------------------------
Current assets:
  Cash and cash equivalents.................................       $    1,607
  Accounts receivable, net of allowance of $1,800 in 1998
     and $1,904 in 1997.....................................           23,935
  Prepaid expenses and other................................            2,105
                                                                   ----------
          Total current assets..............................           27,647
Investment in cable television systems:
  Property, plant and equipment.............................          706,626
  Franchises................................................          972,440
  Noncompetition agreements.................................            6,770
Other assets................................................           36,985
                                                                   ----------
                                                                   $1,750,468
                                                                   ==========
LIABILITIES AND PARTNERS' CAPITAL
----------------------------------------------------------------------------------
Current liabilities:
  Current maturities of long-term debt......................       $   67,499
  Accrued liabilities.......................................           68,754
                                                                   ----------
          Total current liabilities.........................          136,253
Long-term debt..............................................        1,531,927
Other long-term liabilities.................................            2,261
Partners' capital...........................................           80,027
                                                                   ----------
                                                                   $1,750,468
                                                                   ==========
</TABLE>

 
          See accompanying notes to consolidated financial statements.
                                      F-43

<PAGE>   188
 
                 MARCUS CABLE COMPANY, L.L.C. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (IN THOUSANDS)
 

<TABLE>
<CAPTION>
                                                                    PREDECESSOR (NOTE 1)
                                 SUCCESSOR (NOTE 1)    -----------------------------------------------
                                --------------------                           YEAR ENDED DECEMBER 31
                                PERIOD FROM APRIL 23   PERIOD FROM JANUARY 1   -----------------------
                                TO DECEMBER 23, 1998     TO APRIL 22, 1998        1997         1996
                                --------------------   ---------------------   ----------   ----------
<S>                             <C>                    <C>                     <C>          <C>
Revenues:
  Cable services..............       $ 332,139               $ 157,389         $ 473,701    $ 432,172
  Management fees -- related
     party....................             181                     374             5,614        2,335
                                     ---------               ---------         ---------    ---------
          Total revenues......         332,320                 157,763           479,315      434,507
                                     ---------               ---------         ---------    ---------
Operating expenses:
  Selling, service and system
     management...............         129,435                  60,501           176,515      157,197
  General and
     administrative...........          51,912                  24,245            72,351       73,017
  Transaction and severance
     costs....................          16,034                 114,167                --           --
  Management fees -- related
     party....................           3,048                      --                --           --
  Depreciation and
     amortization.............         174,968                  64,669           188,471      166,429
                                     ---------               ---------         ---------    ---------
          Total operating
            expenses..........         375,397                 263,582           437,337      396,643
                                     ---------               ---------         ---------    ---------
          Operating income
            (loss)............         (43,077)               (105,819)           41,978       37,864
                                     ---------               ---------         ---------    ---------
Other (income) expense:
  Interest expense............          93,103                  49,905           151,207      144,376
  Gain on sale of assets......              --                 (43,662)               --       (6,442)
                                     ---------               ---------         ---------    ---------
          Total other
            expense...........          93,103                   6,243           151,207      137,934
                                     ---------               ---------         ---------    ---------
          Loss before
            extraordinary
            item..............        (136,180)               (112,062)         (109,229)    (100,070)
Extraordinary item -- gain on
  early retirement of debt....          (2,384)                     --                --           --
                                     ---------               ---------         ---------    ---------
          Net loss............       $(133,796)              $(112,062)        $(109,229)   $(100,070)
                                     =========               =========         =========    =========
</TABLE>

 
          See accompanying notes to consolidated financial statements.
                                      F-44

<PAGE>   189
 
                 MARCUS CABLE COMPANY, L.L.C. AND SUBSIDIARIES
             CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
                                 (IN THOUSANDS)
 

<TABLE>
<CAPTION>
                                                               PREDECESSOR (NOTE 1)
                                                        ----------------------------------
                                                                     CLASS B
                                                        GENERAL      LIMITED
                                                        PARTNERS    PARTNERS       TOTAL
                                                        --------    --------       -----
<S>                                                     <C>         <C>          <C>
Balance at December 31, 1995..........................  $(21,396)   $ 310,722    $ 289,326
  Net loss............................................      (200)     (99,870)    (100,070)
                                                        --------    ---------    ---------
Balance at December 31, 1996..........................   (21,596)     210,852      189,256
  Net loss............................................      (218)    (109,011)    (109,229)
                                                        --------    ---------    ---------
Balance at December 31, 1997..........................   (21,814)     101,841       80,027
  Net loss -- January 1, 1998 to April 22, 1998.......      (224)    (111,838)    (112,062)
                                                        --------    ---------    ---------
Balance at April 22, 1998.............................  $(22,038)   $  (9,997)   $ (32,035)
                                                        ========    =========    =========
</TABLE>

 
          See accompanying notes to consolidated financial statements.
                                      F-45

<PAGE>   190
 
                 MARCUS CABLE COMPANY, L.L.C. AND SUBSIDIARIES
                   CONSOLIDATED STATEMENTS OF MEMBERS' EQUITY
                                 (IN THOUSANDS)
 

<TABLE>
<CAPTION>
                                                                  SUCCESSOR (NOTE 1)
                                                       ----------------------------------------
                                                         MARCUS
                                                          CABLE
                                                       PROPERTIES,      VULCAN
                                                         L.L.C.       CABLE, INC.      TOTAL
                                                       -----------    -----------    ----------
<S>                                                    <C>            <C>            <C>
Initial capitalization (note 3)......................    $53,200      $1,346,800     $1,400,000
Capital contribution (note 3)........................         --          20,000         20,000
Net loss -- April 23, 1998 to December 23, 1998......     (5,084)       (128,712)      (133,796)
                                                         -------      ----------     ----------
Balance at December 23, 1998.........................    $48,116      $1,238,088     $1,286,204
                                                         =======      ==========     ==========
</TABLE>

 
          See accompanying notes to consolidated financial statements.
                                      F-46

<PAGE>   191
 
                 MARCUS CABLE COMPANY, L.L.C. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
 

<TABLE>
<CAPTION>
                                         SUCCESSOR (NOTE 1)                    PREDECESSOR (NOTE 1)
                                        --------------------    ---------------------------------------------------
                                                                                          YEAR ENDED DECEMBER 31,
                                        PERIOD FROM APRIL 23    PERIOD FROM JANUARY 1    --------------------------
                                        TO DECEMBER 23, 1998      TO APRIL 22, 1998        1997             1996
                                        --------------------    ---------------------      ----             ----
<S>                                     <C>                     <C>                      <C>              <C>
Cash flows from operating activities:
  Net loss............................       $(133,796)               $(112,062)         $(109,229)       $(100,070)
  Adjustments to reconcile net loss to
    net cash provided by operating
    activities:
    Extraordinary item -- gain on
      early retirement of debt........          (2,384)                      --                 --               --
    Gain on sale of assets............              --                  (43,662)                --           (6,442)
    Depreciation and amortization.....         174,969                   64,669            188,471          166,429
    Non cash interest expense.........          52,942                   24,819             72,657           63,278
    Amortization of carrying value
      premium.........................         (11,043)                      --                 --               --
    Changes in assets and liabilities,
      net of working capital
      adjustments for acquisitions:
      Accounts receivable, net........           6,550                    1,330             (6,439)             (70)
      Prepaid expenses and other......          (1,356)                  (1,855)                95             (574)
      Other assets....................              --                      (16)              (385)            (502)
      Payables to related party.......           3,048                       --                 --               --
      Accrued liabilities.............          (1,504)                  90,804              9,132           (3,063)
                                             ---------                ---------          ---------        ---------
         Net cash provided by
           operating activities:......          87,426                   24,027            154,302          118,986
                                             ---------                ---------          ---------        ---------
Cash flows from investing activities:
  Acquisition of cable systems........              --                  (57,500)           (53,812)         (10,272)
  Proceeds from sale of assets, net of
    cash acquired and selling costs...         340,568                   64,564                 --           20,638
  Additions to property, plant and
    equipment.........................        (158,388)                 (65,715)          (197,275)        (110,639)
  Other...............................            (648)                     (42)                --               --
                                             ---------                ---------          ---------        ---------
         Net cash provided by (used
           in) investing
           activities:................         181,532                  (58,693)          (251,087)        (100,273)
                                             ---------                ---------          ---------        ---------
Cash flows from financing activities:
  Borrowings under Senior Credit
    Facility..........................         158,750                   59,000            226,000           65,000
  Repayments under Senior Credit
    Facility..........................        (343,250)                 (16,250)          (131,250)         (95,000)
  Repayments of notes and
    debentures........................        (109,344)                      --                 --               --
  Payment of debt issuance costs......              --                      (99)            (1,725)              --
  Cash contributed by member..........          20,000                       --                 --               --
  Payments on other long-term
    liabilities.......................            (550)                    (321)              (667)             (88)
                                             ---------                ---------          ---------        ---------
         Net cash provided by (used
           in) financing activities...        (274,394)                  42,330             92,358          (30,088)
                                             ---------                ---------          ---------        ---------
Net decrease in cash and cash
  equivalents.........................          (5,436)                   7,664             (4,427)         (11,375)
Cash and cash equivalents at the
  beginning of the period.............           9,271                    1,607              6,034           17,409
                                             ---------                ---------          ---------        ---------
Cash and cash equivalents at the end
  of the period.......................       $   3,835                $   9,271          $   1,607        $   6,034
                                             =========                =========          =========        =========
Supplemental disclosure of cash flow
  information:
  Interest paid.......................       $  52,631                $  28,517          $  81,155        $  83,473
                                             =========                =========          =========        =========
</TABLE>

 
          See accompanying notes to consolidated financial statements.
                                      F-47

<PAGE>   192
 
                 MARCUS CABLE COMPANY, L.L.C. AND SUBSIDIARIES
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             (DOLLARS IN THOUSANDS)
 
(1) ORGANIZATION AND BASIS OF PRESENTATION
 
     Marcus Cable Company, L.L.C. ("MCCLLC") and subsidiaries (collectively, the
"Company") is a Delaware limited liability company, formerly Marcus Cable
Company, L.P. ("MCCLP"). MCCLP was formed as a Delaware limited partnership and
was converted to a Delaware limited liability company on June 9, 1998 (note 3).
The Company derives its primary source of revenues by providing various levels
of cable television programming and services to residential and business
customers. The Company's operations are conducted through Marcus Cable Operating
Company, L.L.C. ("MCOC"), a wholly-owned subsidiary of the Company. The Company
has operated its cable television systems primarily in Texas, Wisconsin,
Indiana, California and Alabama.
 
     The accompanying consolidated financial statements include the accounts of
MCCLLC and its subsidiary limited liability companies and corporations. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
 
     On April 23, 1998, Vulcan Cable, Inc. and Paul G. Allen (collectively
referred to as "Vulcan") acquired all of the outstanding limited partnership
interests and substantially all of the general partner interest in MCCLP. Under
the terms of the purchase agreement, the owner of the remaining 0.6% general
partner interest (the "Minority Interest") in the Company can cause Vulcan to
purchase the 0.6% general partner interest under certain conditions, or Vulcan
can cause the Minority Interest to sell its interest to Vulcan under certain
conditions, at a fair value of not less than $8,000.
 
     As a result of this acquisition (the "Vulcan Acquisition"), the Company has
applied purchase accounting in the preparation of the accompanying consolidated
financial statements. Accordingly, MCCLP adjusted its equity as of April 23,
1998 to reflect the amount paid in the Vulcan Acquisition and has allocated that
amount to assets acquired and liabilities assumed based on their relative fair
values. The excess of the purchase price over the fair value of MCCLP's tangible
and separately identifiable intangible assets less liabilities was allocated as
franchises. The allocation of the purchase price is based, in part, on
preliminary information which is subject to adjustment upon completion of
certain appraisal and valuation information.
 
     The total transaction was valued at $3,243,475 and was allocated as
follows:
 

<TABLE>
<S>                                               <C>
Franchises......................................  $2,492,375
Property, plant and equipment...................     735,832
Noncompetition agreements.......................       6,343
Other assets....................................       8,925
                                                  ----------
                                                  $3,243,475
                                                  ==========
</TABLE>

 
     The transaction was initially funded through cash payments of $1,392,000
from Vulcan and the assumption of $1,809,621 in net liabilities. In addition,
Vulcan incurred direct costs of the acquisition (principally financial advisory,
legal and accounting fees) of $20,000, which will be reimbursed by the Company.
In addition, the Company recorded the fair value of the Minority Interest of
$8,000 in equity and $13,854 in direct transaction costs.
 
     In connection with the Vulcan Acquisition, the Company incurred transaction
costs of approximately $114,167, comprised of $90,167 paid to employees of the
Company in settlement of specially designated Class B units in MCCLP ("EUnit")
granted in past periods by the general partner of MCCLP, and $24,000 of
transaction fees paid to certain equity partners for investment
 
                                      F-48

<PAGE>   193
                 MARCUS CABLE COMPANY, L.L.C. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
banking services. These transaction costs have been included in the accompanying
consolidated statement of operations for the period from January 1, 1998 to
April 22, 1998.
 
     As a result of the Vulcan Acquisition and the application of purchase
accounting, financial information in the accompanying consolidated financial
statements and notes thereto for the period from April 23, 1998 to December 23,
1998 (the "Successor Period") are presented on a different cost basis than the
financial information as of December 31, 1997 and for the period from January 1,
1998 to April 22, 1998 and for the years ended December 31, 1997 and 1996 (the
"Predecessor Period"), and therefore, such information is not comparable.
 
     Effective December 23, 1998, through a series of transactions, Paul G.
Allen acquired approximately 94% of Charter Communications, Inc. ("Charter").
 
     In March 1999, Charter transferred all of its cable television operating
subsidiaries to a subsidiary, Charter Communications Holdings, LLC (Charter
Holdings) in connection with the issuance of Senior Notes and Senior Discount
Notes totaling $3.6 billion. These operating subsidiaries were then transferred
to Charter Communications Operating, LLC ("Charter Operating"). On April 7,
1999, the cable operations of the Company were transferred to Charter Operating
subsequent to the purchase by Paul G. Allen of the Minority Interest. The
transfer was accounted for as a reorganization of entities under common control
similar to a pooling of interests. For periods subsequent to December 23, 1998
(the date Paul G. Allen controlled both Charter and the Company), the accounts
of the Company will be included in the consolidated financial statements of
Charter Holdings at historical carrying amounts.
 
     As a result of the combination of the Company and Charter, the Company
recognized severance and stay-on bonus compensation of $16,034, which is
included in Transaction and Severance Costs in the accompanying statement of
operations for the period from April 22, 1998 to December 23, 1998. As of
December 23, 1998, 35 employees and officers of the Company had been terminated
and $13,634 had been paid under severance and bonus arrangements. By March 31,
1999, an additional 50 employees will be terminated. The remaining balance of
$2,400 is to be paid by April 30, 1999 and an additional $400 in stay-on bonuses
will be recorded as compensation in 1999 as the related services are provided.
 
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
  (a) CASH EQUIVALENTS
 
     The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents. At December 31, 1997,
cash equivalents consist of certificates of deposit and money market funds.
These investments are carried at cost which approximates market value.
 
  (b) 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
installation. The costs of disconnecting a customer are charged to expense in
the period incurred. Expenditures for maintenance and repairs are charged to
expense as incurred and equipment replacements and betterments are capitalized.
 
     Depreciation is provided by the straight-line method over the estimated
useful lives of the related assets as follows:
 

<TABLE>
<S>                                               <C>
Cable distribution systems......................  3-10 years
Buildings and leasehold improvements............  5-15 years
Vehicles and equipment..........................   3-5 years
</TABLE>

 
                                      F-49

<PAGE>   194
                 MARCUS CABLE COMPANY, L.L.C. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
  (c) FRANCHISES
 
     Costs incurred in obtaining and renewing cable franchises are deferred and
amortized over the estimated 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, including the
Vulcan Acquisition, represent the excess of the cost of properties acquired over
the amounts assigned to net tangible and identifiable intangible assets at date
of acquisition and are amortized using the straight-line method over a period of
15 years. Accumulated amortization was $264,600 at December 31, 1997.
 
     The historical cost of $37,274 and the related accumulated amortization of
$9,959 for the going concern value of acquired cable television systems as of
December 31, 1997 has been reflected in the caption "Franchises" in the
accompanying consolidated balance sheet. This asset was amortized in the
Predecessor Period using the straight-line method over a period of up to 15
years.
 
  (d) NONCOMPETITION AGREEMENTS
 
     Noncompetition agreements are amortized using the straight-line method over
the term of the respective agreements. Accumulated amortization was $19,144 at
December 31, 1997.
 
  (e) OTHER ASSETS
 
     Debt issuance costs were amortized to interest expense over the term of the
related debt. Debt issuance costs associated with debt outstanding at the Vulcan
Acquisition date were eliminated in connection with pushdown accounting.
 
  (f) 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 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.
 
  (g) 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, 1997, no installation revenue has
been deferred, as direct selling costs exceeded installation revenue.
 
     Management fee revenues are recognized concurrently with the recognition of
revenues by the managed cable television system, or as a specified monthly
amount as stipulated in the management agreement. Incentive management fee
revenue is recognized upon performance of specified actions as stipulated in the
management agreement.
 
                                      F-50

<PAGE>   195
                 MARCUS CABLE COMPANY, L.L.C. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
  (h) INCOME TAXES
 
     Income taxes are the responsibility of the individual members and are not
provided for in the accompanying financial statements. The Company's subsidiary
corporations are subject to federal income tax but have had no operations and
therefore, no taxable income since inception.
 
  (i) INTEREST RATE HEDGE AGREEMENTS
 
     The Company manages fluctuations in interest rates by using interest rate
hedge agreements, as required by certain of its debt agreements. Interest rate
swaps and caps 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.
 
     The Company's interest rate swap agreements require the Company to pay a
fixed rate and receive a floating rate thereby creating thereby creating fixed
rate debt. Interest rate caps 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.
 
  (j) 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 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.
 
  (k) ACCOUNTING STANDARD NOT IMPLEMENTED
 
     In June 1998, the Financial Accounting Standards Boards adopted Statement
of Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative
Financial 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 of earnings (loss).
 
(3) CAPITAL STRUCTURE
 
  PARTNERS' CAPITAL
 
  (a) CLASSES OF PARTNERSHIP INTERESTS
 
     The MCCLP partnership agreement (the "Partnership Agreement") provided for
Class B Units and Convertible Preference Units. Class B Units consisted of
General Partner Units ("GP Units") and Limited Partner Units ("LP Units"). To
the extent that GP Units had the right to
 
                                      F-51

<PAGE>   196
                 MARCUS CABLE COMPANY, L.L.C. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
vote, GP Units voted as Class B Units together with Class B LP Units. Voting
rights of Class B LP Units were limited to items specified under the Partnership
Agreement. Prior to the dissolution of the Partnership on June 9, 1998, there
were 18,848.19 GP Units and 294,937.67 Class B LP Units outstanding.
 
     The Partnership Agreement also provided for the issuance of a class of
Convertible Preference Units. These units were entitled to a general
distribution preference over the Class B LP Units and were convertible into
Class B LP Units. The Convertible Preference Units could vote together with
Class B Units as a single class, and the voting percentage of each Convertible
Preference Unit, at a given time, was based on the number of Class B LP Units
into which such Convertible Preference Unit is then convertible. MCCLP had
issued 7,500 Convertible Preference Units with a distribution preference and
conversion price of two thousand dollars per unit.
 
     The Partnership Agreement permitted the General Partner, at its sole
discretion, to issue up to 31,517 Employee Units (classified as Class B Units)
to key individuals providing services to the Company. Employee Units were not
entitled to distributions until such time as all units have received certain
distributions as calculated under provisions of the Partnership Agreement
("subordinated thresholds"). At December 31, 1997 28,033.20 Employee Units were
outstanding with a subordinated threshold ranging from $1,600 to $1,750 per unit
(per unit amounts in whole numbers). In connection with the Vulcan Acquisition,
the amount paid to EUnit holders of $90,167 was recognized as Transaction and
Severance Costs in the period from January 1, 1998 to April 22, 1998.
 
  (b) ALLOCATION OF INCOME AND LOSS TO PARTNERS
 
     MCCLP incurred losses from inception. Losses were allocated as follows:
 
     (1) First, among the partners whose capital accounts exceed their
unreturned capital contributions in proportion to such excesses until each such
partner's capital account equals its unreturned capital contribution; and
 
     (2) Next, to the holders of Class B Units in accordance with their
unreturned capital contribution percentages.
 
     The General Partner was allocated a minimum of 0.2% to 1% of income or loss
at all times, depending on the level of capital contributions made by the
partners.
 
  MEMBERS' EQUITY
 
     Upon completion of the Vulcan Acquisition, Vulcan collectively owned 99.4%
of MCCLP through direct ownership of all LP Units and through 80% ownership of
Marcus Cable Properties, Inc. ("MCPI"), the general partner of Marcus Cable
Properties, L.P. ("MCPLP"), the general partner of MCCLP. The Minority Interest
owned the voting common stock, or the remaining 20% of MCPI. In connection with
the Vulcan Acquisition, historical partners' capital at April 22, 1998 was
eliminated and the Successor entity was initially recapitalized at $1,400,000
(see note 1). In July 1998, Vulcan contributed $20,000 in cash to the Company
relating to certain employee severance arrangements.
 
     On June 9, 1998, MCCLP was converted into a Delaware limited liability
company with two members: Vulcan Cable, Inc., with 96.2% ownership, and Marcus
Cable Properties, L.L.C. ("MCPLLC") (formerly MCPLP), with 3.8% ownership.
Vulcan Cable, Inc. owns approximately 25.6% and MCPI owns approximately 74.4% of
MCPLLC, with Vulcan's interest in MCPI unchanged. As there was no change in
ownership interests, the historical partners' capital
 
                                      F-52

<PAGE>   197
                 MARCUS CABLE COMPANY, L.L.C. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
balances at June 9, 1998 were transferred to and became the initial equity of
MCCLLC, and thus the accompanying statement of members' equity from April 22,
1998 to December 23, 1998 has been presented as if the conversion of MCCLP into
MCCLLC occurred on April 23, 1998.
 
     As of December 23, 1998, MCCLLC has 100 issued and outstanding membership
units. Income and losses of MCCLLC are allocated to the members in accordance
with their ownership interests. Members are not personally liable for
obligations of MCCLLC.
 
(4) ACQUISITIONS AND DISPOSITIONS
 
     In 1998, the Company acquired cable television systems in the Birmingham,
Alabama area for a purchase price of $57,500. The excess of the cost of
properties acquired over the amounts assigned to net tangible assets and
noncompetition agreements as of the date of acquisition was approximately
$44,603 and is included in franchises.
 
     Additionally, in 1998, the Company completed the sale of certain cable
television systems for an aggregate sales price of $405,132, resulting in a gain
of $43,662. No gains or losses were recognized on the sale of the cable
television systems divested after the Vulcan Acquisition as such amounts are
considered to be an adjustment of the purchase price allocation as these systems
were designated as assets to be sold at the date of the Vulcan Acquisition.
 
     In 1997, the Company acquired cable television systems in the Dallas-Ft.
Worth, Texas area for a purchase price of $35,263. The excess of the cost of
properties acquired over the amounts assigned to net tangible assets as of the
date of acquisition was $15,098 and is included in franchises.
 
     Additionally, in July 1997, the Company completed an exchange of cable
television systems in Indiana and Wisconsin. According to the terms of the trade
agreement, in addition to the contribution of its systems, the Company paid
$18,549.
 
     In 1996, the Company acquired cable television systems in three separate
transactions for an aggregate purchase price of $10,272. The excess of the cost
of properties acquired over the amounts assigned to net tangible assets as of
the date of acquisition was $4,861 and is included in franchises.
 
     Additionally, in 1996, the Company completed the sale of cable television
systems in Washington, D.C. for a sale price of $20,638. The sale resulted in a
gain of $6,442.
 
     The above acquisitions, which were completed during the Predecessor Period,
were accounted for using the purchase method of accounting and, accordingly,
results of operations of the acquired assets have been included in the
accompanying consolidated financial statements from the dates of acquisition.
The purchase prices were allocated to tangible and intangible assets based on
estimated fair market values at the dates of acquisition. The cable system trade
discussed above was accounted for as a nonmonetary exchange and, accordingly,
the additional cash contribution was allocated to tangible and intangible assets
based on recorded amounts of the nonmonetary assets relinquished.
 
     Unaudited pro forma operating results as though 1998 and 1997 acquisitions
and divestitures discussed above, including the Vulcan Acquisition, had occurred
on January 1, 1997, with
 
                                      F-53

<PAGE>   198
                 MARCUS CABLE COMPANY, L.L.C. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
adjustments to give effect to amortization of franchises, interest expense and
certain other adjustments is as follows:
 

<TABLE>
<CAPTION>
                                                   PERIOD FROM
                                                   JANUARY 1 TO     YEAR ENDED
                                                   DECEMBER 23,    DECEMBER 31,
                                                       1998            1997
                                                   ------------    ------------
                                                           (UNAUDITED)
<S>                                                <C>             <C>
Revenues.........................................    $444,738       $ 421,665
Operating loss...................................     (51,303)        (56,042)
Net loss.........................................    (187,342)       (190,776)
</TABLE>

 
(5) PROPERTY, PLANT AND EQUIPMENT
 
     Property, plant and equipment consists of the following at December 31,
1997:
 

<TABLE>
<CAPTION>
                                                              (PREDECESSOR)
                                                              -------------
<S>                                                           <C>
Cable distribution systems..................................    $878,721
Vehicles and other..........................................      37,943
Land and buildings..........................................      17,271
                                                                --------
                                                                 933,935
Accumulated depreciation....................................    (227,309)
                                                                --------
                                                                $706,626
                                                                ========
</TABLE>

 
     Depreciation expense for the periods from January 1, 1998 to April 22, 1998
and from April 23, 1998 to December 23, 1998 and for the years ended December
31, 1997 and 1996 was $35,929, $70,538, $96,220, and $72,281, respectively.
 
(6) OTHER ASSETS
 
     Other assets consist of the following at December 31, 1997:
 

<TABLE>
<CAPTION>
                                                              (PREDECESSOR)
                                                              -------------
<S>                                                           <C>
Debt issuance costs.........................................     $45,225
Other.......................................................       1,090
                                                                 -------
                                                                  46,315
Accumulated amortization....................................      (9,330)
                                                                 -------
                                                                 $36,985
                                                                 =======
</TABLE>

 
(7) ACCRUED LIABILITIES
 
     Accrued liabilities consist of the following at December 31, 1997:
 

<TABLE>
<CAPTION>
                                                              (PREDECESSOR)
                                                              -------------
<S>                                                           <C>
Accrued operating liabilities...............................     $27,923
Accrued programming costs...................................       9,704
Accrued franchise fees......................................      10,131
Accrued property taxes......................................       5,125
Accrued interest............................................       7,949
Other accrued liabilities...................................       7,922
                                                                 -------
                                                                 $68,754
                                                                 =======
</TABLE>

 
                                      F-54

<PAGE>   199
                 MARCUS CABLE COMPANY, L.L.C. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
(8) LONG-TERM DEBT
 
     The Company has outstanding the following borrowings on long-term debt
arrangements at December 31, 1997:
 

<TABLE>
<CAPTION>
                                                              (PREDECESSOR)
                                                              -------------
<S>                                                           <C>
Senior Credit Facility......................................   $  949,750
13 1/2% Senior Subordinated Discount Notes..................      336,304
14 1/4% Senior Discount Notes...............................      213,372
11 7/8% Senior Debentures...................................      100,000
                                                               ----------
                                                                1,599,426
Less current maturities.....................................       67,499
                                                               ----------
                                                               $1,531,927
                                                               ==========
</TABLE>

 
     In conjunction with the Vulcan Acquisition and in accordance with purchase
accounting, the Company recorded its outstanding debt at its fair value. As a
result, the Company recognized a carrying value premium (fair market value of
outstanding debt less historical carrying amount) of $108,292 as of the date of
the Vulcan Acquisition. The carrying value premium is being amortized to
interest expense over the estimated remaining lives of the related indebtedness
using the effective interest method.
 
     The Company, through MCOC, maintains a senior credit facility ("Senior
Credit Facility"), which provides for two term loan facilities, one with a
principal amount of $490,000 that matures on December 31, 2002 ("Tranche A") and
the other with a principal amount of $300,000 million that matures on April 30,
2004 ("Tranche B"). The Senior Credit Facility provides for scheduled
amortization of the two term loan facilities which began in September 1997. The
Senior Credit Facility also provides for a $360,000 revolving credit facility
("Revolving Credit Facility"), with a maturity date of December 31, 2002.
Amounts outstanding under the Senior Credit Facility bear interest at either
the: i) Eurodollar rate, ii) prime rate, or iii) CD base rate or Federal Funds
rate, plus a margin of up to 2.25%, which is subject to certain quarterly
adjustments based on the ratio of MCOC's total debt to annualized operating cash
flow, as defined. The variable interest rates ranged from 6.23% to 7.75% and
5.97% to 8.00% at December 23, 1998, and December 31, 1997, respectively. A
quarterly commitment fee ranging from 0.250% to 0.375% per annum is payable on
the unused commitment under the Senior Credit Facility.
 
     On October 16, 1998, the Company entered into an agreement to amend its
Senior Credit Facility. The amendment provides for, among other items, a
reduction in the permitted leverage and cash flow ratios, a reduction in the
interest rate charge under the Senior Credit Facility and a change in the
restriction related to the use of cash proceeds from asset sales to allow such
proceeds to be used to redeem the 11 7/8% Senior Debentures.
 
     In 1995, the Company issued $299,228 of 14 1/4% Senior Discount Notes due
December 15, 2005 (the "14 1/4% Notes") for net proceeds of $150,003. The
14 1/4% Notes are unsecured and rank pari passu to the 11 7/8% Debentures
(defined below). The 14 1/4% Notes are redeemable at the option of MCCLLC at
amounts decreasing from 107% to 100% of par beginning on June 15, 2000. No
interest is payable until December 15, 2000. Thereafter interest is payable
semi-annually until maturity. The discount on the 14 1/4% Notes is being
accreted using the effective interest method. The unamortized discount was
$85,856 at December 31, 1997.
 
     In 1994, the Company, through MCOC, issued $413,461 face amount of 13 1/2%
Senior Subordinated Discount Notes due August 1, 2004 (the "13 1/2% Notes") for
net proceeds of
 
                                      F-55

<PAGE>   200
                 MARCUS CABLE COMPANY, L.L.C. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
$215,000. The 13 1/2% Notes are unsecured, are guaranteed by MCCLLC and are
redeemable, at the option of MCOC, at amounts decreasing from 105% to 100% of
par beginning on August 1, 1999. No interest is payable on the 13 1/2% Notes
until February 1, 2000. Thereafter, interest is payable semi-annually until
maturity. The discount on the 13 1/2% Notes is being accreted using the
effective interest method. The unamortized discount was $77,157 at December 31,
1997.
 
     In 1993, the Company issued $100,000 principal amount of 11 7/8% Senior
Debentures due October 1, 2005 (the "11 7/8% Debentures"). The 11 7/8%
Debentures were unsecured and were redeemable at the option of the Company on or
after October 1, 1998 at amounts decreasing from 105.9% to 100% of par at
October 1, 2002, plus accrued interest, to the date of redemption. Interest on
the 11 7/8% Debentures was payable semi-annually each April 1 and October 1
until maturity.
 
     On July 1, 1998, $4,500 face amount of the 14 1/4% Notes and $500 face
amount of the 11 7/8% Notes were tendered for gross tender payments of $3,472
and $520 respectively. The payments resulted in a gain on the retirement of the
debt of $753. On December 11, 1998, the 11 7/8% Notes were redeemed for a gross
payment of $107,668, including accrued interest. The redemption resulted in a
gain on the retirement of the debt of $1,631.
 
     The 14 1/4% Notes, 13 1/2% Notes, 11 7/8% Debentures and Senior Credit
Facility are all unsecured and require the Company and/or its subsidiaries to
comply with various financial and other covenants, including the maintenance of
certain operating and financial ratios. These debt instruments also contain
substantial limitations on, or prohibitions of, distributions, additional
indebtedness, liens, asset sales and certain other items.
 
(9) FAIR VALUE OF FINANCIAL INSTRUMENTS
 
     The carrying and fair values of the Company's significant financial
instruments as of December 31, 1997 are as follows:
 

<TABLE>
<CAPTION>
                                                                  (PREDECESSOR)
                                                               -------------------
                                                               CARRYING     FAIR
                                                                VALUE      VALUE
                                                               --------    -----
<S>                                                            <C>        <C>
Senior Credit Facility......................................   $949,750   $949,750
13 1/2% Notes...............................................    336,304    381,418
14 1/4% Notes...............................................    213,372    258,084
11 7/8% Debentures..........................................    100,000    108,500
</TABLE>

 
     The carrying amount of the Senior Credit Facility approximates fair value
as the outstanding borrowings bear interest at market rates. The fair values of
the 14 1/4% Notes, 13 1/2% Notes, and 11 7/8% Debentures, are based on quoted
market prices. The Company had interest rate swap agreements covering a notional
amount of $500,000 at December 31, 1997.
 
     The weighted average interest pay rate for the interest rate swap
agreements was 5.7% at December 31, 1997. Certain of these agreements allow for
optional extension by the counterparty or for automatic extension in the event
that one month LIBOR exceeds a stipulated rate on any monthly reset date.
Approximately $100,000 notional amount included in the $500,000 notional amount
described above is also modified by an interest rate cap agreement which resets
monthly.
 
     The notional amounts of the 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
 
                                      F-56

<PAGE>   201
                 MARCUS CABLE COMPANY, L.L.C. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
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 values of the interest rate hedge agreements generally reflect 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 Senior Credit Facility thereby reducing the exposure
to credit loss. The Company has policies regarding the financial stability and
credit standing of the 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.
 
(10) RELATED PARTY TRANSACTIONS
 
     The Company and Charter entered into a management agreement on October 6,
1998 whereby Charter began to manage the day-to-day operations of the Company.
In consideration for the management consulting services provided by Charter,
Marcus pays Charter an annual fee equal to 3% of the gross revenues of the cable
system operations, plus expenses. From October 6, 1998 to December 23, 1998,
management fees under this agreement were $3,048.
 
     Prior to the consummation of the Vulcan Acquisition, affiliates of Goldman
Sachs owned limited partnership interests in MCCLP. Maryland Cable Partners,
L.P. ("Maryland Cable"), which was controlled by an affiliate of Goldman Sachs,
owned the Maryland Cable systems. MCOC managed the Maryland Cable systems under
the Maryland Cable Agreement. Pursuant to such agreement, MCOC earned a
management fee equal to 4.7% of the revenues of Maryland Cable.
 
     Effective January 31, 1997, Maryland Cable was sold to a third party.
Pursuant to the Maryland Cable Agreement, MCOC recognized incentive management
fees of $5,069 during the twelve months ended December 31, 1997 in conjunction
with the sale. Although MCOC is no longer involved in the active management of
the Maryland Cable systems, MCOC has entered into an agreement with Maryland
Cable to oversee the activities, if any, of Maryland Cable through the
liquidation of the partnership. Pursuant to such agreement, MCOC earns a nominal
monthly fee. During the periods from January 1, 1998 to April 22, 1998 and from
April 23, 1998 to December 23, 1998, MCOC earned total management fees of $374
and $181, respectively. Including the incentive management fees noted above,
during the years ended December 31, 1997 and 1996, MCOC earned total management
fees of $5,614 and $2,335, respectively.
 
(11) EMPLOYEE BENEFIT PLAN
 
     The Company sponsors a 401(k) plan for its employees whereby employees that
qualify for participation under the plan 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 matches participant
contributions up to a maximum of 2% of a participant's salary. For the periods
from January 1, 1998 to April 22, 1998 and from April 23, 1998 to December 23,
1998, and for the years ended December 31, 1997 and 1996, the Company made
contributions to the plan of $329, $536, $761 and $480, respectively.
 
                                      F-57

<PAGE>   202
                 MARCUS CABLE COMPANY, L.L.C. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
(12) COMMITMENTS AND CONTINGENCIES
 
  LEASES
 
     The Company leases certain facilities and equipment under noncancelable
operating leases. Lease and rental costs charged to expense for the periods from
January 1, 1998 to April 22, 1998 and from April 23, 1998 to December 23, 1998,
and for the years ended December 31, 1997 and 1996 were $1,098, $2,222, $3,230,
and $2,767, respectively. 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 for pole
attachments for the periods from January 1, 1998 to April 22, 1998 and from
April 23, 1998 to December 23, 1998 and for the years ended December 31, 1997
and 1996 were $1,372 , $2,620, $4,314, and $4,008, respectively.
 
  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 23,
1998, the amount returned 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 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 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 financial position or results of operations.
 
                                      F-58

<PAGE>   203
                 MARCUS CABLE COMPANY, L.L.C. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     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.
 
  LITIGATION
 
     In Alabama, Indiana, Texas and Wisconsin, customers have filed punitive
class action lawsuits on behalf of all person residing in those respective
states who are or were potential customers of the Company's cable television
service, and who have been charged a processing fee for delinquent payment of
their cable bill. The actions challenge the legality of the processing fee and
seek declaratory judgment, injunctive relief and unspecified damages. In Alabama
and Wisconsin, the Company has entered into joint speculation and case
management orders with attorneys for plaintiffs. A Motion to Dismiss is pending
in Indiana. The Company intends to vigorously defend the actions. At this stage
of the actions, the Company is not able to project the expenses of defending the
actions or the potential outcome of the actions, including the impact on the
consolidated financial position or results of operations.
 
     The Company is also party to lawsuits which are generally incidental to 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.
 
(13) SUBSEQUENT EVENT (UNAUDITED)
 
     In March 1999, concurrent with the issuance of Senior Notes and Senior
Discount Notes, the combined company (Charter and the Company, see note 1)
extinguished all long-term debt, excluding borrowings of Charter and the Company
under their respective credit agreements, and refinanced all existing credit
agreements at various subsidiaries of the Company and Charter with a new credit
agreement entered into by a wholly owned subsidiary of the combined company.
 
                                      F-59

<PAGE>   204
 
 
                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
 
To CCA Group:
 
     We have audited the accompanying combined balance sheet of CCA Holdings
Corp., CCT Holdings Corp. and Charter Communications Long Beach, Inc.
(collectively CCA Group) and subsidiaries as of December 31, 1997, and the
related combined statements of operations, shareholders' deficit and cash flows
for the period from January 1, 1998, through December 23, 1998, and for the
years ended December 31, 1997 and 1996. These combined financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
 
     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
     In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of CCA Group and
subsidiaries as of December 31, 1997, and the combined results of their
operations and their cash flows for the period from January 1, 1998, through
December 23, 1998, and for the years ended December 31, 1997 and 1996, in
conformity with generally accepted accounting principles.
 
/s/ ARTHUR ANDERSEN LLP
 
St. Louis, Missouri,
  February 5, 1999

 
                                      F-60

<PAGE>   205
 
                                   CCA GROUP
 
                  COMBINED BALANCE SHEET -- DECEMBER 31, 1997
                             (DOLLARS IN THOUSANDS)
 

<TABLE>
<S>                                                           <C>
                                 ASSETS
CURRENT ASSETS:
  Cash and cash equivalents.................................  $    4,501
  Accounts receivable, net of allowance for doubtful
     accounts of $926.......................................       9,407
  Prepaid expenses and other................................       1,988
  Deferred income tax asset.................................       5,915
                                                              ----------
          Total current assets..............................      21,811
                                                              ----------
RECEIVABLE FROM RELATED PARTY, including accrued interest...      13,090
                                                              ----------
INVESTMENT IN CABLE TELEVISION PROPERTIES:
  Property, plant and equipment.............................     352,860
  Franchises, net of accumulated amortization of $132,871...     806,451
                                                              ----------
                                                               1,159,311
                                                              ----------
OTHER ASSETS................................................      13,731
                                                              ----------
                                                              $1,207,943
                                                              ==========
                 LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:
  Current maturities of long-term debt......................  $   25,625
  Accounts payable and accrued expenses.....................      48,554
  Payables to manager of cable television systems -- related
     party..................................................       1,975
                                                              ----------
          Total current liabilities.........................      76,154
                                                              ----------
DEFERRED REVENUE............................................       1,882
                                                              ----------
DEFERRED INCOME TAXES.......................................     117,278
                                                              ----------
LONG-TERM DEBT, less current maturities.....................     758,795
                                                              ----------
DEFERRED MANAGEMENT FEES....................................       4,291
                                                              ----------
NOTES PAYABLE, including accrued interest...................     348,202

                                                              ----------
SHAREHOLDERS' DEFICIT:
  Common stock..............................................           1
  Additional paid-in capital................................     128,499
  Accumulated deficit.......................................    (227,159)
                                                              ----------
          Total shareholders' deficit.......................     (98,659)
                                                              ----------
                                                              $1,207,943
                                                              ==========
</TABLE>

 
   The accompanying notes are an integral part of these combined statements.
                                      F-61

<PAGE>   206
 
                                   CCA GROUP
 
                       COMBINED STATEMENTS OF OPERATIONS
                             (DOLLARS IN THOUSANDS)
 

<TABLE>
<CAPTION>
                                                         PERIOD FROM
                                                         JANUARY 1,           YEAR ENDED
                                                        1998, THROUGH        DECEMBER 31
                                                        DECEMBER 23,     --------------------
                                                            1998           1997        1996
                                                        -------------      ----        ----
<S>                                                     <C>              <C>         <C>
REVENUES..............................................    $ 324,432      $289,697    $233,392
                                                          ---------      --------    --------
EXPENSES:
  Operating costs.....................................      135,705       122,917     102,977
  General and administrative..........................       28,440        26,400      18,687
  Depreciation and amortization.......................      136,689       116,080      96,547
  Management fees -- related parties..................       17,392        11,414       8,634
                                                          ---------      --------    --------
                                                            318,226       276,811     226,845
                                                          ---------      --------    --------
     Income from operations...........................        6,206        12,886       6,547
                                                          ---------      --------    --------
OTHER INCOME (EXPENSE):
  Interest income.....................................        4,962         2,043       1,883
  Interest expense....................................     (113,824)     (108,122)    (88,999)
  Other, net..........................................         (294)          171      (2,504)
                                                          ---------      --------    --------
                                                           (109,156)     (105,908)    (89,620)
                                                          ---------      --------    --------
     Net loss.........................................    $(102,950)     $(93,022)   $(83,073)
                                                          =========      ========    ========
</TABLE>

 
   The accompanying notes are an integral part of these combined statements.
                                      F-62

<PAGE>   207
 
                                   CCA GROUP
 
                  COMBINED STATEMENTS OF SHAREHOLDERS' DEFICIT
                             (DOLLARS IN THOUSANDS)
 

<TABLE>
<CAPTION>
                                                       ADDITIONAL
                                             COMMON     PAID-IN      ACCUMULATED
                                             STOCK      CAPITAL        DEFICIT        TOTAL
                                             ------    ----------    -----------      -----
<S>                                          <C>       <C>           <C>            <C>
BALANCE, December 31, 1995.................   $ 1       $ 99,999      $ (51,064)    $  48,936
  Net loss.................................    --             --        (83,073)      (83,073)
                                              ---       --------      ---------     ---------
BALANCE, December 31, 1996.................     1         99,999       (134,137)      (34,137)
  Capital contributions....................    --         28,500             --        28,500
  Net loss.................................    --             --        (93,022)      (93,022)
                                              ---       --------      ---------     ---------
BALANCE, December 31, 1997.................     1        128,499       (227,159)      (98,659)
  Capital contributions....................    --          5,684             --         5,684
  Net loss.................................    --             --       (102,950)     (102,950)
                                              ---       --------      ---------     ---------
BALANCE, December 23, 1998.................   $ 1       $134,183      $(330,109)    $(195,925)
                                              ===       ========      =========     =========
</TABLE>

 
   The accompanying notes are an integral part of these combined statements.
                                      F-63

<PAGE>   208
 
                                   CCA GROUP
 
                       COMBINED STATEMENTS OF CASH FLOWS
                             (DOLLARS IN THOUSANDS)
 

<TABLE>
<CAPTION>
                                                        PERIOD FROM
                                                        JANUARY 1,           YEAR ENDED
                                                       1998, THROUGH         DECEMBER 31
                                                       DECEMBER 23,     ---------------------
                                                           1998           1997        1996
                                                       -------------      ----        ----
<S>                                                    <C>              <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss...........................................    $(102,950)     $(93,022)   $ (83,073)
  Adjustments to reconcile net loss to net cash
     provided by operating activities --
     Depreciation and amortization...................      136,689       116,080       96,547
     Amortization of debt issuance costs and non cash
       interest cost.................................       44,701        49,107       39,927
     (Gain) loss on sale of property, plant and
       equipment.....................................          511          (156)       1,257
     Changes in assets and liabilities, net of
       effects from acquisitions --
       Accounts receivable, net......................        4,779           222       (1,393)
       Prepaid expenses and other....................          243          (175)         216
       Accounts payable and accrued expenses.........        3,849         8,797        3,855
       Payables to manager of cable television
          systems, including deferred management
          fees.......................................        3,485           784          448
       Deferred revenue..............................        1,336           559         (236)
       Other operating activities....................        5,583        (3,207)       1,372
                                                         ---------      --------    ---------
       Net cash provided by operating activities.....       98,226        78,989       58,920
                                                         ---------      --------    ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of property, plant and equipment.........      (95,060)      (82,551)     (56,073)
  Payments for acquisitions, net of cash acquired....           --      (147,187)    (122,017)
  Other investing activities.........................       (2,898)       (1,296)          54
                                                         ---------      --------    ---------
     Net cash used in investing activities...........      (97,958)     (231,034)    (178,036)
                                                         ---------      --------    ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Borrowings of long-term debt.......................      300,400       162,000      127,000
  Repayments of long-term debt.......................      (64,120)      (39,580)     (13,100)
  Payments of debt issuance costs....................       (8,442)       (3,360)      (3,126)
  Repayments under notes payable.....................     (230,994)           --           --
  Capital contributions..............................           --        28,500           --
                                                         ---------      --------    ---------
     Net cash provided by (used in) financing
       activities....................................       (3,156)      147,560      110,774
                                                         ---------      --------    ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS............       (2,888)       (4,485)      (8,342)
CASH AND CASH EQUIVALENTS, beginning of period.......        4,501         8,986       17,328
                                                         ---------      --------    ---------
CASH AND CASH EQUIVALENTS, end of period.............    $   1,613      $  4,501    $   8,986
                                                         =========      ========    =========
CASH PAID FOR INTEREST...............................    $ 179,781      $ 49,687    $  51,434
                                                         =========      ========    =========
</TABLE>

 
   The accompanying notes are an integral part of these combined statements.
                                      F-64

<PAGE>   209
 
                                   CCA GROUP
 
                     NOTES TO COMBINED FINANCIAL STATEMENTS
                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
 
1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
 
  ORGANIZATION AND BASIS OF PRESENTATION
 
     CCA Group consists of CCA Holdings Corp. (CCA Holdings), CCT Holdings Corp.
(CCT Holdings) and Charter Communications Long Beach, Inc. (CC-LB), all Delaware
corporations (collectively referred to as "CCA Group" or the "Company") and
their subsidiaries. The combined financial statements of each of these companies
have been combined by virtue of their common ownership and management. All
material intercompany transactions and balances have been eliminated.
 
     CCA Holdings commenced operations in January 1995 in connection with
consummation of the Crown Transaction (as defined below). The accompanying
financial statements include the accounts of CCA Holdings; its wholly-owned
subsidiary, CCA Acquisition Corp. (CAC); CAC's wholly-owned subsidiary, Cencom
Cable Entertainment, Inc. (CCE); and Charter Communications Entertainment I,
L.P. (CCE-I), which is controlled by CAC through its general partnership
interest. Through December 23, 1998, CCA Holdings was approximately 85% owned by
Kelso Investment Associates V, L.P., an investment fund, together with an
affiliate (collectively referred to as "Kelso" herein) and certain other
individuals and approximately 15% by Charter Communications, Inc. (Charter),
manager of CCE-I's cable television systems.
 
     CCT Holdings was formed on January 6, 1995. CCT Holdings commenced
operations in September 1995 in connection with consummation of the Gaylord
Transaction (as defined below). The accompanying financial statements include
the accounts of CCT Holdings and Charter Communications Entertainment II, L.P.
(CCE-II), which is controlled by CCT Holdings through its general partnership
interest. Through December 23, 1998, CCT Holdings was owned approximately 85% by
Kelso and certain other individuals and approximately 15% by Charter, manager of
CCE-II's cable television systems.
 
     In January 1995, CAC completed the acquisition of certain cable television
systems from Crown Media, Inc. (Crown), a subsidiary of Hallmark Cards,
Incorporated (Hallmark) (the "Crown Transaction"). On September 29, 1995, CAC
and CCT Holdings entered into an Asset Exchange Agreement whereby CAC exchanged
a 1% undivided interest in all of its assets for a 1.22% undivided interest in
certain assets to be acquired by CCT Holdings from an affiliate of Gaylord
Entertainment Company, Inc. (Gaylord). Effective September 30, 1995, CCT
Holdings acquired certain cable television systems from Gaylord (the "Gaylord
Transaction"). Upon execution of the Asset Purchase Agreement, CAC and CCT
Holdings entered into a series of agreements to contribute the assets acquired
under the Crown Transaction to CCE-I and certain assets acquired in the Gaylord
acquisition to CCE-II. Collectively, CCA Holdings and CCT Holdings own 100% of
CCE-I and CCE-II.
 
     CC-LB was acquired by Kelso and Charter in May 1997. The accompanying
financial statements include the accounts of CC-LB and its wholly owned
subsidiary, Long Beach Acquisition Corp. (LBAC) from the date of acquisition.
Through December 23, 1998, CC-LB was owned approximately 85% by Kelso and
certain other individuals and approximately 15% by Charter, manager of LBAC's
cable television systems.
 
     Effective December 23, 1998, Paul G. Allen acquired 94% of Charter through
a series of transactions. In conjunction with Mr. Allen's acquisition, Charter
acquired 100% of the outstanding stock of CCA Holdings, CCT Holdings and CC-LB
on December 23, 1998.
 
                                      F-65

<PAGE>   210
                                   CCA GROUP
 
             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
     In 1998, CCE-I provided cable television service to customers in
Connecticut, Illinois, Massachusetts, Missouri and New Hampshire, CCE-II
provided cable television service to customers in California and LBAC provided
cable television service to customers in Long Beach, California, and certain
surrounding areas.
 
  CASH EQUIVALENTS
 
     The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents. At December 31, 1997,
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
installation. The costs of disconnecting a residence are charged to expense in
the period incurred. Expenditures for repairs and maintenance are charged to
expense as incurred, and equipment replacement costs 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>

 
In 1997, the Company shortened the estimated useful lives of certain property,
plant and equipment for depreciation purposes. As a result, additional
depreciation of $8,123 was recorded during 1997.
 
  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 amortized using the straight-line method over 15
years.
 
  OTHER ASSETS
 
     Debt issuance costs are amortized to interest expense over the term of the
related debt. The interest rate cap costs are being amortized over the terms of
the agreement, which approximates three years.
 
  INCOME TAXES
 
     Income taxes are recorded in accordance with SFAS No. 109, "Accounting for
Income Taxes".
 
  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-66

<PAGE>   211
                                   CCA GROUP
 
             NOTES TO COMBINED 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.  ACQUISITIONS:
 
     In 1997, CC-LB acquired the stock of LBAC for an aggregate purchase price,
net of cash acquired, of $147,200. In connection with the completion of this
acquisition, LBAC recorded $55,900 of deferred income tax liabilities resulting
from differences between the financial reporting and tax basis of certain assets
acquired. The excess of the cost of properties acquired over the amounts
assigned to net tangible assets at the date of acquisition was $190,200 and is
included in franchises.
 
     In 1996, the Company acquired cable television systems in three separate
transactions for an aggregate purchase price, net of cash acquired, of $122,000.
The excess of the cost of properties acquired over the amounts assigned to net
tangible assets at the dates of acquisition was $100,200 and is included in
franchises.
 
     The above acquisitions were accounted for using the purchase method of
accounting, and accordingly, results of operations of the acquired assets have
been included in the financial statements from the dates of the acquisitions.
 
     Unaudited pro forma operating results for the 1997 acquisitions as though
the acquisitions had been made on January 1, 1997, with pro forma adjustments to
give effect to amortization of franchises, interest expense and certain other
adjustments as follows:
 

<TABLE>
<CAPTION>
                                                                 YEAR ENDED
                                                                DECEMBER 31,
                                                                    1997
                                                                 (UNAUDITED)
                                                                -------------
<S>                                                             <C>
Revenues....................................................      $303,797
Income from operations......................................        14,108
Net loss....................................................       (94,853)
</TABLE>

 
     The unaudited pro forma information has been presented for comparative
purposes and does not purport to be indicative of the results of operations had
these transactions been completed as of the assumed date or which may be
obtained in the future.
 
3.  RECEIVABLE FROM RELATED PARTY:
 
     In connection with the transfer of certain assets acquired in the Gaylord
Transaction to Charter Communications Properties, Inc. (CCP), Charter
Communications Properties Holding Corp. (CCP Holdings), the parent of CCP and a
wholly owned subsidiary of Charter, entered into a $9,447 promissory note with
CCT Holdings. The promissory note bears interest at the rates paid by CCT
Holdings on the Gaylord Seller Note. Principal and interest are due on September
29, 2005. Interest income has been accrued based on an average rate of interest
over the life of the Gaylord Seller Note, which approximates 15.4% and totaled
$1,899 for the period from January 1, 1998, through December 23, 1998, and
$1,806 and $1,547 for the years ended December 31, 1997 and 1996, respectively.
As of December 31, 1997, interest receivable totaled $3,643.
 
                                      F-67

<PAGE>   212
                                   CCA GROUP
 
             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
4.  PROPERTY, PLANT AND EQUIPMENT:
 
     Property, plant and equipment consists of the following at December 31,
1997:
 

<TABLE>
<S>                                                             <C>
Cable distribution systems..................................    $ 426,241
Land, buildings and leasehold improvements..................       15,443
Vehicles and equipment......................................       24,375
                                                                ---------
                                                                  466,059
Less -- Accumulated depreciation............................     (113,199)
                                                                ---------
                                                                $ 352,860
                                                                =========
</TABLE>

 
     Depreciation expense for the period from January 1, 1998, through December
23, 1998, and for the years ended December 31, 1997 and 1996, was $72,914,
$59,599 and $39,575, respectively.
 
5.  OTHER ASSETS:
 
     Other assets consists of the following at December 31, 1997:
 

<TABLE>
<S>                                                             <C>
Debt issuance costs.........................................    $13,416
Note receivable.............................................      2,100
Other.......................................................      1,342
                                                                -------
                                                                 16,858
Less -- Accumulated amortization............................     (3,127)
                                                                -------
                                                                $13,731
                                                                =======
</TABLE>

 
6.  ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
 
     Accounts payable and accrued expenses consist of the following at December
31, 1997:
 

<TABLE>
<S>                                                             <C>
Accrued interest............................................    $ 8,389
Franchise fees..............................................      6,434
Programming expenses........................................      5,855
Accounts payable............................................      4,734
Public education and governmental costs.....................      4,059
Salaries and related benefits...............................      3,977
Capital expenditures........................................      3,629
Other.......................................................     11,477
                                                                -------
                                                                $48,554
                                                                =======
</TABLE>

 
                                      F-68

<PAGE>   213
                                   CCA GROUP
 
             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
7.  LONG-TERM DEBT:
 
     Long-term debt consists of the following at December 31, 1997:
 

<TABLE>
<S>                                                           <C>
CCE-I:
  Term loans................................................  $274,120
  Fund loans................................................    85,000
  Revolving credit facility.................................   103,800
                                                              --------
                                                               462,920
                                                              --------
CCE-II:
  Term loans................................................   105,000
  Revolving credit facility.................................   123,500
                                                              --------
                                                               228,500
                                                              --------
LBAC:
  Term loans................................................    85,000
  Revolving credit facility.................................     8,000
                                                              --------
                                                                93,000
                                                              --------
          Total debt........................................   784,420
Less -- Current maturities..................................   (25,625)
                                                              --------
          Total long-term debt..............................  $758,795
                                                              ========
</TABLE>

 
  CCE-I CREDIT AGREEMENT
 
     CCE-I maintains a credit agreement (the "CCE-I Credit Agreement"), which
provides for a $280,000 term loan that matures on September 30, 2006, an $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 of up to 2.75%. The variable interest rate ranged from
6.88% to 8.06% at December 23, 1998, and from 7.63% to 8.50% and 7.63% to 8.38%
at December 31, 1997 and 1996, respectively.
 
     Commencing June 30, 2002, and at the end of each calendar quarter
thereafter, available borrowings under the revolving credit facility and the
term loan shall be reduced on an annual basis by 12.0% in 2002 and 15.0% in
2003. Commencing June 30, 2002, and at the end of each calendar quarter
thereafter, the available borrowings for the fund loan shall be reduced on an
annual basis by 0.75% in 2002 and 1.0% in 2003. A quarterly commitment fee of
between 0.375% and 0.5% per annum is payable on the unborrowed balance of the
revolving credit facility.
 
  COMBINED CREDIT AGREEMENT
 
     CCE-II and LBAC maintain a credit agreement (the "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 Combined Credit
Agreement also provides for a $185,000 revolving credit facility, with a
maturity date of March 31, 2005. Amounts under the Combined Credit Agreement
bear interest at either the LIBOR Rate or Base Rate, as defined, plus a margin
of up to 2.5%. The variable interest rate ranged from 6.56% to 7.59% at December
23, 1998, and from 7.50% to 8.38% at December 31, 1997, respectively.
 
                                      F-69

<PAGE>   214
                                   CCA GROUP
 
             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
     Commencing March 31, 2001, and at the end of each quarter thereafter,
available borrowings under the revolving credit facility and one term loan shall
be reduced on an annual basis by 5.0% in 2001, 15.0% in 2002 and 18.0% in 2003.
Commencing in December 31, 1999, and at the end of each quarter thereafter,
available borrowings under the other term loan shall be reduced on annual basis
by 0.5% in 1999, 0.8% in 2000, 1.0% in 2001, 1.0% in 2002 and 1.0% in 2003. A
quarterly commitment fee of between 0.25% and 0.375% per annum, based upon the
intercompany indebtedness of the Company, is payable on the unborrowed balance
of the revolving credit facility.
 
  CCE CREDIT AGREEMENT
 
     In October 1998, Charter Communications Entertainment, L.P. (CCE L.P.), a
98% direct and indirect owner of CCE-I and CCE-II and indirectly owned
subsidiary of the Company, entered into a credit agreement (the "CCE L.P. 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 L.P. Credit
Agreement bear interest at the LIBOR Rate or Base Rate, as defined, plus a
margin of up to 3.25%. The variable interest rate at December 23, 1998, was
8.62%.
 
     Commencing June 30, 2002, and the end of each calendar quarter thereafter,
the available borrowings for the term loan shall be reduced on an annual basis
by 0.75% in 2002 and 1.0% in 2003.
 
  CCE-II HOLDINGS CREDIT AGREEMENT
 
     CCE-II Holdings, LLC (CCE-II Holdings), a wholly owned subsidiary of CCE
L.P. and the parent of CCE-II, entered into a credit agreement (the "CCE-II
Holdings Credit Agreement") in November 1998, 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 of up to 3.25%. The
variable rate at December 23, 1998, was 8.56%.
 
     Commencing June 30, 2002, and at the end of each quarter thereafter,
available borrowings under the revolving credit facility and one term loan shall
be reduced on an annual basis by 0.5% in 2002 and 1.0% in 2003.
 
     The credit agreements require the Company to comply with various financial
and nonfinancial covenants, including the maintenance of annualized operating
cash flow to fixed charge ratio, as defined, not to exceed 1.0 to 1.0. These
debt instruments also contain substantial limitations on, or prohibitions of,
distributions, additional indebtedness, liens asset sales and certain other
items.
 
8.  NOTES PAYABLE:
 
     Notes payable consists of the following at December 31, 1997:
 

<TABLE>
<S>                                                           <C>
HC Crown Note...............................................  $ 82,000
Accrued interest on HC Crown Note...........................    36,919
Gaylord Seller Note.........................................   165,688
Accrued interest on Gaylord Seller Note.....................    63,595
                                                              --------
          Total.............................................  $348,202
                                                              ========
</TABLE>

 
     In connection with the Crown Transaction, the Company entered into an
$82,000 senior subordinated loan agreement with a subsidiary of Hallmark, HC
Crown Corp., and pursuant to
 
                                      F-70

<PAGE>   215
                                   CCA GROUP
 
             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
such loan agreement issued a senior subordinated note (the "HC Crown Note"). The
HC Crown Note was an unsecured obligation. The HC Crown Note was limited in
aggregate principal amount to $82,000 and has a stated maturity date of December
31, 1999 (the "Stated Maturity Date"). Interest has been accrued at 13% per
annum, compounded semiannually, payable upon maturity. In October 1998, the
Crown Note and accrued interest was paid in full.
 
     In connection with the Gaylord Transaction, CCT Holdings entered into a
$165,700 subordinated loan agreement with Gaylord (the "Gaylord Seller Note").
Interest expense has been accrued based on an average rate of interest over the
life of the Gaylord Seller Note, which approximated 15.4%.
 
     In connection with the Gaylord Transaction, CCT Holdings, CCE L.P. and
Gaylord entered into a contingent payment agreement (the "Contingent
Agreement"). The Contingent Agreement indicates CCE L.P. will pay Gaylord 15% of
any amount distributed to CCT Holdings in excess of the total of the Gaylord
Seller Note, Crown Seller Note and $450,000. In conjunction with the Paul G.
Allen acquisition of Charter and the Company, Gaylord was paid an additional
$132,000 pursuant to the Contingent Agreement and the Gaylord Seller Note was
paid in full.
 
9.  FAIR VALUE OF FINANCIAL INSTRUMENTS:
 
     A summary of debt and the related interest rate hedge agreements at
December 31, 1997, is as follows:
 

<TABLE>
<CAPTION>
                                                                        1997
                                                          --------------------------------
                                                          CARRYING    NOTIONAL      FAIR
                                                           VALUE       AMOUNT      VALUE
                                                          --------    --------     -----
<S>                                                       <C>         <C>         <C>
DEBT
Debt under credit agreements............................  $784,420    $     --    $784,420
HC Crown Note (including accrued interest)..............   118,919          --     118,587
Gaylord Seller Note (including accrued interest)........   229,283          --     214,074
INTEREST RATE HEDGE AGREEMENTS
Swaps...................................................        --     405,000      (1,214)
Caps....................................................        --     120,000          --
Collars.................................................        --     190,000        (437)
</TABLE>

 
     As the long-term debt under the credit agreements bear interest at current
market rates, their carrying amount approximates fair market value at December
31, 1997. Fair value of the HC Crown Note is based upon trading activity at
December 31, 1997. Fair value of the Gaylord Seller Note is based on current
redemption value.
 
     The weighted average interest pay rate for the Company's interest rate swap
agreements was 7.82% at December 31, 1997. The weighted average interest rate
for the Company's interest rate cap agreements was 8.49% at December 31, 1997.
The weighted average interest rates for the Company's interest rate collar
agreements were 9.04% and 7.57% for the cap and floor components, respectively,
at December 31, 1997.
 
     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.
 
                                      F-71

<PAGE>   216
                                   CCA GROUP
 
             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
     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 Senior Credit Facility 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 results of
operations or the financial position of the Company.
 
10.  COMMON STOCK:
 
     The Company's common stock consist of the following at December 31, 1997:
 

<TABLE>
<S>                                                             <C>
CCA Holdings:
  Common stock -- Class A, voting, $.01 par value, 100,000
     shares authorized; 75,515 shares issued and
     outstanding............................................    $ 1
  Common stock -- Class B, voting, $.01 par value, 20,000
     shares authorized; 4,300 shares issued and
     outstanding............................................     --
  Common stock -- Class C, nonvoting, $.01 par value, 5,000
     shares authorized; 185 shares issued and outstanding...     --
                                                                ---
                                                                  1
                                                                ---
CCT Holdings:
  Common stock -- Class A, voting, $.01 par value, 20,000
     shares authorized; 16,726 shares issued and
     outstanding............................................     --
  Common stock -- Class B, voting, $.01 par value, 4,000
     shares authorized; 3,000 shares issued and
     outstanding............................................     --
  Common stock -- Class C, nonvoting, $.01 par value, 1,000
     shares authorized; 275 shares issued and outstanding...     --
                                                                ---
CC-LB:
  Common stock -- Class A, voting, $.01 par value, 31,000
     shares authorized, 27,850 shares issued and
     outstanding............................................     --
  Common stock -- Class B, voting, $.01 par value, 2,000
     shares authorized, 1,500 shares issued and
     outstanding............................................     --
  Common stock -- Class C, nonvoting, $.01 par value, 2,000
     shares authorized, 650 shares issued and outstanding...     --
                                                                ---
          Total common stock................................    $ 1
                                                                ===
</TABLE>

 
  CCA HOLDINGS
 
     The Class A Voting Common Stock (CCA Class A Common Stock) and Class C
Nonvoting Common Stock (CCA Class C Common Stock) have certain preferential
rights upon liquidation of CCA Holdings. In the event of liquidation,
dissolution or "winding up" of CCA Holdings, holders of CCA Class A and Class C
Common Stock are entitled to a preference of $1,000 per share. After such amount
is paid, holders of Class B Voting Common Stock (CCA Class B Common Stock) are
entitled to receive $1,000 per share. Thereafter, Class A and Class C
shareholders shall ratably receive the remaining proceeds.
 
                                      F-72

<PAGE>   217
                                   CCA GROUP
 
             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
     If upon liquidation, dissolution or "winding up" the assets of CCA Holdings
are insufficient to permit payment to Class A and Class C shareholders for their
full preferential amounts, all assets of CCA Holdings shall then be distributed
ratably to Class A and Class C shareholders. Furthermore, if the proceeds from
liquidation are inadequate to pay Class B shareholders their full preferential
amounts, the proceeds are to be distributed on a pro rata basis to Class B
shareholders.
 
     Upon the occurrence of any Conversion Event (as defined within the Amended
and Restated Certificate of Incorporation) Class C shareholders may convert any
or all of their outstanding shares into the same number of Class A shares.
Furthermore, CCA Holdings may automatically convert outstanding Class C shares
into the same number of Class A shares.
 
     CCA Holdings is restricted from making cash dividends on its common stock
until the balance outstanding under the HC Crown Note is repaid.
 
     Charter and Kelso entered into a Stockholders' Agreement providing for
certain restrictions on the transfer, sale or purchase of CCA Holdings' common
stock.
 
  CCT HOLDINGS
 
     The Class A Voting Common Stock (CCT Class A Common Stock) and Class C
Nonvoting Common Stock (CCT Class C Common Stock) have certain preferential
rights upon liquidation of CCT Holdings. In the event of liquidation,
dissolution or "winding up" of CCT Holdings, holders of CCT Class A Common Stock
and Class C Common Stock are entitled to a preference of $1,000 per share. After
such amount is paid, holders of Class B Voting Common Stock (CCT Class B Common
Stock) are entitled to receive $1,000 per share. Thereafter, Class A and Class C
shareholders shall ratably receive the remaining proceeds.
 
     If upon liquidation, dissolution or "winding up" the assets of CCT Holdings
are insufficient to permit payment to Class A Common Stock and Class C
shareholders for their full preferential amount, all assets of the Company shall
then be distributed ratably to Class A and Class C shareholders. Furthermore, if
the proceeds from liquidation are inadequate to pay Class B shareholders their
full preferential amount, the proceeds are to be distributed on a pro rata basis
to Class B shareholders.
 
     Upon the occurrence of any Conversion Event (as defined within the Amended
and Restated Certificate of Incorporation), Class C shareholders may convert any
or all of their outstanding shares into the same number of Class A shares.
Furthermore, CCT Holdings may automatically convert outstanding Class C shares
into the same number of Class A shares.
 
     CCT Holdings is restricted from making cash dividends on its common stock
until the balance outstanding under the note payable to seller is repaid.
 
     Charter and Kelso entered into a Stockholders' Agreement providing for
certain restrictions on the transfer, sale or purchase of CCT Holdings' common
stock.
 
  CC-LB
 
     The Class A Voting Common Stock (CC-LB Class A Common Stock) and Class C
Nonvoting Common Stock (CC-LB Class C Common Stock) have certain preferential
rights upon liquidation of CC-LB. In the event of liquidation, dissolution or
"winding up" of CC-LB, holders of CC-LB Class A Common Stock and Class C Common
Stock are entitled to a preference of $1,000 per share. After such amount is
paid, holders of Class B Voting Common Stock (CC-LB
 
                                      F-73

<PAGE>   218
                                   CCA GROUP
 
             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
Class B Common Stock) are entitled to receive $1,000 per share. Thereafter,
Class A, Class B and Class C shareholders shall ratably receive the remaining
proceeds.
 
     If upon liquidation, dissolution or "winding up" the assets of CC-LB are
insufficient to permit payment to Class A and Class C shareholders for their
full preferential amount, all assets of the Company shall then be distributed
ratably to Class A and Class C shareholders. Furthermore, if the proceeds from
liquidation are inadequate to pay Class B shareholders their full preferential
amount, the proceeds are to be distributed on a pro rata basis to Class B
shareholders.
 
     CC-LB Class C Common Stock may be converted into CC-LB Class A Common Stock
upon the transfer of CC-LB Class C Common Stock to a person not affiliated with
the seller. Furthermore, CC-LB may automatically convert outstanding Class C
shares into the same number of Class A shares.
 
11.  RELATED PARTY TRANSACTIONS:
 
     Charter provides management services to the Company under the terms of a
contract which provides for annual base fees equal to $9,277 and $9,485 for the
period from January 1, 1998, through December 23, 1998, and for the year ended
December 31, 1997, respectively, plus an additional fee equal to 30% of the
excess, if any, of operating cash flow (as defined in the management agreement)
over the projected operating cash flow. Payment of the additional fee is
deferred due to restrictions provided within the Company's credit agreements.
Deferred management fees bear interest at 8.0% per annum. The additional fees
for the periods from January 1, 1998, through December 23, 1998, and the years
ended December 31, 1997 and 1996, totaled $2,160, $1,990 and $1,255,
respectively. In addition, the Company receives financial advisory services from
an affiliate of Kelso, under terms of a contract which provides for fees equal
to $1,064 and $1,113 per annum as of January 1, 1998, through December 23, 1998,
and December 31, 1997, respectively. Management and financial advisory service
fees currently payable of $2,281 are included in payables to manager of cable
television systems -- related party at December 31, 1997.
 
     The Company pays certain acquisition advisory fees to an affiliate of Kelso
and Charter, which typically equal approximately 1% of the total purchase price
paid for cable television systems acquired. Total acquisition fees paid to the
affiliate of Kelso for the period from January 1, 1998, through December 23,
1998, were $-0-. Total acquisition fees paid to the affiliate of Kelso in 1997
and 1996 were $-0- and $1,400, respectively. Total acquisition fees paid to
Charter for the period from January 1, 1998, through December 23, 1998, were
$-0-. Total acquisition fees paid to Charter in 1997 and 1996 were $-0- and
$1,400, respectively.
 
     The Company and all entities managed by Charter collectively utilize a
combination of insurance coverage and self-insurance programs for medical,
dental and workers' compensation claims. 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. Charges are
determined by independent actuaries at the present value of the actuarially
computed present and future liabilities for such benefits. The Company is
allocated its share of the charges monthly based upon its total number of
employees, historical claims and medical cost trend rates. Management considers
this allocation to be reasonable for the operations of the Company. For the
period from January 1, 1998, through December 23, 1998, the Company expensed
$1,950 relating to insurance allocations. During 1997 and 1996, the Company
expensed $1,689 and $2,065, respectively, relating to insurance allocations.
 
                                      F-74

<PAGE>   219
                                   CCA GROUP
 
             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
     Beginning in 1996, the Company and other entities managed by Charter
employed the services of Charter's National Data Center (the "National Data
Center"). The National Data Center performs certain customer billing services
and provides computer network, hardware and software support to the Company and
other affiliated entities. The cost of these services is allocated based on the
number of customers. Management considers this allocation to be reasonable for
the operations of the Company. For the period from January 1, 1998, through
December 23, 1998, the Company expensed $843 relating to these services. During
1997 and 1996, the Company expensed $723 and $466 relating to these services,
respectively.
 
     CCE-I maintains a regional office. The regional office performs certain
operational services on behalf of CCE-I and other affiliated entities. The cost
of these services is allocated to CCE-I and affiliated entities based on their
number of customers. Management considers this allocation to be reasonable for
the operations of CCE-I. From the period January 1, 1998, through December 23,
1998, the Company expensed $1,926 relating to these services. During 1997 and
1996, CCE-I expensed $861 and $799, respectively, relating to these services.
 
12.  COMMITMENTS AND CONTINGENCIES:
 
  LEASES
 
     The Company leases certain facilities and equipment under noncancelable
operating leases. Lease and rental costs charged to expense for the period from
January 1, 1998, through December 23, 1998, was $2,222. Rent expense incurred
under these leases during 1997 and 1996 was $1,956 and $1,704, respectively.
 
     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 expensed incurred for pole attachments for the period
from January 1, 1998, through December 23, 1998, was $2,430. Rent expense
incurred for pole attachments during 1997 and 1996 was $2,601 and $2,330,
respectively.
 
  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.
 
13.  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
 
                                      F-75

<PAGE>   220
                                   CCA GROUP
 
             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
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 23,
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 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 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 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.
 
14.  INCOME TAXES:
 
     Deferred tax assets and liabilities are recognized for the estimated future
tax consequence attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred income tax assets and liabilities are measured using the enacted
tax rates in effect for the year in which those temporary differences are
expected to be recovered or settled. Deferred income tax expense or benefit is
the result of changes in the liability or asset recorded for deferred taxes. A
valuation allowance must be established for any portion of a deferred tax asset
for which it is more likely than not that a tax benefit will not be realized.
 
     For the period from January 1, 1998, through December 23, 1998, and the
years ended December 31, 1997 and 1996, no current provision (benefit) for
income taxes was recorded. The effective income tax rate is less than the
federal rate of 35% primarily due to providing a valuation allowance on deferred
income tax assets.
 
                                      F-76

<PAGE>   221
                                   CCA GROUP
 
             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
     Deferred taxes are comprised of the following at December 31, 1997:
 

<TABLE>
<S>                                                           <C>
Deferred income tax assets:
  Accounts receivable.......................................  $     252
  Other assets..............................................      7,607
  Accrued expenses..........................................      4,740
  Deferred revenue..........................................        624
  Deferred management fees..................................      1,654
  Tax loss carryforwards....................................     80,681
  Tax credit carryforward...................................      1,360
  Valuation allowance.......................................    (40,795)
                                                              ---------
          Total deferred income tax assets..................     56,123
                                                              ---------
Deferred income tax liabilities:
  Property, plant and equipment.............................    (38,555)
  Franchise costs...........................................   (117,524)
  Other.....................................................    (11,407)
                                                              ---------
          Total deferred income tax liabilities.............   (167,486)
                                                              ---------
          Net deferred income tax liability.................  $(111,363)
                                                              =========
</TABLE>

 
     At December 31, 1997, the Company had net operating loss (NOL)
carryforwards for regular income tax purposes aggregating $204,400, which expire
in various years from 1999 through 2012. Utilization of the NOLs carryforwards
is subject to certain limitations.
 
15.  EMPLOYEE BENEFIT PLANS:
 
     The Company's employees may participate in the Charter Communications, Inc.
401(k) Plan (the "401(k) Plan"). 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 contributes an amount equal to 50% of the first 5% of contributions by
each employee. For the period from January 1, 1998, through December 23, 1998,
the Company contributed $585 to the 401(k) plan. During 1997 and 1996, the
Company contributed approximately $499 and $435 to the 401(k) Plan,
respectively.
 
     Certain employees of the Company are participants in the 1996 Charter
Communications/ Kelso Group Appreciation Rights Plan (the "Plan"). The Plan
covers certain key employees and consultants within the group of companies and
partnerships controlled by affiliates of Kelso and managed by Charter. The Plan
permits the granting of up to 1,000,000 units, of which 705,000 were outstanding
at December 31, 1997. Unless otherwise provided in a particular instance, units
vest at a rate of 20% per annum. The Plan entitles participants to receive
payment of the appreciated unit value for vested units, upon the occurrence of
certain events specified in the Plan (i.e. change in control, employee
termination) The units do not represent a right to an equity interest to any
entities within the CCA Group. Compensation expense is based on the appreciated
unit value and is amortized over the vesting period.
 
     As a result of the acquisition of Charter and the Company, the Plan was
terminated, all outstanding units became 100% vested and all amounts were paid
by Charter in 1999. For the period from January 1, 1998, through December 23,
1998, the Company recorded $5,684 of expense, included in management fees, and a
contribution from Charter related to the Appreciation Rights Plan.
 
                                      F-77

<PAGE>   222
                                   CCA GROUP
 
             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
16.  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).
 
17.  SUBSEQUENT EVENT:
 
     Subsequent to December 23, 1998, CCA Holdings, CCT Holdings and CC-LB
converted to limited liability companies and are now known as CCA Holdings LLC,
CCT Holdings LLC and Charter Communications Long Beach, LLC, respectively.
 
                                      F-78

<PAGE>   223
 
 
                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
 
To CharterComm Holdings, L.P.:
 
     We have audited the accompanying consolidated balance sheet of CharterComm
Holdings, L.P. and subsidiaries as of December 31, 1997, and the related
consolidated statements of operations, partners' capital and cash flows for the
period from January 1, 1998, through December 23, 1998, and for the years ended
December 31, 1997 and 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
 
     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of CharterComm Holdings, L.P.
and subsidiaries as of December 31, 1997, and the results of their operations
and their cash flows for the period from January 1, 1998, through December 23,
1998, and for the years ended December 31, 1997 and 1996, in conformity with
generally accepted accounting principles.
 
/s/ ARTHUR ANDERSEN LLP
 
St. Louis, Missouri,
  February 5, 1999

 
                                      F-79

<PAGE>   224
 
                           CHARTERCOMM HOLDINGS, L.P.
                                AND SUBSIDIARIES
 
                CONSOLIDATED BALANCE SHEET -- DECEMBER 31, 1997
                             (DOLLARS IN THOUSANDS)
 
                                     ASSETS
 

<TABLE>
<S>                                                           <C>
CURRENT ASSETS:
  Cash and cash equivalents.................................  $  2,742
  Accounts receivable, net of allowance for doubtful
     accounts of $330.......................................     3,158
  Prepaid expenses and other................................       342
                                                              --------
          Total current assets..............................     6,242
                                                              --------
INVESTMENT IN CABLE TELEVISION PROPERTIES:
  Property, plant and equipment.............................   235,808
  Franchises, net of accumulated amortization of $119,968...   480,201
                                                              --------
                                                               716,009
                                                              --------
OTHER ASSETS................................................    16,176
                                                              --------
                                                              $738,427
                                                              ========
</TABLE>

 
                       LIABILITIES AND PARTNERS' CAPITAL
 

<TABLE>
<S>                                                             <C>
CURRENT LIABILITIES:
  Current maturities of long-term debt......................    $  5,375
  Accounts payable and accrued expenses.....................      30,507
  Payables to manager of cable television systems -- related
     party..................................................       1,120
                                                                --------
          Total current liabilities.........................      37,002
                                                                --------
DEFERRED REVENUE............................................       1,719
                                                                --------
LONG-TERM DEBT, less current maturities.....................     666,662
                                                                --------
DEFERRED MANAGEMENT FEES....................................       7,805
                                                                --------
DEFERRED INCOME TAXES.......................................       5,111
                                                                --------
REDEEMABLE PREFERRED LIMITED UNITS -- 577.81 units,
  issued and outstanding....................................      20,128
                                                                --------
PARTNERS' CAPITAL:
  General Partner...........................................          --
  Common Limited Partners -- 220.24 units issued and
     outstanding............................................          --
                                                                --------
          Total partners' capital...........................          --
                                                                --------
                                                                $738,427
                                                                ========
</TABLE>

 
 The accompanying notes are an integral part of these consolidated statements.
                                      F-80

<PAGE>   225
 
                           CHARTERCOMM HOLDINGS, L.P.
                                AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                             (DOLLARS IN THOUSANDS)
 

<TABLE>
<CAPTION>
                                                        PERIOD FROM
                                                         JANUARY 1,
                                                           1998,             YEAR ENDED
                                                          THROUGH           DECEMBER 31
                                                        DECEMBER 23,    --------------------
                                                            1998          1997        1996
                                                        ------------      ----        ----
<S>                                                     <C>             <C>         <C>
REVENUES..............................................    $196,801      $175,591    $120,280
                                                          --------      --------    --------
OPERATING EXPENSES:
  Operating costs.....................................      83,745        75,728      50,970
  General and administrative..........................      14,586        12,607       9,327
  Depreciation and amortization.......................      86,741        76,535      53,133
  Management fees -- related party....................      14,780         8,779       6,014
                                                          --------      --------    --------
                                                           199,852       173,649     119,444
                                                          --------      --------    --------
     Income (loss) from operations....................      (3,051)        1,942         836
                                                          --------      --------    --------
OTHER INCOME (EXPENSE):
  Interest income.....................................         211           182         233
  Interest expense....................................     (66,121)      (61,498)    (41,021)
  Other, net..........................................      (1,895)           17        (468)
                                                          --------      --------    --------
                                                           (67,805)      (61,299)    (41,256)
                                                          --------      --------    --------
     Loss before extraordinary item...................     (70,856)      (59,357)    (40,420)
EXTRAORDINARY ITEM -- Loss on early retirement of
  debt................................................      (6,264)           --          --
                                                          --------      --------    --------
     Net loss.........................................     (77,120)      (59,357)    (40,420)
REDEMPTION PREFERENCE ALLOCATION:
  Special Limited Partner units.......................          --            --        (829)
  Redeemable Preferred Limited units..................          --            --      (4,081)
NET LOSS ALLOCATED TO REDEEMABLE PREFERRED LIMITED
  UNITS...............................................      20,128         2,553       4,063
                                                          --------      --------    --------
     Net loss applicable to partners' capital
       accounts.......................................    $(56,992)     $(56,804)   $(41,267)
                                                          ========      ========    ========
NET LOSS ALLOCATION TO PARTNERS' CAPITAL ACCOUNTS:
  General Partner.....................................    $(56,992)     $(21,708)   $(38,391)
  Common Limited Partners.............................          --       (35,096)     (2,876)
                                                          --------      --------    --------
                                                          $(56,992)     $(56,804)   $(41,267)
                                                          ========      ========    ========
</TABLE>

 
 The accompanying notes are an integral part of these consolidated statements.
                                      F-81

<PAGE>   226
 
                           CHARTERCOMM HOLDINGS, L.P.
                                AND SUBSIDIARIES
 
                  CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
                             (DOLLARS IN THOUSANDS)
 

<TABLE>
<CAPTION>
                                                                       COMMON
                                                          GENERAL     LIMITED
                                                          PARTNER     PARTNERS     TOTAL
                                                          -------     --------     -----
<S>                                                       <C>         <C>         <C>
BALANCE, December 31, 1995..............................  $ 29,396    $  2,202    $ 31,598
  Capital contributions.................................    30,703       2,300      33,003
  Allocation of net loss................................   (38,391)     (2,876)    (41,267)
                                                          --------    --------    --------
BALANCE, December 31, 1996..............................    21,708       1,626      23,334
  Capital contributions.................................        --      33,470      33,470
  Allocation of net loss................................   (21,708)    (35,096)    (56,804)
                                                          --------    --------    --------
BALANCE, December 31, 1997..............................        --          --          --
  Capital contributions.................................     4,920          --       4,920
  Allocation of net loss................................   (56,992)         --     (56,992)
                                                          --------    --------    --------
BALANCE, December 23, 1998..............................  $(52,072)   $     --    $(52,072)
                                                          ========    ========    ========
</TABLE>

 
 The accompanying notes are an integral part of these consolidated statements.
                                      F-82

<PAGE>   227
 
                           CHARTERCOMM HOLDINGS, L.P.
                                AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (DOLLARS IN THOUSANDS)
 

<TABLE>
<CAPTION>
                                                          PERIOD FROM
                                                           JANUARY 1,
                                                             1998,
                                                            THROUGH      YEAR ENDED DECEMBER 31,
                                                          DECEMBER 23,   -----------------------
                                                              1998          1997         1996
                                                          ------------      ----         ----
<S>                                                       <C>            <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss..............................................   $ (77,120)    $ (59,357)   $ (40,420)
  Adjustments to reconcile net loss to net cash provided
     by operating activities --
     Extraordinary item -- Loss on early retirement of
       debt.............................................       6,264            --           --
     Depreciation and amortization......................      86,741        76,535       53,133
     Amortization of debt issuance costs, debt discount
       and interest rate cap agreements.................      14,563        14,212        9,564
     Loss on disposal of property, plant and
       equipment........................................       1,714           203          367
     Changes in assets and liabilities, net of effects
       from acquisition --
       Accounts receivable, net.........................       2,000           369         (303)
       Prepaid expenses and other.......................        (203)          943          245
       Accounts payable and accrued expenses............      (1,970)        3,988        9,911
       Payables to manager of cable television systems,
          including deferred management fees............       9,456         3,207        3,479
       Deferred revenue.................................         770           (82)         452
       Other operating activities.......................       5,378            --           --
                                                           ---------     ---------    ---------
       Net cash provided by operating activities........      47,593        40,018       36,428
                                                           ---------     ---------    ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of property, plant and equipment............     (85,044)      (72,178)     (48,324)
  Payments for acquisitions, net of cash acquired.......      (5,900)     (159,563)    (145,366)
  Other investing activities............................       5,280         1,577       (2,089)
                                                           ---------     ---------    ---------
     Net cash used in investing activities..............     (85,664)     (230,164)    (195,779)
                                                           ---------     ---------    ---------
</TABLE>

 

<TABLE>
<CAPTION>
CASH FLOWS FROM FINANCING ACTIVITIES:
<S>                                                       <C>            <C>         <C>
  Borrowings of long-term debt..........................     547,400       231,250     260,576
  Repayments of long-term debt..........................    (505,300)      (67,930)    (34,401)
  Partners' capital contributions.......................          --        29,800          --
  Payment of debt issuance costs........................      (3,651)       (3,593)    (11,732)
  Payment of Special Limited Partnership units..........          --            --     (43,243)
  Repayments of note payable -- related party...........          --            --     (15,000)
  Payments for interest rate cap agreements.............          --            --         (35)
                                                           ---------     ---------   ---------
     Net cash provided by financing activities..........      38,449       189,527     156,165
                                                           ---------     ---------   ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS....         378          (619)     (3,186)
CASH AND CASH EQUIVALENTS, beginning of period..........       2,742         3,361       6,547
                                                           ---------     ---------   ---------
CASH AND CASH EQUIVALENTS, end of period................   $   3,120     $   2,742   $   3,361
                                                           =========     =========   =========
CASH PAID FOR INTEREST..................................   $  61,559     $  42,538   $  28,860
                                                           =========     =========   =========
</TABLE>

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

                                      F-83

<PAGE>   228
 
                           CHARTERCOMM HOLDINGS, L.P.
                                AND SUBSIDIARIES
 

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             (DOLLARS IN THOUSANDS)
 
1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
 
  ORGANIZATION AND BASIS OF PRESENTATION
 
     CharterComm Holdings, L.P. (CharterComm Holdings) was formed in March 1996
with the contributions of Charter Communications Southeast Holdings, L.P.
(Southeast Holdings), Charter Communications, L.P. (CC-I) and Charter
Communications II, L.P. (CC-II). This contribution was accounted for as a
reorganization under common control and, accordingly, the consolidated financial
statements and notes have been restated to include the results and financial
position of Southeast Holdings, CC-I and CC-II.
 
     Through December 23, 1998, CharterComm Holdings was owned 75.3% by
affiliates of Charterhouse Group International, Inc., a privately owned
investment firm (collectively referred to herein as "Charterhouse"), indirectly
owned 5.7% by Charter Communications, Inc. (Charter), manager of the
Partnership's (as defined below) cable television systems, and owned 19.0%
primarily by other institutional investors.
 
     Effective December 23, 1998, Paul G. Allen acquired 94% of Charter through
a series of transactions. In conjunction with Mr. Allen's acquisition, Charter
acquired 100% of the outstanding partnership interests in CharterComm Holdings
on December 23, 1998.
 
     The accompanying consolidated financial statements include the accounts of
CharterComm Holdings and its subsidiaries collectively referred to as the
"Partnership" herein. All significant intercompany balances and transactions
have been eliminated in consolidation.
 
     In 1998, the Partnership through its subsidiaries provided cable television
service to customers in Alabama, Georgia, Kentucky, Louisiana, North Carolina,
South Carolina and Tennessee.
 
  CASH EQUIVALENTS
 
     The Partnership considers all highly liquid investments with original
maturities of three months or less to be cash equivalents. At December 31, 1997,
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
installation. 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>

 
                                      F-84

<PAGE>   229
                           CHARTERCOMM HOLDINGS, L.P.
                                AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     In 1997, the Partnership shortened the estimated useful lives of certain
property, plant and equipment for depreciation purposes. As a result, an
additional $4,775 of depreciation was recorded during 1997.
 
  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. In addition, approximately $100,000 of
franchise rights are being amortized over a period of 3 to 11 years.
 
  OTHER ASSETS
 
     Debt issuance costs are being amortized to interest expense over the term
of the related debt. The interest rate cap costs are being amortized over the
terms of the agreement, which approximates three years.
 
  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 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, 1997, no installation revenue has
been deferred, as direct selling costs 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 Partnership ranging up to a federally
mandated maximum of 5.0% of gross revenues. On a monthly basis, such fees are
collected from the Partnership's customers and are periodically remitted to
local franchises. Franchise fees collected and paid are reported as revenue.
 
  INTEREST RATE HEDGE AGREEMENTS
 
     The Partnership 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.
                                      F-85

<PAGE>   230
                           CHARTERCOMM HOLDINGS, L.P.
                                AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The Partnership's interest rate swap agreements require the Partnership 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 Partnership to reduce the
impact of rising interest rates on floating rate debt.
 
     The Partnership'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.
 
  OTHER INCOME (EXPENSE)
 
     Other, net includes gain and loss on disposition of property, plant and
equipment, and other miscellaneous items, all of which are not directly related
to the Partnership's primary line of business. In 1996, the Partnership recorded
$367 of nonoperating losses for its portion of insurance deductibles pertaining
to damage caused by hurricanes to certain cable television systems.
 
  INCOME TAXES
 
     Income taxes are the responsibility of the partners and are not provided
for in the accompanying financial statements except for Peachtree Cable TV, Inc.
(Peachtree), an indirect wholly owned subsidiary, which is a C corporation and
for which taxes are presented in accordance with SFAS No. 109.
 
  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 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.  ACQUISITIONS:
 
     In 1998, the Partnership acquired cable television systems in one
transaction for a purchase price net of cash acquired, of $5,900. The excess
cost of properties acquired over the amounts assigned to net tangible assets at
the date of acquisition was $5,000 and is included in franchises.
 
     In 1997, the Partnership acquired cable television systems in three
separate transactions for an aggregate purchase price, net of cash acquired, of
$159,600. The excess of the cost of properties acquired over the amounts
assigned to net tangible assets at the date of acquisition was $126,400 and is
included in franchises.
 
     In 1996, the Partnership acquired cable television systems in three
separate transactions for an aggregate purchase price, net of cash acquired, of
$145,400. The excess of the cost of properties acquired over the amounts
assigned to net tangible assets at the date of acquisition was $118,200 and is
included in franchises.
 
     The above acquisitions were accounted for using the purchase method of
accounting, and accordingly, results of operations of the acquired assets have
been included in the financial statements from the dates of acquisition.
 
                                      F-86

<PAGE>   231
                           CHARTERCOMM HOLDINGS, L.P.
                                AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     Unaudited pro forma operating results for the 1997 acquisitions as though
the acquisitions had been made on January 1, 1997, with pro forma adjustments to
give effect to amortization of franchises, interest expense and certain other
adjustments are as follows.
 

<TABLE>
<CAPTION>
                                                               YEAR ENDED
                                                              DECEMBER 31,
                                                                  1997
                                                              ------------
                                                              (UNAUDITED)
<S>                                                           <C>
Revenues....................................................    $182,770
Income from operations......................................       2,608
Net loss....................................................     (61,389)
</TABLE>

 
     The unaudited pro forma information does not purport to be indicative of
the results of operations had these transactions been completed as of the
assumed date or which may be obtained in the future.
 
3.  DISTRIBUTIONS AND ALLOCATIONS:
 
     For financial reporting purposes, redemption preference allocations,
profits and losses are allocated to partners in accordance with the liquidation
provision of the applicable partnership agreement.
 
     As stated in the Partnership Agreement, the Partnership may make
distributions to the partners out of all available funds at such times and in
such amounts as the General Partner may determine in its sole discretion.
 
4.  REDEEMABLE PREFERRED LIMITED UNITS:
 
     As of December 31, 1995, certain Redeemable Preferred Limited Partner units
of CC-I and CC-II were outstanding. During 1996, the Partnership issued certain
Redeemable Preferred Limited Partner units of CharterComm Holdings.
 
     The Preferred Limited Partners' preference return has been reflected as an
addition to the Redeemable Preferred Limited Partner units, and the decrease has
been allocated to the General Partner and Common Limited Partner consistent with
the liquidation and distribution provisions in the partnership agreements.
 
     At December 23, 1998, the balance related to the CharterComm Holdings
Preferred Limited Partner units was as follows:
 

<TABLE>
<S>                                                           <C>
Contribution, March 1996....................................  $ 20,052
  1996 redemption preference allocation.....................     2,629
  Allocation of net loss....................................        --
                                                              --------
Balance, December 31, 1996..................................    22,681
  1997 redemption preference allocation.....................        --
  Allocation of net loss....................................    (2,553)
                                                              --------
Balance, December 31, 1997..................................    20,128
  1998 redemption preference allocation.....................        --
  Allocation of net loss....................................   (20,128)
                                                              --------
Balance, December 23, 1998..................................  $     --
                                                              ========
</TABLE>

 
                                      F-87

<PAGE>   232
                           CHARTERCOMM HOLDINGS, L.P.
                                AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The 1998 and 1997 redemption preference allocations of $4,617 and $4,020,
respectively, have not been reflected in the Preferred Limited Partners' capital
accounts since the General Partner and Common Limited Partners' capital accounts
have been reduced to $-0-.
 
5.  SPECIAL LIMITED PARTNER UNITS (CC-I):
 
     Prior to March 28, 1996, certain Special Limited Partner units of CC-I were
outstanding. CC-I's profits were allocated to the Special Limited Partners until
allocated profits equaled the unrecovered preference amount (preference amounts
range from 6% to 17.5% of the unrecovered initial cost of the partnership units
and unrecovered preference amounts per annum). When there was no profit to
allocate, the preference return was reflected as a decrease in Partners'
Capital.
 
     In accordance with a purchase agreement and through the use of a capital
contribution from Charter Communications Southeast, L.P. (Southeast), a wholly
owned subsidiary of Southeast Holdings, resulting from the proceeds of the Notes
(see Note 9), CC-I paid the Special Limited Partners $43,243 as full
consideration for their partnership interests on March 28, 1996.
 
6.  PROPERTY, PLANT AND EQUIPMENT:
 
     Property, plant and equipment consists of the following at December 31,
1997:
 

<TABLE>
<S>                                                           <C>
Cable distribution systems..................................  $274,837
Land, buildings and leasehold improvements..................     5,439
Vehicles and equipment......................................    14,669
                                                              --------
                                                               294,945
Less -- Accumulated depreciation............................   (59,137)
                                                              --------
                                                              $235,808
                                                              ========
</TABLE>

 
     Depreciation expense for the period from January 1, 1998, through December
23, 1998, and for the years ended December 31, 1997 and 1996, was $44,307,
$33,634 and $16,997, respectively.
 
7.  OTHER ASSETS:
 
     Other assets consist of the following at December 31, 1997:
 

<TABLE>
<S>                                                           <C>
Debt issuance costs.........................................  $18,385
Other assets................................................    3,549
                                                              -------
                                                               21,934
Less -- Accumulated amortization............................   (5,758)
                                                              -------
                                                              $16,176
                                                              =======
</TABLE>

 
     As a result of the payment and termination of the CC-I Credit Agreement and
CC-II Credit Agreement (see Note 9), debt issuance costs of $6,264 were written
off as an extraordinary loss on early retirement of debt for the period from
January 1, 1998, through December 23, 1998.
 
                                      F-88

<PAGE>   233
                           CHARTERCOMM HOLDINGS, L.P.
                                AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
8.  ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
 
     Accounts payable and accrued expenses consist of the following at December
31, 1997:
 

<TABLE>
<S>                                                           <C>
Accrued interest............................................  $ 9,804
Franchise fees..............................................    3,524
Programming costs...........................................    3,391
Accounts payable............................................    2,479
Capital expenditures........................................    2,099
Salaries and related benefits...............................    2,079
Other.......................................................    7,131
                                                              -------
                                                              $30,507
                                                              =======
</TABLE>

 
9.  LONG-TERM DEBT:
 
     Long-term debt consists of the following at December 31, 1997:
 

<TABLE>
<S>                                                           <C>
Senior Secured Discount Debentures..........................  $146,820
11 1/4% Senior Notes........................................   125,000
Credit Agreements:
  CC-I......................................................   112,200
  CC-II.....................................................   339,500
                                                              --------
                                                               723,520
Less:
  Current maturities........................................    (5,375)
  Unamortized discount......................................   (51,483)
                                                              --------
                                                              $666,662
                                                              ========
</TABLE>

 
  SENIOR SECURED DISCOUNT DEBENTURES
 
     On March 28, 1996, Southeast Holdings and CharterComm Holdings Capital
Corporation (Holdings Capital), a wholly owned subsidiary of Southeast Holdings
(collectively the "Debentures Issuers"), issued $146,820 of Senior Secured
Discount Debentures (the "Debentures") for proceeds of $75,000. Proceeds from
the Debentures were used to pay fees and expenses related to the issuance of the
Debentures and the balance of $72,400 was a capital contribution to Southeast.
The Debentures are secured by all of Southeast Holdings' ownership interest in
Southeast and rank pari passu in right and priority of payment to all other
existing and future indebtedness of the Debentures Issuers. The Debentures are
effectively subordinated to the claims of creditors of Southeast Holdings'
subsidiaries, including the Combined Credit Agreement (as defined herein). The
Debentures are redeemable at the Debentures Issuers' 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 Debentures Issuers are
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. The discount on the
Debentures is being accreted
 
                                      F-89

<PAGE>   234
                           CHARTERCOMM HOLDINGS, L.P.
                                AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
using the effective interest method at an interest rate of 14% from the date of
issuance to March 15, 2001.
 
  11 1/4% SENIOR NOTES
 
     Southeast and CharterComm Capital Corporation (Southeast Capital), a wholly
owned subsidiary of Southeast (collectively the "Notes Issuers"), issued
$125,000 aggregate principal amount of 11 1/4% Senior Notes (the "Notes"). The
Notes are senior unsecured obligations of the Notes Issuers and rank pari passu
in right and priority of payment to all other existing and future indebtedness
of the Notes Issuers. The Notes are effectively subordinated to the claims of
creditors of Southeast's subsidiaries, including the lenders under the Combined
Credit Agreement. The Notes are redeemable at the Notes Issuers' option at
amounts decreasing from 105.625% to 100% of principal, plus accrued and unpaid
interest to the date of redemption, beginning on March 15, 2001. The Notes
Issuers are required to make an offer to purchase all of the 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 Notes Indenture.
Interest is payable semiannually on March 15 and September 15 until maturity on
March 15, 2006.
 
     Southeast and Southeast Holdings are holding companies with no significant
assets other than their direct and indirect investments in CC-I and CC-II.
Southeast Capital and Holdings Capital were formed solely for the purpose of
serving as co-issuers and have no operations. Accordingly, the Notes Issuers and
Debentures Issuers must rely upon distributions from CC-I and CC-II to generate
funds necessary to meet their obligations, including the payment of principal
and interest on the Notes and Debentures.
 
  COMBINED CREDIT AGREEMENT
 
     In June 1998, CC-I and CC-II (the "Borrowers") replaced their existing
credit agreements and entered into 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 of up to
2.0%. The variable interest rates ranged from 6.69% to 7.31% at December 23,
1998.
 
     Commencing March 31, 2002, and at the end of each calendar quarter
thereafter, the available borrowings for the revolving credit facility and the
$200,000 term loan shall be reduced on an annual basis by 11.0% in 2002 and
14.6% in 2003. Commencing March 31, 2002, and at the end of each calendar
quarter thereafter, the available borrowings for the $150,000 term loan shall be
reduced on an annual basis by 1.0% in 2002 and 1.0% in 2003. A quarterly
commitment fee of between 0.25% and 0.375% per annum is payable on the
unborrowed balance of the revolving credit facility.
 
     The Debentures, Notes and Combined Credit Agreement require the Partnership
to comply with various financial and nonfinancial covenants including the
maintenance of a ratio of debt to annualized operating cash flow, as defined,
not to exceed 5.25 to 1 at December 23, 1998. These debt instruments also
contain substantial limitations on, or prohibitions of, distributions,
additional indebtedness, liens, asset sales and certain other items.
 
                                      F-90

<PAGE>   235
                           CHARTERCOMM HOLDINGS, L.P.
                                AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
  CC-I CREDIT AGREEMENT
 
     CC-I maintained a credit agreement (the "CC-I Credit Agreement") with a
consortium of banks for borrowings up to $127,200, consisting of a revolving
line of credit of $63,600 and a term loan of $63,600. Interest accrued, at
CC-I's option, at rates based upon the Base Rate, as defined in the CC-I Credit
Agreement, LIBOR, or prevailing bid rates of certificates of deposit plus the
applicable margin based upon CC-I's leverage ratio at the time of the
borrowings. The variable interest rates ranged from 7.75% to 8.00% and 7.44% to
7.50% at December 31, 1997 and 1996, respectively.
 
     In June 1998, the CC-I Credit Agreement was repaid and terminated in
conjunction with the establishment of the Combined Credit Agreement.
 
  CC-II CREDIT AGREEMENT
 
     CC-II maintained a credit agreement (the "CC-II Credit Agreement") with a
consortium of banks for borrowings up to $390,000, consisting of a revolving
credit facility of $215,000, and two term loans totaling $175,000. Interest
accrued, at CC-II's option, at rates based upon the Base Rate, as defined in the
CC-II Credit Agreement, LIBOR, or prevailing bid rates of certificates of
deposit plus the applicable margin based upon CC-II's leverage ratio at the time
of the borrowings. The variable interest rates ranged from 7.63% to 8.25% and
7.25% to 8.125% at December 31, 1997 and 1996, respectively.
 
     In June 1998, the CC-II Credit Agreement was repaid and terminated in
conjunction with the establishment of the Combined Credit Agreement.
 
10.  FAIR VALUE OF FINANCIAL INSTRUMENTS:
 
     A summary of debt and the related interest rate hedge agreements at
December 31, 1997, is as follows:
 

<TABLE>
<CAPTION>
                                                  CARRYING    NOTIONAL      FAIR
                                                   VALUE       AMOUNT      VALUE
                                                  --------    --------     -----
<S>                                               <C>         <C>         <C>
DEBT
Senior Secured Discount Debentures..............  $ 95,337    $     --    $115,254
11 1/4% Senior Notes............................   125,000          --     136,875
CC-I Credit Agreement...........................   112,200          --     112,200
CC-II Credit Agreement..........................   339,500          --     339,500
 
INTEREST RATE HEDGE AGREEMENTS
CC-I:
  Swaps.........................................        --     100,000        (797)
CC-II:
  Swaps.........................................        --     170,000      (1,030)
  Caps..........................................        --      70,000          --
  Collars.......................................        --      55,000        (166)
</TABLE>

 
     As the CC-I and CC-II Credit Agreements bear interest at current market
rates, their carrying amounts approximate fair market values at December 31,
1997. The fair value of the Notes and the Debentures is based on current
redemption value.
 
                                      F-91

<PAGE>   236
                           CHARTERCOMM HOLDINGS, L.P.
                                AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The weighted average interest pay rate for CC-I interest rate swap
agreements was 8.07% at December 31, 1997.
 
     The weighted average interest pay rate for CC-II interest rate swap
agreements was 8.03% at December 31, 1997. The weighted average interest rate
for CC-II interest cap agreements was 8.48% at December 31, 1997. The weighted
average interest rates for CC-II interest rate collar agreements were 9.01% and
7.61% for the cap and floor components, respectively, at December 31, 1997.
 
     The notional amounts of interest rate hedge agreements do not represent
amounts exchanged by the parties and, thus, are not a measure of the
Partnership'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 Partnership 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 Partnership'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 Partnership's credit facilities thereby reducing the exposure to
credit loss. The Partnership 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 results of
operations or the financial position of the Partnership.
 
11.  INCOME TAXES:
 
     The book value of the Partnership's net assets (excluding Peachtree)
exceeds its tax reporting basis by $2,919 as of December 31, 1997.
 
     As of December 31, 1997, temporary differences and carryforwards that gave
rise to deferred income tax assets and liabilities for Peachtree are as follows:
 

<TABLE>
<S>                                                           <C>
Deferred income tax assets:
  Accounts receivable.......................................  $     4
  Accrued expenses..........................................       29
  Deferred management fees..................................      111
  Deferred revenue..........................................       24
  Tax loss carryforwards....................................      294
  Tax credit carryforwards..................................      361
                                                              -------
          Total deferred income tax assets..................      823
                                                              -------
Deferred income tax liabilities:
  Property, plant and equipment.............................   (1,372)
  Franchises and other assets...............................   (4,562)
                                                              -------
          Total deferred income tax liabilities.............   (5,934)
                                                              -------
          Net deferred income tax liability.................  $(5,111)
                                                              =======
</TABLE>

 
                                      F-92

<PAGE>   237
                           CHARTERCOMM HOLDINGS, L.P.
                                AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
12.  RELATED PARTY TRANSACTIONS:
 
     Charter provides management services to the Partnership under the terms of
contracts which provide for fees equal to 5% of the Partnership's gross service
revenues. The debt agreements prohibit payment of a portion of such management
fees (40% for both CC-I and CC-II) until repayment in full of the outstanding
indebtedness. The remaining 60% of management fees, are paid quarterly through
December 31, 1998. Thereafter, the entire fee may be deferred if a multiple of
EBITDA, as defined, does not exceed outstanding indebtedness of CC-I and CC-II.
In addition, payments due on the Notes and Debentures shall be paid before any
deferred management fees are paid. Expenses recognized under the contracts for
the period from January 1, 1998, through December 23, 1998, were $9,860.
Expenses recognized under the contracts during 1997 and 1996 were $8,779 and
$6,014, respectively. Management fees currently payable of $1,432 are included
in payables to manager of cable television systems -- related party at December
31, 1997.
 
     The Partnership and all entities managed by Charter collectively utilize a
combination of insurance coverage and self-insurance programs for medical,
dental and workers' compensation claims. 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. Charges are
determined by independent actuaries at the present value of the actuarially
computed present and future liabilities for such benefits. The Partnership is
allocated its share of the charges monthly based upon its total number of
employees, historical claims and medical cost trend rates. Management considers
this allocation to be reasonable for the operations of the Partnership. For the
period from January 1, 1998, through December 23, 1998, the Partnership expensed
$1,831 relating to insurance allocations. During 1997 and 1996, the Partnership
expensed $1,524 and $1,136, respectively, relating to insurance allocations.
 
     The Partnership employs the services of Charter's National Data Center (the
"National Data Center"). The National Data Center performs certain customer
billing services and provides computer network, hardware and software support
for the Partnership and other entities managed by Charter. The cost of these
services is allocated based on the number of basic customers. Management
considers this allocation to be reasonable for the operations of the
Partnership. For the period from January 1, 1998, through December 23, 1998, the
Partnership expensed $685 relating to these services. During 1997 and 1996, the
Partnership expensed $606 and $345, respectively, relating to these services.
 
     CC-I, CC-II and other entities managed by Charter maintain regional
offices. The regional offices perform certain operational services. The cost of
these services is allocated based on number of basic customers. Management
considers this allocation to be reasonable for the operations of the
Partnership. For the period from January 1, 1998, through December 23, 1998, the
Partnership expensed $3,009 relating to these services. During 1997 and 1996,
the Partnership expensed $1,992 and $1,294, respectively, relating to these
services.
 
     The Partnership pays certain acquisition advisory fees to Charter and
Charterhouse for cable television systems acquired. Total acquisition fees paid
to Charter for the period from January 1, 1998, through December 23, 1998, were
$-0-. Total acquisition fees paid to Charter in 1997 and 1996 were $982 and
$1,738, respectively. Total acquisition fees paid to Charterhouse for the period
from January 1, 1998, through December 23, 1998, were $-0-. Total acquisition
fees paid to Charterhouse in 1997 and 1996 were $982 and $1,738, respectively.
 
                                      F-93

<PAGE>   238
                           CHARTERCOMM HOLDINGS, L.P.
                                AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     During 1997, the ownership of CharterComm Holdings changed as a result of
CharterComm Holdings receiving a $25,000 cash contribution from an institutional
investor, a $3,000 cash contribution from Charterhouse and a $2,000 cash
contribution from Charter, as well as the transfer of assets and liabilities of
a cable television system through a series of transactions initiated by Charter
and Charterhouse. Costs of $200 were incurred in connection with the cash
contributions. These contributions were contributed to Southeast Holdings which,
in turn, contributed them to Southeast.
 
13.  COMMITMENTS AND CONTINGENCIES:
 
  LEASES
 
     The Partnership leases certain facilities and equipment under noncancelable
operating leases. Lease and rental costs charged to expense for the period from
January 1, 1998, through December 23, 1998, was $642. Rent expense incurred
under leases during 1997 and 1996 was $615 and $522, respectively.
 
     The Partnership also rents utility poles in its operations. Generally, pole
rentals are cancelable on short notice, but the Partnership anticipates that
such rentals will recur. Rent expense incurred for pole rental attachments for
the period from January 1, 1998, through December 23, 1998, was $3,261. Rent
expense incurred for pole attachments during 1997 and 1996 was $2,930 and
$2,092, respectively.
 
  LITIGATION
 
     The Partnership 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 Partnership'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
 
                                      F-94

<PAGE>   239
                           CHARTERCOMM HOLDINGS, L.P.
                                AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
maximum permitted rates. As of December 23, 1998, the amount returned 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 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 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 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.
 
14.  EMPLOYEE BENEFIT PLANS:
 
     The Partnership's employees may participate in Charter Communications, Inc.
401(k) Plan (the "401(k) Plan"). 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
Partnership contributes an amount equal to 50% of the first 5% of contributions
by each employee. For the period from January 1, 1998, through December 23,
1998, the Partnership contributed $305. During 1997 and 1996, the Partnership
contributed $262 and $149, respectively.
 
     Certain Partnership employees participate in the 1996 Charter
Communications/ Charterhouse Group Appreciation Rights Plan (the "Appreciation
Rights Plan"). The Appreciation Rights Plan covers certain key employees and
consultants within the group of companies and partnerships controlled by
Charterhouse and managed by Charter. The Plan permits the granting of up to
1,000,000 units, of which 925,000 were outstanding at December 31, 1997. Unless
otherwise provided in a particular instance, units vest at a rate of 20% per
annum. The Plan entitles participants to receive payment of the appreciated unit
value for vested units, upon the occurrence of certain events specified in the
Plan (i.e. change in control, employee
 
                                      F-95

<PAGE>   240
                           CHARTERCOMM HOLDINGS, L.P.
                                AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
termination). The units do not represent a right to an equity interest in
CharterComm Holdings. Compensation expense is based on the appreciated unit
value and is amortized over the vesting period.
 
     As a result of the acquisition of Charter and the Partnership, the Plan was
terminated, all outstanding units became 100% vested and all amounts were paid
by Charter in 1999. For the period from January 1, 1998, through December 23,
1998, the Partnership recorded $4,920 of expense, included in management fees,
and a contribution from Charter related to the Appreciation Rights Plan.
 
15.  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 Partnership
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).
 
16.  SUBSEQUENT EVENT:
 
     Subsequent to December 31, 1998, CharterComm Holdings, L.P. and all of its
subsidiaries converted to limited liability companies and are now known as
CharterComm Holdings LLC and subsidiaries.
 
                                      F-96

<PAGE>   241
 
 
                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
 
To Greater Media, Inc.:
 
     We have audited the accompanying combined balance sheets of Greater Media
Cablevision Systems (see Note 1) (collectively, the "Combined Systems") included
in Greater Media, Inc., as of September 30, 1998 and 1997, and the related
combined statements of income, changes in net assets, and cash flows for each of
the three years in the period ended September 30, 1998. These combined financial
statements are the responsibility of management. Our responsibility is to
express an opinion on these combined financial statements based on our audits.
 
     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
     In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of the
Combined Systems, as of September 30, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
September 30, 1998, in conformity with generally accepted accounting principles.
 
/s/  ARTHUR ANDERSEN LLP
 
Roseland, New Jersey
March 2, 1999

 
                                      F-97

<PAGE>   242
 
                 GREATER MEDIA CABLEVISION SYSTEMS (SEE NOTE 1)
 
                            COMBINED BALANCE SHEETS
                                 (IN THOUSANDS)
 

<TABLE>
<CAPTION>
                                                                             SEPTEMBER 30,
                                                            MARCH 31,      ------------------
                                                               1999         1998       1997
                                                            ---------       ----       ----
                                                           (UNAUDITED)
<S>                                                        <C>             <C>        <C>
                                      ASSETS
Current assets:
  Cash and cash equivalents..............................    $ 2,440       $ 4,080    $ 3,680
  Accounts receivable (less allowance for doubtful
     accounts of $308 (unaudited), $244 and $337)........      2,577         2,755      2,739
  Prepaid expenses and other current assets..............      3,052         2,746      1,949
                                                             -------       -------    -------
          Total current assets...........................      8,069         9,581      8,368
Property and equipment, net..............................     58,196        54,468     41,971
Intangible assets, net...................................      2,653         2,690      1,647
Other assets.............................................         80            77        103
                                                             -------       -------    -------
          Total assets...................................    $68,998       $66,816    $52,089
                                                             =======       =======    =======
                            LIABILITIES AND NET ASSETS
Current liabilities:
  Accounts payable and accrued expenses..................    $ 6,022       $ 7,125    $ 5,299
  Customers' prepayments and deferred installation
     revenue.............................................      1,904         1,910      1,815
                                                             -------       -------    -------
          Total current liabilities......................      7,926         9,035      7,114
Other long-term liabilities..............................      3,618         3,650      3,920
Net assets...............................................     57,454        54,131     41,055
                                                             -------       -------    -------
          Total liabilities and net assets...............    $68,998       $66,816    $52,089
                                                             =======       =======    =======
</TABLE>

 
     The accompanying notes are an integral part of these combined balance
sheets.
                                      F-98

<PAGE>   243
 
                 GREATER MEDIA CABLEVISION SYSTEMS (SEE NOTE 1)
 
                         COMBINED STATEMENTS OF INCOME
                                 (IN THOUSANDS)
 

<TABLE>
<CAPTION>
                                           SIX MONTHS ENDED
                                               MARCH 31,        YEAR ENDED SEPTEMBER 30,
                                           -----------------   ---------------------------
                                            1999      1998      1998      1997      1996
                                            ----      ----      ----      ----      ----
                                              (UNAUDITED)
<S>                                        <C>       <C>       <C>       <C>       <C>
NET REVENUES............................   $40,515   $37,389   $77,127   $73,436   $66,816
                                           -------   -------   -------   -------   -------
OPERATING EXPENSES:
  Operating expenses....................    17,356    16,009    32,665    31,115    29,460
  General and administrative............     5,850     5,313    10,869    11,211    10,321
  Corporate charges.....................     2,057     1,882     3,888     3,696     3,365
  Depreciation and amortization.........     4,628     3,631     8,183     7,368     7,353
                                           -------   -------   -------   -------   -------
                                            29,891    26,835    55,605    53,390    50,499
                                           -------   -------   -------   -------   -------
     Income from operations.............    10,624    10,554    21,522    20,046    16,317
OTHER EXPENSES:
Interest expense, net...................      (297)     (177)     (504)     (307)     (764)
Other...................................        17       (15)     (532)     (957)     (366)
                                           -------   -------   -------   -------   -------
INCOME BEFORE PROVISION IN LIEU OF
  INCOME TAXES..........................    10,344    10,362    20,486    18,782    15,187
Provision in lieu of income taxes (Note
  6)....................................     4,199     4,025     8,008     7,964     5,987
                                           -------   -------   -------   -------   -------
Net income..............................   $ 6,145   $ 6,337   $12,478   $10,818   $ 9,200
                                           =======   =======   =======   =======   =======
</TABLE>

 
   The accompanying notes are an integral part of these combined statements.
                                      F-99

<PAGE>   244
 
                 GREATER MEDIA CABLEVISION SYSTEMS (SEE NOTE 1)
 
                  COMBINED STATEMENTS OF CHANGES IN NET ASSETS
                                 (IN THOUSANDS)
 

<TABLE>
<CAPTION>
                                                                 TOTAL
                                                                 -----
<S>                                                             <C>
Balance, September 30, 1995.................................    $ 42,185
  Net income................................................       9,200
  Provision in lieu of income taxes.........................       5,987
  Net payments to affiliates................................     (17,038)
                                                                --------
Balance, September 30, 1996.................................      40,334
  Net income................................................      10,818
  Provision in lieu of income taxes.........................       7,964
  Net payments to affiliates................................     (18,061)
                                                                --------
Balance, September 30, 1997.................................      41,055
  Net income................................................      12,478
  Provision in lieu of income taxes.........................       8,008
  Net payments to affiliates................................      (7,410)
                                                                --------
Balance, September 30, 1998.................................      54,131
  Net income (unaudited)....................................       6,145
  Provision in lieu of income taxes (unaudited).............       4,199
  Net payments to affiliates (unaudited)....................      (7,021)
                                                                --------
Balance, March 31, 1999 (unaudited).........................    $ 57,454
                                                                ========
</TABLE>

 
     The accompanying notes are an integral part of these combined statements.
                                      F-100

<PAGE>   245
 
                 GREATER MEDIA CABLEVISION SYSTEMS (SEE NOTE 1)
 
                       COMBINED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
 

<TABLE>
<CAPTION>
                                                 SIX MONTHS
                                                    ENDED
                                                  MARCH 31,          YEAR ENDED SEPTEMBER 30,
                                             -------------------   ----------------------------
                                               1999       1998      1998      1997       1996
                                               ----       ----      ----      ----       ----
                                                 (UNAUDITED)
<S>                                          <C>        <C>        <C>       <C>       <C>
Net income.................................  $  6,145   $  6,337   $12,478   $10,818   $  9,200
Adjustments to reconcile net income to net
  cash provided by operating activities:
  Provision in lieu of income taxes........     4,199      4,025     8,008     7,964      5,987
  Depreciation and amortization............     4,628      3,631     8,183     7,368      7,353
  (Gain) loss on sale of fixed assets......        --        (19)      300       715        274
Changes in assets and liabilities:
  Accounts receivable, prepaid expenses and
     other assets..........................      (129)    (3,277)     (813)   (1,115)      (498)
  Other assets.............................        (3)        27        24       (30)       (11)
  Accounts payable and accrued expenses....    (1,103)       700     1,825      (440)    (1,900)
  Customers' prepayments and deferred
     installation revenue..................        (6)        25        96       367         94
  Customers' deposits and deferred
     revenue...............................       (32)       (67)     (270)      (69)       466
                                             --------   --------   -------   -------   --------
 
Net cash provided by operating
  activities...............................    13,699     11,382    29,831    25,578     20,965
                                             --------   --------   -------   -------   --------
Cash flow from investing activities:
Capital expenditures.......................    (8,319)   (10,447)  (21,049)   (7,587)    (5,122)
Proceeds from disposition of property and
  equipment................................        --         19        72        --        128
Purchase of licenses.......................        --        (50)   (1,044)      (99)        --
                                             --------   --------   -------   -------   --------
Net cash used in investing activities......    (8,319)   (10,478)  (22,021)   (7,686)    (4,994)
                                             --------   --------   -------   -------   --------
Cash flow from financing activities:
 
Net payments to affiliates.................    (7,020)    (1,759)   (7,410)  (18,061)   (17,038)
                                             --------   --------   -------   -------   --------
Net increase (decrease) in cash............    (1,640)      (855)      400      (169)    (1,067)
Cash and cash equivalents, beginning of
  year.....................................     4,080      3,680     3,680     3,849      4,916
                                             --------   --------   -------   -------   --------
Cash and cash equivalents, end of year.....  $  2,440   $  2,825   $ 4,080   $ 3,680   $  3,849
                                             ========   ========   =======   =======   ========
Supplemental disclosure of cash flow
  information:
  Non-affiliate interest paid during the
     year..................................  $     65   $     90   $   296   $   155   $    447
                                             ========   ========   =======   =======   ========
</TABLE>

 
   The accompanying notes are an integral part of these combined statements.
                                      F-101

<PAGE>   246
 
                       GREATER MEDIA CABLEVISION SYSTEMS
 

                     NOTES TO COMBINED FINANCIAL STATEMENTS
                                 (IN THOUSANDS)
 
1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
  ORGANIZATION, BASIS OF PRESENTATION AND OPERATIONS
 
     Greater Media Cablevision Systems is the owner and operator of the
following Massachusetts-based cable television systems: Auburn, Boylston,
Chicopee, Dudley, East Longmeadow, Easthampton, Grafton, Hampden, Holden,
Leicester, Ludlow, Millbury, Northborough, Northbridge, Oxford, Paxton,
Southampton, Southborough, Southbridge, Spencer, Sturbridge, Upton, Webster,
West Boylston, West Brookfield, Westborough, Wilbraham and Worcester ("the
Combined Systems"). The Combined Systems are wholly-owned by Greater Media
Cablevision, Inc. ("the Company"). The combined financial statements do not
include the accounts of Greater Philadelphia Cablevision, Inc. or Greater
Philadelphia Cablevision Limited Partnership (the "Philadelphia System"), which
are also wholly-owned by the Company. The Company is a wholly-owned subsidiary
of Greater Media, Inc. ("the Parent"). In February, 1999 the Parent and the
Company entered into an agreement ("Sales Agreement") to sell the net assets of
the Company including the Combined Systems but excluding the Philadelphia
Systems to Charter Communications Holdings, LLC.
 
     Significant intercompany accounts and transactions between the Combined
Systems have been eliminated in the combined financial statements. Significant
accounts and transactions with the Parent and other affiliates are disclosed as
related party transactions (See Note 7).
 
     The Combined Systems primarily provide cable television services to
subscribers in central and western Massachusetts.
 
  CASH AND CASH EQUIVALENTS
 
     The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents.
 
  PROPERTY AND EQUIPMENT
 
     Maintenance and repair costs are expensed when incurred. For financial
reporting purposes, depreciation is provided on the straight-line method based
on the following estimated useful lives:
 

<TABLE>
<CAPTION>
                       CLASSIFICATION                           YEARS
                       --------------                           -----
<S>                                                             <C>
Land improvements...........................................       20
Buildings...................................................    15-40
Furniture, fixtures and equipment...........................     3-15
Trunk and distribution systems..............................     7-12
</TABLE>

 
  INTANGIBLE ASSETS
 
     Intangible assets consist primarily of goodwill amortized over forty years
and costs incurred in obtaining and renewing cable franchises which are
amortized over the life of the respective franchise agreements.
 
  REVENUES
 
     Cable revenues from basic and premium services are recognized when the
related services are provided.
 
                                      F-102

<PAGE>   247
                       GREATER MEDIA CABLEVISION SYSTEMS
 
             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
  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 amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates.
 
  QUARTERLY RESULTS
 
     The financial statements included herein as of December 31, 1998 and for
the three months ended December 31, 1998 and 1997 have been prepared by the
Company without audit. In the opinion of management, all adjustments have been
made which are of a normal recurring nature necessary to present fairly the
Combined Systems' financial position as of December 31, 1998 and the results of
operations, changes in net assets and cash flows for the three months ended
December 31, 1998 and 1997. Certain information and footnote disclosures have
been condensed or omitted for these periods. The results for interim periods are
not necessarily indicative of results for the entire year.
 
2.  PREPAID EXPENSES AND OTHER CURRENT ASSETS
 
     Prepaid and other current assets consist of the following at September 30:
 

<TABLE>
<CAPTION>
                                                            1998      1997
                                                            ----      ----
<S>                                                        <C>       <C>
Franchise grant..........................................  $1,445    $  604
Corporate business tax...................................   1,015       882
Other....................................................     286       463
                                                           ------    ------
Prepaid expenses and other current assets................  $2,746    $1,949
                                                           ======    ======
</TABLE>

 
3.  PROPERTY AND EQUIPMENT
 
     Property and equipment consist of the following at September 30:
 

<TABLE>
<CAPTION>
                                                         1998        1997
                                                         ----        ----
<S>                                                    <C>         <C>
Land and land improvements...........................  $  1,229    $  1,134
Buildings............................................     4,521       4,521
Furniture, fixtures and equipment....................     5,503       4,822
Trunk and distribution systems.......................   109,253      97,042
Construction in progress.............................     9,026       4,450
                                                       --------    --------
                                                        129,532     111,969
Accumulated depreciation.............................    75,064      69,998
                                                       --------    --------
Property and equipment, net..........................  $ 54,468    $ 41,971
                                                       ========    ========
</TABLE>

 
     Depreciation expense for the years ended September 30, 1998, 1997 and 1996
was $8,081, $7,337, and $7,314, respectively. Construction in progress results
primarily from costs to upgrade the systems to fiber optic technologies in the
areas served by the Combined Systems.
 
                                      F-103

<PAGE>   248
                       GREATER MEDIA CABLEVISION SYSTEMS
 
             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
4.  INTANGIBLE ASSETS
 
     Intangible assets consist of the following at September 30:
 

<TABLE>
<CAPTION>
                                                            1998      1997
                                                            ----      ----
<S>                                                        <C>       <C>
Franchise agreements.....................................  $3,230    $2,883
Customer lists...........................................   1,751     1,751
Organization expenses....................................     146       146
Goodwill.................................................   2,260     1,510
Covenant not to compete..................................      40        40
                                                           ------    ------
                                                            7,427     6,330
Accumulated amortization.................................   4,737     4,683
                                                           ------    ------
Intangible assets, net...................................  $2,690    $1,647
                                                           ======    ======
</TABLE>

 
     Amortization expense for the years ended September 30, 1998, 1997 and 1996
was $102, $31 and $39, respectively.
 
5.  ACCOUNTS PAYABLE AND ACCRUED EXPENSES
 
     Accounts payable and accrued expenses consist of the following at September
30:
 

<TABLE>
<CAPTION>
                                                            1998      1997
                                                            ----      ----
<S>                                                        <C>       <C>
Accounts payable.........................................  $4,733    $3,544
Rate refund liability....................................     923       481
Programming expenses.....................................     586       557
Other....................................................     883       717
                                                           ------    ------
                                                           $7,125    $5,299
                                                           ======    ======
</TABLE>

 
6.  INCOME TAXES
 
     The Combined Systems are included in the consolidated federal income tax
return of the Parent. However, the Parent is responsible for tax payments
applicable to the Combined Systems. The combined financial statements reflect a
provision in lieu of income taxes as if the combined systems were filing on a
separate company basis. Accordingly, the Combined Systems have included the
provision in lieu of income taxes as a component of net assets for all periods
presented.
 
     The provision in lieu of income taxes approximates the amount of tax
computed using U.S. statutory rates, after reflecting state income tax expense
of $2,053, $1,924 and $1,486, for 1998, 1997 and 1996, respectively.
 
     As the Sales Agreement represents a sale of assets, Charter Communications
Holdings, LLC will have new tax basis in the Combined Systems' assets and
liabilities acquired.
 
7.  RELATED PARTY TRANSACTIONS
 
     The Company and each of its subsidiaries are guarantors of the Parent
Company's debt.
 
                                      F-104

<PAGE>   249
                       GREATER MEDIA CABLEVISION SYSTEMS
 
             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The combined statements include the charge for certain corporate expenses
incurred by the Parent on behalf of the Combined Systems. Such charges amounted
to $3,888, $3,696, and $3,365 for the three years ended September 30, 1998, 1997
and 1996. Management believes that these costs are reasonable and reflect costs
of doing business that the Combined Systems would have incurred on a stand-alone
basis.
 
     The Combined Systems charge an affiliate interest on certain balances,
aggregating $15,000 per year, at an annual rate of 12%. Interest income on such
balances amounted to $1,800 for each of the three years in the period ended
September 30, 1998. In addition, the Combined Systems are required to pay the
Parent interest on certain balances, at an annual rate of 12%. Interest expense
on such balances amounted to $2,340 for each of these years in the period ended
September 30, 1998, all which were due during the periods presented. The amounts
described above and certain non-interest bearing amounts due affiliates are
included in Net Assets in the Combined Systems balance sheet. As a result of the
Sales Agreement, such amounts will be assumed by the Parent. The interest income
and expense have been netted in the accompanying statement of operations.
 
8.  EMPLOYEE BENEFIT PLAN
 
  401(k) PLAN
 
     The Combined Systems' employees participate in the Greater Media, Inc.
401(k) Plan (the "401(k) Plan"). Employees that qualify for participation can
contribute up to 12% of their salary, on a before tax basis, subject to a
maximum contribution limit as determined by the Internal Revenue Service. The
Parent contributes an amount equal to 50% of the participant's contribution,
limited to the lessor of 3% of the participant's compensation or $1 per year.
 
     The Combined Systems expense relating to the 401(k) Plan was $140, $127,
and $96 in 1998, 1997, and 1996, respectively.
 
  PENSION
 
     Employees of the Combined Systems participate in a pension plan sponsored
by the Parent. The Combined Systems allocable share of the pension expense
amounted to $105, $204 and $217 during the years ended September 30, 1998, 1997
and 1996, respectively. As a result of the Sales Agreement, the Combined
Systems' employees will be fully vested with respect to their plan benefits,
although no additional benefits will accrue to such employees in the future. In
addition, the Parent will be responsible for the allocable pension liability
($838 at September 30, 1998) and will continue to administer the plan on behalf
of the Combined Systems' employees after the sale is consummated.
 
9.  COMMITMENTS AND CONTINGENCIES
 
  LEASES
 
     The Company leases certain facilities and equipment under noncancellable
operating leases. Leases and rental costs charged to expense for the years ended
September 30, 1998, 1997 and 1996, was $2,124, $2,133 and $1,636, respectively.
Rent expense incurred under leases for the
 
                                      F-105

<PAGE>   250
                       GREATER MEDIA CABLEVISION SYSTEMS
 
             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
years ended September 30, 1998, 1997 and 1996, was $678, $665 and $660,
respectively. Future minimum lease payments are as follows:
 

<TABLE>
<S>                                                      <C>
1999.................................................    $  690
2000.................................................       618
2001.................................................       524
2002.................................................       402
2003.................................................       396
Thereafter...........................................     3,267
</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
years ended September 30, 1998, 1997 and 1996, was $1,008, $840 and $578,
respectively.
 
  LITIGATION
 
     The Company is party to lawsuits that arise 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 combined 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. The Company may be
required to refund additional amounts in the future.
 
     The Combined Systems believe that they have complied in all material
respects with the provisions of the 1992 Cable Act, including the rate setting
provisions promulgated by the FCC. However, in jurisdictions that have chosen
not to certify, refunds covering the previous twelve-month period may be ordered
upon certification if a company is unable to justify its basic rates. The
Combined Systems are unable to estimate at this time the amount of refunds, if
any, that may be payable by the Combined Systems in the event certain of its
rates are successfully
 
                                      F-106

<PAGE>   251
                       GREATER MEDIA CABLEVISION SYSTEMS
 
             NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
challenged by franchising authorities or found to be unreasonable by the FCC.
The Combined Systems do not believe that the amount of any such refunds would
have a material adverse effect on their financial position or results of
operations.
 
     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 Combined Systems cannot predict the ultimate effect of the 1996 Telecom
Act on their 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 Combined Systems.
 
     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 Combined Systems are subject to state
regulation in Massachusetts.
 
                                      F-107

<PAGE>   252
 

                         REPORT OF INDEPENDENT AUDITORS
 
To the Board of Directors of
  Renaissance Media Group LLC
 
     We have audited the accompanying consolidated balance sheet of Renaissance
Media Group LLC as of December 31, 1998 and the related consolidated statements
of operations, changes in members' equity, and cash flows for the year ended
December 31, 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our 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 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 consolidated financial position of Renaissance
Media Group LLC at December 31, 1998, and the consolidated results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
 
                                          /s/ ERNST & YOUNG LLP
 
New York, New York
February 22, 1999

except for Note 11, as to which
the date is February 24, 1999
 
                                      F-108

<PAGE>   253
 
                          RENAISSANCE MEDIA GROUP LLC
                           CONSOLIDATED BALANCE SHEET
                            AS OF DECEMBER 31, 1998
                                 (IN THOUSANDS)
 

<TABLE>
<S>                                                             <C>
                                 ASSETS
 
Cash and cash equivalents...................................    $  8,482
Accounts receivable -- trade (less allowance for doubtful
  accounts of $92)..........................................         726
Accounts receivable -- other................................         584
Prepaid expenses and other assets...........................         340
Escrow deposit..............................................         150
Investment in cable television systems:
  Property, plant and equipment.............................      71,246
  Less: Accumulated depreciation............................      (7,294)
                                                                --------
                                                                  63,952
                                                                --------
  Cable television franchises...............................     236,489
  Less: Accumulated amortization............................     (11,473)
                                                                --------
                                                                 225,016
                                                                --------
  Intangible assets.........................................      17,559
  Less: Accumulated amortization............................      (1,059)
                                                                --------
                                                                  16,500
                                                                --------
       Total investment in cable television systems.........     305,468
                                                                --------
          Total assets......................................    $315,750
                                                                ========
 
                    LIABILITIES AND MEMBERS' EQUITY
 
Accounts payable............................................    $  2,042
Accrued expenses(a).........................................       6,670
Subscriber advance payments and deposits....................         608
Deferred marketing support..................................         800
Advances from Holdings......................................         135
Debt........................................................     209,874
                                                                --------
          Total Liabilities.................................     220,129
                                                                --------
 
Members' Equity:
Paid in capital.............................................     108,600
Accumulated deficit.........................................     (12,979)
                                                                --------
       Total members' equity................................      95,621
                                                                --------
          Total liabilities and members' equity.............    $315,750
                                                                ========
</TABLE>

 
---------------
(a) includes accrued costs from transactions with affiliated companies of $921.
 
                See accompanying notes to financial statements.
                                      F-109

<PAGE>   254
 
                          RENAISSANCE MEDIA GROUP LLC
 
                      CONSOLIDATED STATEMENT OF OPERATIONS
                      FOR THE YEAR ENDED DECEMBER 31, 1998
                                 (IN THOUSANDS)
 

<TABLE>
<S>                                                             <C>
REVENUES....................................................    $ 41,524
                                                                --------
COSTS & EXPENSES
  Service Costs(a)..........................................      13,326
  Selling, General & Administrative.........................       7,711
  Depreciation & Amortization...............................      19,107
                                                                --------
     Operating Income.......................................       1,380
     Interest Income........................................         158
     Interest (Expense) (b).................................     (14,358)
                                                                --------
     (Loss) Before Provision for Taxes......................     (12,820)
     Provision for Taxes....................................         135
                                                                --------
     Net (Loss).............................................    $(12,955)
                                                                ========
</TABLE>

 
---------------
(a) includes costs from transactions with affiliated companies of $7,523.
 
(b) includes $676 of amortization of deferred financing costs.
 
                See accompanying notes to financial statements.
                                      F-110

<PAGE>   255
 
                          RENAISSANCE MEDIA GROUP LLC
 
              CONSOLIDATED STATEMENT OF CHANGES IN MEMBERS' EQUITY
                      FOR THE YEAR ENDED DECEMBER 31, 1998
                                 (IN THOUSANDS)
 

<TABLE>
<CAPTION>
                                                            PAID                      TOTAL
                                                             IN       ACCUMULATED    MEMBER'S
                                                          CAPITAL      (DEFICIT)      EQUITY
                                                          -------     -----------    --------
<S>                                                       <C>         <C>            <C>
Contributed Members' Equity -- Renaissance Media
  Holdings LLC and Renaissance Media LLC................  $ 15,000     $    (24)     $14,976
Additional capital contributions........................    93,600           --       93,600
Net (Loss)..............................................        --      (12,955)     (12,955)
                                                          --------     --------      -------
Balance December 31, 1998...............................  $108,600     $(12,979)     $95,621
                                                          ========     ========      =======
</TABLE>

 
                See accompanying notes to financial statements.
                                      F-111

<PAGE>   256
 
                          RENAISSANCE MEDIA GROUP LLC
 
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                      FOR THE YEAR ENDED DECEMBER 31, 1998
                                 (IN THOUSANDS)
 

<TABLE>
<S>                                                             <C>
OPERATING ACTIVITIES:
Net (loss)..................................................    $(12,955)
Adjustments to non-cash and non-operating items:
  Depreciation and amortization.............................      19,107
  Accretion on Senior Discount Notes........................       7,363
  Other non-cash charges....................................         730
  Changes in operating assets and liabilities:
     Accounts receivable -- trade, net......................        (726)
     Accounts receivable -- other...........................        (584)
     Prepaid expenses and other assets......................        (338)
     Accounts payable.......................................       2,031
     Accrued expenses.......................................       6,660
     Subscriber advance payments and deposits...............         608
     Deferred marketing support.............................         800
                                                                --------
Net cash provided by operating activities...................      22,696
                                                                --------
INVESTING ACTIVITIES:
  Purchased cable television systems:
     Property, plant and equipment..........................     (65,580)
     Cable television franchises............................    (235,412)
     Cash paid in excess of identifiable assets.............      (8,608)
  Escrow deposit............................................        (150)
  Capital expenditures......................................      (5,683)
  Cable television franchises...............................      (1,077)
  Other intangible assets...................................        (526)
                                                                --------
Net cash (used in) investing activities.....................    (317,036)
                                                                --------
FINANCING ACTIVITIES:
  Debt acquisition costs....................................      (8,323)
  Principal repayments on bank debt.........................      (7,500)
  Advances from Holdings....................................          33
  Proceeds from bank debt...................................     110,000
  Proceeds from 10% Senior Discount Notes...................     100,012
  Capital contributions.....................................     108,600
                                                                --------
Net cash provided by financing activities...................     302,822
                                                                --------
NET INCREASE IN CASH AND CASH EQUIVALENTS...................       8,482
CASH AND CASH EQUIVALENTS AT DECEMBER 31, 1997..............          --
                                                                --------
CASH AND CASH EQUIVALENTS AT DECEMBER 31, 1998..............    $  8,482
                                                                ========
SUPPLEMENTAL DISCLOSURES:
  INTEREST PAID.............................................    $  4,639
                                                                ========
</TABLE>

 
                See accompanying notes to financial statements.
                                      F-112

<PAGE>   257
 
                          RENAISSANCE MEDIA GROUP LLC
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               DECEMBER 31, 1998
                       (ALL DOLLAR AMOUNTS IN THOUSANDS)
 
1.  ORGANIZATION AND BASIS OF PRESENTATION
 
     Renaissance Media Group LLC ("Group") was formed on March 13, 1998 by
Renaissance Media Holdings LLC ("Holdings"). Holdings is owned by Morgan Stanley
Capital Partners III, L.P. ("MSCP III"), Morgan Stanley Capital Investors, L.P.
("MSCI"), MSCP III 892 Investors, L.P. ("MSCP Investors" and, collectively, with
its affiliates, MSCP III and MSCI and their respective affiliates, the "Morgan
Stanley Entities"), Time Warner and the Management Investors. On March 20, 1998,
Holdings contributed to Group its membership interests in two wholly-owned
subsidiaries; Renaissance Media (Louisiana) LLC ("Louisiana") and Renaissance
Media (Tennessee) LLC ("Tennessee"), which were formed on January 7, 1998.
Louisiana and Tennessee acquired a 76% interest and 24% interest, respectively,
in Renaissance Media LLC ("Media") from Morgan Stanley Capital Partners III,
Inc. ("MSCP"), on February 13, 1998 through an acquisition of entities under
common control accounted for as if it were a pooling of interests. As a result,
Media became a subsidiary of Group and Holdings. Group and its aforementioned
subsidiaries are collectively referred to as the "Company". On April 9, 1998,
the Company acquired (the "Acquisition") six cable television systems (the
"Systems") from TWI Cable, Inc. ("TWI Cable"), a subsidiary of Time Warner Inc.
("Time Warner"). See Note 3. Prior to this Acquisition, the Company had no
operations other than start-up related activities.
 
2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
     NEW ACCOUNTING STANDARDS
 
     During fiscal 1998, the Financial Accounting Standards Board ("FASB")
issued Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("FAS 133").
 
     FAS 133 provides a comprehensive and consistent standard for the
recognition and measurement of derivatives and hedging activities. The Company
will adopt FAS 133 as of January 1, 2000. The impact of the adoption on the
Company's consolidated financial statements is not expected to be material.
 
     PRINCIPLES OF CONSOLIDATION
 
     The consolidated financial statements of the Company include the accounts
of the Company and its wholly owned subsidiaries. Significant intercompany
accounts and transactions have been eliminated.
 
     CONCENTRATION OF CREDIT RISK
 
     A significant portion of the customer base is concentrated within the local
geographical area of each of the individual cable television systems. The
Company generally extends credit to customers and the ultimate collection of
accounts receivable could be affected by the local economy. Management performs
continuous credit evaluations of its customers and may require cash in advance
or other special arrangements from certain customers. Management does not
believe that there is any significant credit risk which could have a material
effect on the Company's financial condition.
 
     REVENUE AND COSTS
 
     Subscriber fees are recorded as revenue in the period the related services
are provided and advertising revenues are recognized in the period the related
advertisements are exhibited.
 
                                      F-113

<PAGE>   258
                          RENAISSANCE MEDIA GROUP LLC
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                               DECEMBER 31, 1998
                       (ALL DOLLAR AMOUNTS IN THOUSANDS)
 
Rights to exhibit programming are purchased from various cable networks. The
costs of such rights are generally expensed as the related services are made
available to subscribers.
 
     ADVERTISING COSTS
 
     Advertising costs are expensed upon the first exhibition of the related
advertisements. Advertising expense amounted to $491 in 1998.
 
     CASH AND CASH EQUIVALENTS
 
     Cash and cash equivalents include cash and investments in short-term,
highly liquid securities, which have maturities when purchased of three months
or less.
 
     PROPERTY, PLANT AND EQUIPMENT
 
     Property, plant and equipment is recorded at purchased and capitalized
cost. Capitalized internal costs principally, consist of employee costs and
interest on funds borrowed during construction. Capitalized labor, materials and
associated overhead amounted to approximately $1,429 in 1998. Replacements,
renewals and improvements to installed cable plant are capitalized. Maintenance
and repairs are charged to expense as incurred. Depreciation expense for the
year ended December 31, 1998 amounted to $7,314. Property, plant and equipment
is depreciated using the straight-line method over the following estimated
service lives:
 

<TABLE>
<S>                                                             <C>
Buildings and leasehold improvements........................    5 - 30 years
Cable systems, equipment and subscriber devices.............    5 - 30 years
Transportation equipment....................................    3 -  5 years
Furniture, fixtures and office equipment....................    5 - 10 years
</TABLE>

 
     Property, plant and equipment at December 31, 1998 consisted of:
 

<TABLE>
<S>                                                             <C>
  Land......................................................    $   432
  Buildings and leasehold improvements......................      1,347
  Cable systems, equipment and subscriber devices...........     62,740
  Transportation equipment..................................      2,181
  Furniture, Fixtures and office equipment..................        904
  Construction in progress..................................      3,642
                                                                -------
                                                                 71,246
Less: accumulated depreciation..............................     (7,294)
                                                                -------
          Total.............................................    $63,952
                                                                =======
</TABLE>

 
     CABLE TELEVISION FRANCHISES AND INTANGIBLE ASSETS
 
     Cable television franchise costs include the assigned fair value, at the
date of acquisition, of the franchises from purchased cable television systems.
Intangible assets include goodwill,
 
                                      F-114

<PAGE>   259
                          RENAISSANCE MEDIA GROUP LLC
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                               DECEMBER 31, 1998
                       (ALL DOLLAR AMOUNTS IN THOUSANDS)
 
deferred financing and other intangible assets. Cable television franchises and
intangible assets are amortized using the straight-line method over the
following estimated useful lives:
 

<TABLE>
<S>                                                             <C>
Cable television franchises.................................        15 years
Goodwill....................................................        25 years
Deferred financing and other intangible assets..............    2 - 10 years
</TABLE>

 
     Intangible assets at December 31, 1998 consisted of:
 

<TABLE>
<S>                                                             <C>
Goodwill....................................................    $ 8,608
Deferred Financing Costs....................................      8,323
Other intangible assets.....................................        628
                                                                -------
                                                                 17,559
Less: accumulated amortization..............................     (1,059)
                                                                -------
          Total.............................................    $16,500
                                                                =======
</TABLE>

 
     The Company periodically reviews the carrying value of its long-lived
assets, including property, plant and equipment, cable television franchises and
intangible assets, whenever events or changes in circumstances indicate that the
carrying value may not be recoverable. To the extent the estimated future cash
inflows attributable to the asset, less estimated future cash outflows, is less
than the carrying amount, an impairment loss is recognized to the extent that
the carrying value of such asset is greater than its fair value.
 
     ESTIMATES USED IN FINANCIAL STATEMENT PRESENTATION
 
     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amount of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
 
3.  ACQUISITIONS
 
     TWI CABLE
 
     On April 9, 1998, the Company acquired six cable television systems from
TWI Cable. The systems are clustered in southern Louisiana, western Mississippi
and western Tennessee. This Acquisition represented the first acquisition by the
Company. The purchase price for the systems was $309,500 which was paid as
follows: TWI Cable received $300,000 in cash, inclusive of an escrow deposit of
$15,000, and a $9,500 (9,500 units) equity interest in Renaissance Media
Holdings LLC, the parent company of Group. In addition to the purchase price,
the Company incurred approximately $1,385 in transaction costs, exclusive of
financing costs.
 
     The Acquisition was accounted for using the purchase method and,
accordingly, results of operations are reported from the date of the Acquisition
(April 9, 1998). The excess of the purchase price over the estimated fair value
of the tangible assets acquired has been allocated to cable television
franchises and goodwill in the amount of $235,387 and $8,608, respectively.
 
                                      F-115

<PAGE>   260
                          RENAISSANCE MEDIA GROUP LLC
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                               DECEMBER 31, 1998
                       (ALL DOLLAR AMOUNTS IN THOUSANDS)
 
     DEFFNER CABLE
 
     On August 31, 1998, the Company acquired the assets of Deffner Cable, a
cable television company located in Gadsden, Tennessee. The purchase price was
$100 and was accounted for using the purchase method. The allocation of the
purchase price is subject to change, although management does not believe that
any material adjustment to such allocation is expected.
 
     BAYOU VISION, INC.
 
     On February 3, 1999, Media acquired the cable television assets of Bayou
Vision, Inc. and Gulf South Cable, Inc. serving approximately 1,950 subscribers
in the Villages of Estherwood, Morse and Mermentau and Acadia and Livingston
Parish, Louisiana. The cash purchase price was approximately $2,700 and was paid
out of available Company funds.
 
     Unaudited Pro Forma summarized results of operations for the Company for
the year ended December 31, 1998 and 1997, assuming the Acquisition, Notes (as
hereinafter defined) offering and Credit Agreement (as hereinafter defined) had
been consummated on January 1, 1998 and 1997, are as follows:
 

<TABLE>
<CAPTION>
                                                              YEAR ENDED DECEMBER 31
                                                              ----------------------
                                                                1997         1998
                                                                ----         ----
<S>                                                           <C>          <C>
Revenues....................................................  $ 50,987     $ 56,745
Expenses....................................................    53,022       55,210
                                                              --------     --------
Operating (loss) income.....................................    (2,035)       1,535
Interest expense and other expenses.........................   (19,740)     (19,699)
                                                              --------     --------
Net (Loss)..................................................  $(21,775)    $(18,164)
                                                              ========     ========
</TABLE>

 
4.  DEBT
 
     As of December 31, 1998, debt consisted of:
 

<TABLE>
<S>                                                             <C>
10.00% Senior Discount Notes at Accreted Value(a)...........    $107,374
Credit Agreement(b).........................................     102,500
                                                                --------
                                                                $209,874
                                                                ========
</TABLE>

 
     (a) On April 9, 1998, in connection with the Acquisition described in Note
3, the Company issued $163,175 principal amount at maturity, $100,012 initial
accreted value, of 10.00% senior discount notes due 2008 ("Notes"). The Notes
pay no interest until April 15, 2003. From and after April 15, 2003 the Notes
will bear interest, payable semi-annually in cash, at a rate of 10% per annum on
April 15 and October 15 of each year, commencing October 15, 2003. The Notes are
due on April 15, 2008.
 
     (b) On April 9, 1998, Renaissance Media entered into a credit agreement
among Morgan Stanley & Co. Incorporated as Placement Agent, Morgan Stanley
Senior Funding Inc., as Syndication Agent, the Lenders, CIBC Inc., as
Documentation Agent and Bankers Trust Company as Administrative Agent (the
"Credit Agreement"). The aggregate commitments under the Credit Agreement total
$150,000, consisting of a $40,000 revolver, $60,000 Tranche A Term Loans and
$50,000 Tranche B Term Loans (collectively the "Term Loans"). The revolving
credit and term loans are collateralized by a first lien position on all present
and future assets and the member's interest of Media, Louisiana and Tennessee.
The Credit Agreement provides for interest at varying rates based upon various
borrowing options and the attainment of certain financial ratios
 
                                      F-116

<PAGE>   261
                          RENAISSANCE MEDIA GROUP LLC
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                               DECEMBER 31, 1998
                       (ALL DOLLAR AMOUNTS IN THOUSANDS)
 
and for commitment fees of  1/2% on the unused portion of the revolver. The
effective interest rate, including commitment fees and amortization of related
deferred financing costs and the interest-rate cap, for the year ended December
31, 1998 was 8.82%.
 
     On April 9, 1998, $110,000 was borrowed under the Credit Agreement's
Tranche A and B Term Loans. On June 23, 1998, $7,500 was repaid resulting in
$102,500 of outstanding Tranche A and B Term Loans as of December 31, 1998.
 
     As of December 31, 1998, the Company had unrestricted use of the $40,000
revolver. No borrowings had been made by the Company under the revolver through
that date.
 
     Annual maturities of borrowings under the Credit Agreement for the years
ending December 31 are as follows:
 

<TABLE>
<S>                                                             <C>
1999........................................................    $    776
2000........................................................       1,035
2001........................................................       2,701
2002........................................................       9,506
2003........................................................      11,590
2004........................................................      11,590
Thereafter..................................................      65,302
                                                                --------
                                                                 102,500
Less: Current portion.......................................        (776)
                                                                --------
                                                                $101,724
                                                                ========
</TABLE>

 
     The Credit Agreement and the Indenture pursuant to which the Notes were
issued contain restrictive covenants on the Company and subsidiaries regarding
additional indebtedness, investment guarantees, loans, acquisitions, dividends
and merger or sale of the subsidiaries and require the maintenance of certain
financial ratios.
 
     Total interest cost incurred for the year ended December 31, 1998,
including commitment fees and amortization of deferred financing and
interest-rate cap costs was $14,358, net of capitalized interest of $42.
 
5.  INTEREST RATE-CAP AGREEMENT
 
     The Company purchases interest-rate cap agreements that are designed to
limit its exposure to increasing interest rates and are designated to its
floating rate debt. The strike price of these agreements exceeds the current
market levels at the time they are entered into. The interest rate indices
specified by the agreements have been and are expected to be highly correlated
with the interest rates the Company incurs on its floating rate debt. Payments
to be received as a result of the specified interest rate index exceeding the
strike price are accrued in other assets and are recognized as a reduction of
interest expense (the accrual accounting method). The cost of these agreements
is included in other assets and amortized to interest expense ratably during the
life of the agreement. Upon termination of an interest-rate cap agreement, any
gain is deferred in other liabilities and amortized over the remaining term of
the original contractual life of the agreement as a reduction of interest
expense.
 
     On December 1, 1997, the Company purchased an interest-rate cap agreement
from Morgan Stanley Capital Services Inc. The carrying value as of December 31,
1998 was $47. The fair value
 
                                      F-117

<PAGE>   262
                          RENAISSANCE MEDIA GROUP LLC
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                               DECEMBER 31, 1998
                       (ALL DOLLAR AMOUNTS IN THOUSANDS)
 
of the interest-rate cap, which is based upon the estimated amount that the
Company would receive or pay to terminate the cap agreement as of December 31,
1998, taking into consideration current interest rates and the credit worthiness
of the counterparties, approximates its carrying value.
 
     The following table summarizes the interest-rate cap agreement:
 

<TABLE>
<CAPTION>
NOTIONAL                                        INITIAL
PRINCIPAL             EFFECTIVE   TERMINATION   CONTRACT   FIXED RATE
 AMOUNT      TERM       DATE         DATE         COST     (PAY RATE)
---------    ----     ---------   -----------   --------   ----------
<S>         <C>       <C>         <C>           <C>        <C>
$100,000    2 years    12/1/97      12/1/99       $100        7.25%
</TABLE>

 
6.  TAXES
 
     For the year ended December 31, 1998, the provision for income taxes has
been calculated on a separate company basis. The components of the provision for
income taxes are as follows:
 

<TABLE>
<CAPTION>
                                                                 YEAR ENDED
                                                              DECEMBER 31, 1998
                                                              -----------------
<S>                                                           <C>
Federal:
  Current...................................................        $ --
  Deferred..................................................          --
State:
  Current...................................................         135
  Deferred..................................................          --
                                                                    ----
     Provision for income taxes.............................        $135
                                                                    ====
</TABLE>

 
     The Company's current state tax liability results from its obligation to
pay franchise tax in Tennessee and Mississippi and tax on capital in New York.
 
     The Company has a net operating loss ("NOL") carryforward for income tax
purposes which is available to offset future taxable income. This NOL totals
approximately $14,900 and expires in the year 2018. The Company has established
a valuation allowance to offset the entire potential future tax benefit of the
NOL carryforward and, therefore, has recognized no deferred tax asset with
respect to the NOL.
 
     Louisiana and Tennessee have elected to be treated as corporations for
federal income tax purposes and have not recorded any tax benefit for their
losses as the realization of theses losses by reducing future taxable income in
the carry forward period is uncertain at this time.
 
7.  RELATED PARTY TRANSACTIONS
 
     (a) TRANSACTIONS WITH MORGAN STANLEY ENTITIES
 
     In connection with the Acquisition, Media entered into the Credit Agreement
with Morgan Stanley Senior Funding Inc. and Morgan Stanley & Co. Incorporated
acted as the Placement Agent for the Notes. In connection with these services
the Morgan Stanley Entities received customary fees and expense reimbursement.
 
     (b) TRANSACTIONS WITH TIME WARNER AND RELATED PARTIES
 
     In connection with the Acquisition, Media entered into an agreement with
Time Warner, pursuant to which Time Warner manages the Company's programming in
exchange for providing the Company access to certain Time Warner programming
arrangements.
 
                                      F-118

<PAGE>   263
                          RENAISSANCE MEDIA GROUP LLC
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                               DECEMBER 31, 1998
                       (ALL DOLLAR AMOUNTS IN THOUSANDS)
 
     (c) Transactions with Management
 
     Prior to the consummation of the Acquisition described in Note 3, Media
paid fees in 1998 to six senior executives of the Company who are investors in
the Company (the "Management Investors") for services rendered prior to their
employment by Media relating to the Acquisition and the Credit Agreement. These
fees totaled $287 and were recorded as transaction and financing costs.
 
     (d) DUE TO MANAGEMENT INVESTORS
 
     Prior to the formation of the Company, the Management Investors advanced
$1,000 to Holdings, which was used primarily for working capital purposes. Upon
formation of the Company, Holdings contributed certain assets and liabilities to
Group and the $1,000 advance from the Management Investors was recorded as paid
in capital.
 
     (e) TRANSACTIONS WITH BOARD MEMBER
 
     The Company has utilized the law firm of one of its board members for legal
services for the Acquisition, financing agreements and various ongoing legal
matters. These fees totaled approximately $1,348 for the year ended December 31,
1998.
 
8.  ACCRUED EXPENSES
 
     Accrued expenses as of December 31, 1998 consist of the following:
 

<TABLE>
<S>                                                             <C>
Accrued programming costs...................................    $1,986
Accrued interest............................................     1,671
Accrued franchise fees......................................     1,022
Accrued legal and professional fees,........................       254
Accrued salaries, wages and benefits........................       570
Accrued property and sales tax..............................       637
Other accrued expenses......................................       530
                                                                ------
                                                                $6,670
                                                                ======
</TABLE>

 
9.  EMPLOYEE BENEFIT PLAN
 
     Effective April 9, 1998, the Company began sponsoring a defined
contribution plan which covers substantially all employees (the "Plan"). The
Plan provides for contributions from eligible employees up to 15% of their
compensation. The Company's contribution to the Plan is limited to 50% of each
eligible employee's contribution up to 10% of his or her compensation. The
Company has the right in any year to set the amount of the Company's
contribution percentage. Company matching contributions to the Plan for the year
ended December 31, 1998 were approximately $97. All participant contributions
and earnings are fully vested upon contribution and company contributions and
earnings vest 20% per year of employment with the Company, becoming fully vested
after five years.
 
                                      F-119

<PAGE>   264
                          RENAISSANCE MEDIA GROUP LLC
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                               DECEMBER 31, 1998
                       (ALL DOLLAR AMOUNTS IN THOUSANDS)
 
10.  COMMITMENTS AND CONTINGENCIES
 
     (a) LEASES
 
     The Company had rental expense under various lease and rental agreements
primarily for offices, tower sites and warehouses of approximately $125 in 1998.
In addition, the Company rents utility poles in its operations generally under
short term arrangements, but the Company expects these arrangements to recur.
Total rent expense for utility poles was approximately $620 in 1998. Future
minimum annual rental payments under noncancellable leases are as follows:
 

<TABLE>
<S>                                                    <C>
1999...............................................    $162
2000...............................................      38
2001...............................................      24
2002...............................................      20
2003 and thereafter................................      66
                                                       ----
     Total.........................................    $310
                                                       ====
</TABLE>

 
     (b) EMPLOYMENT AGREEMENTS
 
     Media has entered into employment agreements with six senior executives who
are also investors in Holdings. Under the conditions of five of the agreements
the employment term is five years, expiring in April 2003 and requires Media to
continue salary payments (including any bonus) through the term if the
executive's employment is terminated by Media without cause, as defined in the
employment agreement. Media's obligations under the employment agreements may be
reduced in certain situations based on actual operating performance relative to
the business plan, death or disability or by actions of the other senior
executives.
 
     The employment agreement for one senior executive has a term of one year
and may be renewed annually. This agreement has been renewed through April 8,
2000.
 
     (c) OTHER AGREEMENTS
 
     In exchange for certain flexibility in establishing cable rate pricing
structures for regulated services that went into effect on January 1, 1996, Time
Warner agreed with the Federal Communications Commission ("FCC") to invest in
certain upgrades to its cable infrastructure (consisting primarily of materials
and labor in connection with the plant upgrades up to 750 megahertz) by 1999
(approximately $23 million). This agreement with the FCC has been assumed by the
Company as part of the Acquisition.
 
11.  SUBSEQUENT EVENT
 
     On February 23, 1999, Holdings entered into an agreement with Charter
Communications, LLC and Charter Communications, Inc., to sell 100% of its
members' equity in the Company for approximately $459,000, subject to certain
closing conditions. This transaction is expected to close during the third
quarter of 1999.
 
12.  YEAR 2000 ISSUES (UNAUDITED)
 
     The Company relies on computer systems, related software applications and
other control devices in operating and monitoring all major aspects of its
business, including, but not limited to, its financial systems (such as general
ledger, accounts payable, payroll and fixed asset
 
                                      F-120

<PAGE>   265
                          RENAISSANCE MEDIA GROUP LLC
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                               DECEMBER 31, 1998
                       (ALL DOLLAR AMOUNTS IN THOUSANDS)
 
modules), subscriber billing systems, internal networks and telecommunications
equipment. The Company also relies, directly and indirectly, on the external
systems of various independent business enterprises, such as its suppliers and
financial organizations, for the accurate exchange of data.
 
     The Company continues to assess the likely impact of Year 2000 issues on
its business operations, including its material information technology ("IT")
and non-IT applications. These material applications include all billing and
subscriber information systems, general ledger software, payroll systems,
accounting software, phone switches and certain headend applications, all of
which are third party supported.
 
     The Company believes it has identified all systems that may be affected by
Year 2000 Issues. Concurrent with the identification phase, the Company is
securing compliance determinations relative to all identified systems. For those
systems that the Company believes are material, compliance programs have been
received or such systems have been certified by independent parities as Year
2000 compliant. For those material systems that are subject to compliance
programs, the Company expects to receive Year 2000 certifications from
independent parties by the second quarter 1999. Determinations of Year 2000
compliance requirements for less mission critical systems are in progress and
are expected to be completed in the second quarter of 1999.
 
     With respect to third parties with which the Company has a material
relationship, the Company believes its most significant relationships are with
financial institutions, who receive subscriber monthly payments and maintain
Company bank accounts, and subscriber billing and management systems providers.
We have received compliance programs which if executed as planned should provide
a high degree of assurance that all Year 2000 issues will be addressed by mid
1999.
 
     The Company has not incurred any material Year 2000 costs to date, and
excluding the need for contingency plans, does not expect to incur any material
Year 2000 costs in the future because most of its applications are maintained by
third parties who have borne Year 2000 compliance costs.
 
     The Company cannot be certain that it or third parties supporting its
systems have resolved or will resolve all Year 2000 issues in a timely manner.
Failure by the Company or any such third party to successfully address the
relevant Year 2000 issues could result in disruptions of the Company's business
and the incurrence of significant expenses by the Company. Additionally, the
Company could be affected by any disruption to third parties with which the
Company does business if such third parties have not successfully addressed
their Year 2000 issues.
 
     Failure to resolve Year 2000 issues could result in improper billing to the
Company's subscribers which could have a major impact on the recording of
revenue and the collection of cash as well as create significant customer
dissatisfaction. In addition, failure on the part of the financial institutions
with which the Company relies on for its cash collection and management services
could also have a significant impact on collections, results of operations and
the liquidity of the Company.
 
     The Company has not yet finalized contingency plans necessary to handle the
most likely worst case scenarios. Before concluding as to possible contingency
plans, the Company must determine whether the material service providers
contemplate having such plans in place. In the event that contingency plans from
material service providers are not in place or are deemed inadequate, management
expects to have such plans in place by the third quarter of 1999.
 
                                      F-121

<PAGE>   266
 

                         REPORT OF INDEPENDENT AUDITORS
 
To the Board of Directors of
  TWI Cable, Inc.
 
     We have audited the accompanying combined balance sheet of the Picayune MS,
Lafourche LA, St. Tammany LA, St. Landry LA, Pointe Coupee LA, and Jackson TN
cable television systems, (collectively, the "Combined Systems") included in TWI
Cable, Inc. ("TWI Cable"), as of April 8, 1998, and the related combined
statements of operations, changes in net assets and cash flows for the period
from January 1, 1998 through April 8, 1998. These combined financial statements
are the responsibility of the Combined Systems' management. Our responsibility
is to express an opinion on these combined 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
misstate