ENSTAR INCOME PROGRAM IV-1 LP - 10-K Annual Report

Back to GetFilings.com

================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

---------

FORM 10-K

---------

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

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002

OR

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

FOR THE TRANSITION PERIOD FROM _______________ TO _______________

COMMISSION FILE NUMBER: 000-15705

ENSTAR INCOME PROGRAM IV-1, L.P.
---------------------------------
(Exact name of registrant as specified in its charter)

GEORGIA 58-1648322
------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)

12405 POWERSCOURT DRIVE
ST. LOUIS, MISSOURI 63131
------------------- -----
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (314) 965-0555
--------------

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

Securities registered pursuant to Section 12(g) of the Act:

TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
----------------------------------------------- -----------------------------------------------------
Units of Limited Partnership Interest None

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

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

State the aggregate market value of the voting equity securities held by
non-affiliates of the registrant: All of the registrant's 39,982 units of
limited partnership interests, its only class of equity securities, are held by
non-affiliates. There is no public trading market for the units, and transfers
of units are subject to certain restrictions; accordingly, the registrant is
unable to state the market value of the units held by non-affiliates.

================================================================================

The Exhibit Index is located at Page E-1.

ENSTAR INCOME PROGRAM IV-1, L.P.

2002 FORM 10-K ANNUAL REPORT

TABLE OF CONTENTS

This Annual Report on Form 10-K is for the year ended December 31, 2002. This
Annual Report modifies and supersedes documents filed prior to this Annual
Report. The Securities and Exchange Commission (SEC) allows us to "incorporate
by reference" information that we file with the SEC, which means that we can
disclose important information to you by referring you directly to those
documents. Information incorporated by reference is considered to be part of
this Annual Report. In addition, information that we file with the SEC in the
future will automatically update and supersede information contained in this
Annual Report. In this Annual Report, "we," "us," and "our" refers to Enstar
Income Program IV-1, L.P.

PART I

ITEM 1. BUSINESS

INTRODUCTION

Enstar Income Program IV-1, L.P., a Georgia limited partnership (the
"Partnership"), is engaged in the ownership and operation of cable television
systems.

All of our cable television business operations are conducted through the
Partnership's participation as a co-general partner in both Enstar IV/PBD
Systems Venture (the "PBD Joint Venture") and, until the sale of its remaining
cable systems in the second quarter of 2002, Enstar Cable of Macoupin County
(the "Macoupin Joint Venture") (collectively the "Joint Ventures"), the other
general partners of which are also cable television limited partnerships
sponsored by the General Partners of the Partnership (collectively the "joint
venturers"). The Joint Ventures were formed in order to enable each of their
partners to participate in the acquisition and ownership of a more diverse pool
of systems by combining certain of their financial resources. Because all of our
operations are conducted through our participation in the Joint Ventures, much
of the discussion in this report relates to the Joint Ventures and their
activities. References to the Partnership include the Joint Ventures where
appropriate. The PBD Joint Venture serves approximately 3,600 basic customers at
December 31, 2002 in and around the city of Dexter, Missouri.

The General Partners of the Partnership are Enstar Communications Corporation, a
Georgia corporation (the "Corporate General Partner") and Robert T. Graff, Jr.
(the "Individual General Partner"). Since its incorporation in 1982, the
Corporate General Partner has been engaged in the cable/telecommunications
business, both as a General Partner of 14 Limited Partnerships formed to own and
operate cable television systems and through a wholly-owned operating
subsidiary. As of December 31, 2002, the Corporate General Partner managed cable
television systems serving approximately 32,400 basic customers. On November 12,
1999, the Corporate General Partner became an indirect controlled subsidiary of
Charter Communications, Inc. (also called Charter), the nation's third largest
cable operator, serving approximately 6.6 million customers. The Corporate
General Partner is responsible for day-to-day management of the Partnership and
its operations. Charter and its affiliates provide management and other services
to the Partnership, for which they receive a management fee and reimbursement of
expenses. The principal executive offices of the Partnership and the Corporate
General Partner are located at 12405 Powerscourt Drive, St. Louis, MO 63131-0555
and their telephone number is (314) 965-0555.

LIQUIDATION BASIS ACCOUNTING AND SALE OF CABLE SYSTEMS

Our Corporate General Partner continues to operate our cable television systems
during our divestiture transactions for the benefit of our unitholders.

On April 10, 2002, pursuant to an asset purchase agreement dated August 29,
2001, the Partnership, together with its affiliates, Enstar Income Program IV-2,
L.P. (Enstar IV-2) and Enstar Income Program IV-3, L.P., completed the sale of
the Macoupin Joint Venture's systems to Charter Communications Entertainment I,
LLC ("CCE-1"), an affiliate of the Corporate General Partner and an indirect
subsidiary of Charter, for a total sale price of approximately $9,076,800, the
Partnership's one-third share of which is approximately $3,025,600, and,
together with Enstar IV-2, the sale to Interlink Communications Partners, LLC of
the PBD Joint Venture's Mt. Carmel system for a total sale price of
approximately $4,994,800, the Partnership's one-half share of which is
approximately $2,497,400 (the "Charter Sale"). The Charter Sale is part of a
larger transaction in which the Partnership and five other affiliated
partnerships (which, together with the Partnership are collectively referred to
as the "Charter Selling Partnerships") sold all of their assets used in the
operation of their respective Illinois cable television systems to CCE-1 and two
of its affiliates (also referred to, with CCE-1, as the "Purchasers") for a
total cash sale price of $63,000,000. Each Charter Selling Partnership received
the same value per customer. In addition, the Limited Partners of each of the
Charter Selling Partnerships approved an amendment to their respective
partnership agreement to allow the sale of assets to an affiliate of such
partnership's General Partner. The Purchasers are each indirect subsidiaries of
the Corporate General Partner's ultimate parent company, Charter, and,
therefore, are affiliates of the Partnership and each of the other Charter
Selling Partnerships.

In addition, on March 21, 2002, pursuant to an asset purchase agreement dated
September 4, 2001, the Partnership, together with Enstar IV-2, completed the
sale of the Poplar Bluff franchise area with the City of Poplar Bluff, Missouri
for a sale price of approximately $8,000,000 (the "Poplar Bluff Sale"), the
Partnership's one-half share of which is approximately $4,000,000.

3

The Charter Sale and Poplar Bluff Sale resulted from a sale process actively
pursued since 1999, when the Corporate General Partner sought purchasers for all
of the cable television systems of the Selling Partnerships, as well as eight
other affiliated limited partnership cable operators of which the Corporate
General Partner is also the general partner. This effort was undertaken
primarily because, based on the Corporate General Partner's experience in the
cable television industry, it was concluded that generally applicable market
conditions and competitive factors were making (and would increasingly make) it
extremely difficult for smaller operators of rural cable systems (such as the
Joint Ventures and the other affiliated partnerships) to effectively compete and
be financially successful. This determination was based on the anticipated cost
of electronics and additional equipment to enable the Joint Venture's systems to
operate on a two-way basis with improved technical capacity, insufficiency of
Joint Ventures cash reserves and cash flows from operations to finance such
expenditures, limited customer growth potential due to the Joint Venture's
systems' rural location, and a general inability of a small cable system
operator such as the Joint Ventures to benefit from economies of scale and the
ability to combine and integrate systems that large cable operators have. In
addition, the City of Poplar Bluff sold bonds to raise money to construct a
competing cable system. Although limited plant upgrades have been made, the
Corporate General Partner projected that if the Joint Ventures made the
comprehensive additional upgrades deemed necessary to enable enhanced and
competitive services, particularly two-way capability, the Joint Ventures would
not recoup the costs or regain its ability to operate profitably within the
remaining term of its franchises, and as a result, making these upgrades would
not be economically prudent.

As a result of the sale of the Macoupin Joint Venture's systems, the Macoupin
Joint Venture changed its basis of accounting to the liquidation basis on April
10, 2002. Accordingly, the assets in the accompanying statement of net assets in
liquidation as of December 31, 2002 have been stated at estimated realizable
values and the liabilities have been reflected at estimated settlement amounts.
There were no significant adjustments recorded upon changing to liquidation
basis accounting. Net assets in liquidation as of December 31, 2002 represent
the estimated distribution to the joint venturers. In January 2003, all
remaining assets of the Macoupin Joint Venture were distributed including a
final distribution of $126,000 made to the joint venturers, of which the
Partnership's portion is $42,000.

On November 8, 2002, the joint venturers entered into an asset purchase
agreement providing for the sale of PBD Joint Venture's remaining cable system
in Dexter, Missouri to Telecommunications Management, LLC (Telecommunications
Management) for a total sale price of approximately $3,148,000, (approximately
$825 per customer acquired). This sale is a part of a larger transaction in
which the joint venturers and eight other affiliated partnerships (which,
together with the Partnership are collectively referred to as the
"Telecommunications Management Selling Partnerships") would sell all of their
remaining assets used in the operation of their respective cable systems to
Telecommunications Management for a total cash sale price of approximately
$15,341,600 (before adjustments) (the Telecommunications Management Sale). The
Telecommunications Management Sale is subject to the approval of a majority of
the holders of the Partnership's units and approval of the holders of the other
Telecommunications Management Selling Partnerships. In addition, the transaction
is subject to certain closing conditions, including regulatory and franchise
approvals. In April 2003, a majority of the limited Partners approved the
Telecommunications Management Sale and a plan of liquidation.

On February 6, 2003, the PBD Joint Venture entered into a side letter amending
the asset purchase agreement providing for the sale of its remaining cable
system in Dexter, Missouri to Telecommunications Management. The February 6,
2003 side letter amends the asset purchase agreement and Deposit Escrow
Agreement to extend the date of the second installment of the deposit and the
Outside Closing Date each by 60 days. On April 7, 2003, the second installment
of the escrow deposit was due and was not received. We are currently evaluating
our alternatives with respect to this new development.

The PBD Joint Venture finalized its proposed plan of liquidation in December
2002 in connection with the Partnership's filing of a proxy to obtain the
approval of the Limited Partners for the sale of the PBD Joint Venture's final
cable system and the subsequent liquidation and dissolution of the PBD Joint
Venture and the Partnership. In April 2003, the required number of votes
necessary to implement the plan of liquidation were obtained. As a result, the
PBD Joint Venture changed its basis of accounting to the liquidation basis as of
December 31, 2002. The statements of operations, venturer's capital and cash
flows for the year ended December 31, 2002 have been presented on a going
concern basis comparable to prior periods. Upon changing to liquidation basis
accounting, the PBD Joint Venture recorded $30,600 of accrued costs of
liquidation in accounts payable and accrued liabilities representing an estimate
of the costs to be incurred after the sale of the final cable system but prior
to dissolution of the PBD Joint Venture. Because we are unable to develop
reliable estimates of future operating results or the ultimate realizable value
of property, plant and equipment due to the current uncertainties surrounding
the final

4

dissolution of the PBD Joint Venture, no adjustments have been recorded to
reflect assets at estimated realizable values or to reflect estimates of future
operating results. These adjustments will be recorded once a sale is imminent
and the net sales proceeds are reasonably estimable. Accordingly, the assets in
the accompanying statement of net assets in liquidation of the PBD Joint Venture
as of December 31, 2002 have been stated at historical book values. In addition,
the Partnership changed its basis of accounting to the liquidation basis and
recorded $25,000 of accrued costs of liquidation in accounts payable and accrued
liabilities. Distributions ultimately made to the partners upon liquidation will
differ from the net assets in liquidation recorded in the accompanying statement
of net assets in liquidation as a result of future operations, the sale proceeds
ultimately received by the PBD Joint Venture and adjustments if any to estimated
costs of liquidation.

The Corporate General Partner's intention is to settle the outstanding
obligations of the Partnership and terminate the Partnership as expeditiously as
possible. Final dissolution of the Partnership and related cash distributions to
the partners will occur upon obtaining final resolution of all liquidation
issues.

DESCRIPTION OF THE PBD JOINT VENTURE'S SYSTEMS

The table below sets forth certain operating statistics for the PBD Joint
Venture's cable systems as of December 31, 2002.

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

(2) Basic penetration represents basic customers as a percentage
of homes passed by cable transmission lines.

(3) Premium service units include only single channel services
offered for a monthly fee per channel and do not include tiers
of channels offered as a package for a single monthly fee.

(4) Premium penetration represents premium service units as a
percentage of homes subscribing to cable service. A customer
may purchase more than one premium service, each of which is
counted as a separate premium service unit. This ratio may be
greater than 100% if the average customer subscribes for more
than one premium service.

(5) Average monthly revenue per basic customer has been computed
based on revenue for the year ended December 31, 2002, divided
by twelve months, divided by the actual number of basic
customers at the end of the year.

SERVICES, MARKETING AND PRICES

The Joint Venture's cable television systems offer customers various levels of
cable services consisting of:

o broadcast television signals of local network, independent and
educational stations;

o a limited number of television signals originating from distant cities,
such as WGN;

o various satellite delivered, non-broadcast channels, such as CNN, MTV,
The USA Network, ESPN, TNT, and The Disney Channel;

o programming originated locally by the cable television system, such as
public, educational and government access programs; and

For an extra monthly charge, our cable television systems also offer premium
television services to their customers. These services, such as HBO and
Showtime, are satellite channels that consist principally of feature films, live
sporting events, concerts and other special entertainment features, usually
presented without commercial interruption. See "Regulation and Legislation."

5

In October 2001, we began offering customers digital services through a hybrid
system that delivers traditional cable television services through the
terrestrial cable plant and digital service through a satellite dish mounted at
the customer's home. This hybrid digital package includes a digital set top
terminal, an interactive electronic programming guide, 45 channels of CD quality
digital music, a menu of pay per view channels and at least thirty additional
digital channels. Certain digital packages also offer customers one or more
premium channels with "multiplexes." Multiplexes give customers access to
several different versions of the same premium channels which are varied as to
time of broadcast (such as east and west coast time slots) or programming
content and theme (such as westerns and romance).

A customer generally pays an initial installation charge and fixed monthly fees
for basic, expanded basic, other tiers of satellite services and premium
programming services. Such monthly service fees constitute the primary source of
revenues for the Joint Venture's cable television systems. In addition to
customer revenues, the Joint Venture's cable television systems receive revenues
from the sale of available advertising spots on advertiser-supported programming
and also offer to the Joint Venture's customers home shopping services, which
pay the Joint Venture a share of revenues from sales of products to our
customers, in addition to paying the Joint Venture a separate fee in return for
carrying their shopping service.

The Joint Venture's marketing strategy is to provide added value to increasing
levels of subscription services through packaging. In addition to the basic
service package, customers in substantially all of our cable television systems
may purchase additional unregulated packages of satellite-delivered services and
premium services. The Joint Venture's service options vary from system to
system, depending upon a cable system's channel capacity and viewer interests.
In some cable television systems, the Joint Venture offers discounts to
customers who purchase premium services on a limited trial basis in order to
encourage a higher level of service subscription. The Joint Venture also has a
coordinated strategy for retaining customers that includes televised retention
advertising to reinforce the initial decision to subscribe and encourage
customers to purchase higher service levels.

Rates for services also vary from market to market and according to the type of
services selected. Under the Cable Television Consumer Protection and
Competition Act of 1992 (the "1992 Cable Act"), most cable television systems
are subject to rate regulation of the basic service tier, the charges for
installation of cable service, and the rental rates for customer premises
equipment such as converter boxes and remote control devices. These rate
regulation provisions affect all of the Joint Venture's cable television systems
not deemed to be subject to effective competition under the Federal
Communications Commission's ("FCC") definition. Currently, none of the Joint
Venture's cable television systems are subject to effective competition. See
"Regulation and Legislation."

At December 31, 2002, the Joint Venture's monthly rates for basic cable service
for residential customers, including certain discounted prices, was $20.58 and
our premium price was $11.95, excluding special promotions offered periodically
in conjunction with the Partnership's marketing programs. A one-time
installation fee, which the Joint Venture may wholly or partially waive during a
promotional period, is usually charged to new customers. The Joint Venture
charges commercial customers, such as hotels, motels and hospitals, a
negotiated, non-recurring fee for installation of service and monthly fees based
upon a standard discounting procedure. The Joint Venture offers most multi-unit
dwellings a negotiated bulk rate in exchange for single-point billing and basic
service to all units. These rates are also subject to regulation.

PROGRAMMING

The Joint Venture purchases basic and premium programming for the Joint
Venture's systems from Charter based on Charter's actual cost. Charter's
programming costs are generally based on a fixed fee per customer or a
percentage of the gross receipts for the particular service. Charter's
programming contracts are generally for a fixed period of time and are subject
to negotiated renewal. Accordingly, no assurances can be given that Charter's,
and correspondingly our, programming costs will not continue to increase
substantially in the near future, or that other materially adverse terms will
not be added to Charter's programming contracts. We believe, however, that
Charter's relations with its programming suppliers generally are good.

The Joint Venture's cable programming costs have increased in recent years due
to additional programming being provided to basic customers and are expected to
continue to increase due to increased costs to produce or purchase cable
programming (with particularly significant increases occurring with respect to
sports programming), inflationary increases and other factors. In addition, the
Joint Venture is facing higher costs to carry local broadcast channels who elect
retransmission carriage agreements.

6

CABLE SYSTEM AND TECHNOLOGY

A cable television system receives television, radio and data signals at the
system's headend site by means of over-the-air antennas, microwave relay systems
and satellite earth stations. These signals are then modulated, amplified and
distributed, primarily through coaxial and fiber optic distribution systems, to
customers who pay a fee for this service.

Significant capital would be required for a comprehensive plant and headend
upgrade, particularly in light of the high cost of electronics to enable two-way
service, to offer high speed cable modem Internet and other interactive
services, as well as to increase channel capacity and allow a greater variety of
video services. The Joint Venture's capital expenditures for recent upgrades
have been made with available funds, and have enhanced the economic value of the
Joint Venture's systems and permitted the Joint Venture to comply with franchise
agreements.

The estimated cost of upgrading the PBD Joint Venture's system to two-way
capability in order to be able to offer high-speed Internet service from the
Dexter, Missouri headend, as well as to increase channel capacity and allow
additional video services, would be approximately $2.4 million (for an upgrade
to 550 megahertz (MHz) capacity) to $2.8 million (for an upgrade to 870 MHz
capacity). Given pending sale transactions, the high cost of this comprehensive
upgrade plan and the limited funds available to us, such a plan is not judged to
be economically prudent, the Corporate General Partner does not presently
anticipate that it will proceed with a comprehensive upgrade plan, and
accordingly, the Corporate General Partner has continued to evaluate
alternative, cost-effective solutions to increase channel capacity, pay-per-view
services, and digital services which would enhance the value of our system,
maintain compliance with franchise agreements.

CUSTOMER SERVICE AND COMMUNITY RELATIONS

The Joint Venture continually strives to improve customer service and strengthen
community relations and believe that success in these areas is critical to our
business. The Joint Venture relies upon Charter pursuant to the management
services agreement to assist us with customer service and community relations.
The Joint Venture is also committed to fostering strong community relations in
the towns and cities the Joint Venture serves. The Joint Venture supports many
local charities and community causes in various ways. The Joint Venture also
participates in the "Cable in the Classroom" program, whereby cable television
companies throughout the United States provide schools with free cable
television service. In addition, the Joint Venture installs and provides free
basic cable service to public schools, government buildings and non-profit
hospitals in many of the communities in which the Joint Venture operates.

FRANCHISES

As of December 31, 2002, the PBD Joint Venture's system operated pursuant to a
total of 3 franchises, permits and similar authorizations issued by local and
state governmental authorities. Each franchise is awarded by a governmental
authority and may not be transferable unless the granting governmental authority
consents. Most franchises are subject to termination proceedings in the event of
a material breach. In addition, franchises can require us to pay the granting
authority a franchise fee of up to 5% of gross revenues as defined by the
franchise agreements, which is the maximum amount that may be charged under the
applicable law.

Prior to the scheduled expiration of most franchises, we initiate renewal
proceedings with the granting authorities. The Cable Communications Policy Act
of 1984 (the "1984 Cable Act") provides for, among other things, an orderly
franchise renewal process in which franchise renewal will not be unreasonably
withheld. If renewal is denied, the franchising authority may acquire ownership
of the system or effect a transfer of the system to another person. The operator
generally is entitled to the fair market value for the system covered by such
franchise, but no value may be attributed to the franchise itself. In addition,
the 1984 Cable Act, as amended by the 1992 Cable Act, establishes comprehensive
renewal procedures which require that an incumbent franchisee's renewal
application be assessed on its own merit and not as part of a comparative
process with competing applications. See "Legislation and Regulation." In
connection with the franchise renewal process, many governmental authorities
require the cable operator to make certain commitments, such as technological
upgrades to the system. Although historically we have been able to renew our
franchises without incurring significant costs, we cannot assure you 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 areas where we have the most customers, would have a material adverse
effect on our business, results of operations and financial condition.

7

Under the 1996 Telecommunications Act ("1996 Telecom Act"), state and local
authorities are prohibited from limiting, restricting or conditioning the
provision of telecommunications services. They may, however, impose
"competitively neutral" requirements and manage the public rights-of-way.
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.

Cable television systems are generally constructed and operated under
non-exclusive franchises granted by local governmental authorities. The
franchise agreements typically contain many conditions, such as time limitations
on commencement and completion of construction; conditions of service, including
number of channels, types of programming and the provision of free service to
schools and other public institutions; and the maintenance of insurance and
indemnity bonds. The provisions of local franchise agreements are subject to
federal regulation under the 1984 Cable Act, the 1992 Cable Act and the 1996
Telecom Act. See "Regulation and Legislation."

We believe our relations with the franchising authorities under which our system
is operated are generally good.

PBD JOINT VENTURE

As of December 31, 2002, the PBD Joint Venture operated its cable system in
three franchise areas. These franchises, all of which are non-exclusive, provide
for the payment of fees to the issuing authority. Annual franchise fees imposed
on the PBD Joint Venture's systems range up to 5% of the gross revenues
generated by a system. The 1984 Cable Act prohibits franchising authorities from
imposing franchise fees in excess of 5% of gross revenues and also permits the
cable system operator to seek renegotiation and modification of franchise
requirements if warranted by changed circumstances.

As of December 31, 2002, a franchise agreement with no expiration date serves
one franchise area with approximately 2,300 basic customers, or 63.9% of total
basic customers. As of December 31, 2002, franchise agreements have expired in
two of the PBD Joint Venture's franchise areas which serves approximately 1,300
basic customers, or 36.1% of total basic customers. The PBD Joint Venture
continues to serve these customers while it is in negotiations to transfer and
renew the franchise agreements and continues to pay franchise fees to the
franchise authorities. The PBD Joint Venture operates a cable television system
which serves multiple communities and, in some circumstances, portions of the
system extends into jurisdictions, such as unincorporated communities, for which
the PBD Joint Venture believes no franchise is necessary. The PBD Joint Venture
has never had a franchise revoked for its system and believes that it has
satisfactory relationships with its franchising authorities.

COMPETITION

The PBD Joint Venture faces competition in the areas of price, services, and
service reliability. We compete with other providers of television signals and
other sources of home entertainment. We operate in a very competitive business
environment which can adversely affect our business and operations.

Through business developments such as the merger of Comcast Corp. and AT&T
Broadband, the largest and third largest cable providers in the country and the
merger of America Online, Inc. (AOL) and Time Warner Inc., customers have come
to expect a variety of services from a single provider. While these mergers are
not expected to have a direct or immediate impact on our business, they
encourage providers of cable and telecommunications services to expand their
service offerings, as cable operators recognize the competitive benefits of a
large customer base and expanded financial resources.

The PBD Joint Venture's key competitors include:

DBS. Direct broadcast satellite, known as DBS, is a significant competitor 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
more than 19 million subscribers nationwide. DBS service allows the subscriber
to receive video and high-speed Internet access services directly via satellite
using a relatively small dish antenna, provided the customer enables two-way
communication through a separate telephone connection.

8

Video compression technology and high powered satellites allow DBS providers to
offer more than 200 digital channels from a single 32 transponder satellite,
thereby surpassing the typical analog cable system. In 2002, major DBS
competitors offered a greater variety of channel packages, and were especially
competitive at the lower end pricing. In addition, while we continue to believe
that the initial investment by a DBS customer exceeds that of a cable customer,
the initial equipment cost for DBS has decreased substantially, as the DBS
providers have aggressively marketed offers to new customers of incentives for
discounted or free equipment, installation and multiple units. DBS providers
have a national service and are able to establish a national image and branding
with standardized offerings, which together with their ability to avoid
franchise fees of up to 5% of revenues, leads to greater efficiencies and lower
costs in the lower tiers of service. However, we believe that some consumers
continue to prefer our stronger local presence in our markets.

DBS companies historically were prohibited from retransmitting popular local
broadcast programming. However, a change to the copyright laws in 1999
eliminated this legal impediment. As a result, DBS companies now may retransmit
such programming, once they have secured retransmission consent from the popular
broadcast stations they wish to carry, and honor mandatory carriage obligations
of less popular broadcast stations in the same television markets. In response
to the legislation, DirecTV, Inc. and EchoStar Communications Corporation have
begun carrying the major network stations in the nation's top television
markets. DBS, however, is limited in the local programming it can provide
because of the current capacity limitations of satellite technology, and the DBS
companies currently offer local broadcast programming only in the larger U.S.
markets.

Broadcast Television. Cable television has long competed with broadcast
television, which consists of television signals that the viewer is able to
receive without charge using an "off-air" antenna. The extent of such
competition is dependent upon the quality and quantity of broadcast signals
available through "off-air" reception compared to the services provided by the
local cable system. Traditionally, cable television has provided a higher
picture quality and more channel offerings than broadcast television. However,
the recent licensing of digital spectrum by the Federal Communications
Commission will provide traditional broadcasters 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 and
data transmission.

Traditional Overbuilds. Cable television systems are operated under
non-exclusive franchises granted by local authorities. More than one cable
system may legally be built in the same area. It is possible that a franchising
authority might grant a second franchise to another cable operator and that such
a franchise might contain terms and conditions more favorable than those
afforded us. In addition, entities willing to establish an open video system,
under which they offer unaffiliated programmers non-discriminatory access to a
portion of the system's cable system, may be able to avoid local franchising
requirements. Well-financed businesses from outside the cable industry, such as
public utilities that already possess fiber optic and other transmission lines
in the areas they serve, may over time become competitors. There are a number of
cities that have constructed their own cable systems, in a manner similar to
city-provided utility services. There also has been interest in traditional
overbuilds by private companies. 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.

Telephone Companies and Utilities. The competitive environment has been
significantly affected by technological developments and regulatory changes
enacted under the 1996 Telecom Act, which was 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 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.

Although telephone companies can lawfully enter the cable television business,
activity in this area is currently quite limited. 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 may become more widespread and
could adversely affect the profitability and valuation of established cable
systems.

Additionally, we are subject to competition from utilities which possess fiber
optic transmission lines capable of transmitting signals with minimal signal
distortion.

9

Private Cable. 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 "MDUs", 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. Private
cable systems can offer both improved reception of local television stations and
many of the same satellite-delivered program services that 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. The Federal Communications Commission ruled
in 1998 that private cable operators can lease video distribution capacity from
local telephone companies and distribute cable programming services over public
rights-of-way without obtaining a cable franchise. In 1999, both the Fifth and
Seventh Circuit Courts of Appeals upheld this Federal Communications Commission
policy.

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.

REGULATION AND LEGISLATION

The following summary addresses the key regulatory developments and legislation
affecting the cable industry.

The operation of a cable system is extensively regulated by the Federal
Communications Commission, some state governments and most local governments.
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. The 1996 Telecom Act altered the regulatory structure governing the
nation's communications providers. It removed barriers to competition in both
the cable television market and the local telephone market. Among other things,
it reduced the scope of cable rate regulation and encouraged 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 required the Federal Communications Commission to undertake
a number 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.

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 were
subjected to rate regulation, unless they faced "effective competition" in their
local franchise area. Federal law defines "effective competition" on a
community-specific basis as requiring satisfaction of certain conditions. These
conditions are not typically satisfied in the current marketplace; hence, most
cable systems potentially are subject to rate regulation. However, with the
rapid growth of DBS, it is likely that additional cable systems will soon
qualify for "effective competition" and thereby avoid further rate regulation.

Although the Federal Communications Commission 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 service--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.

10

For regulated cable systems, the basic service tier rate increases are governed
by a complicated price cap scheme devised by the Federal Communications
Commission that allows for the recovery of inflation and certain increased
costs, as well as providing some incentive for system upgrades. Operators also
have the opportunity to bypass this "benchmark" regulatory scheme in favor of
traditional "cost-of-service" regulation in cases where the latter methodology
appears favorable. Cost-of-service regulation is a traditional form of rate
regulation, under which a utility is allowed to recover its costs of providing
the regulated service, plus a reasonable profit.

Cable programming service tiers, which are the expanded basic programming
packages that offer services other than basic programming and which typically
contain satellite-delivered programming, were historically rate regulated by the
Federal Communications Commission. Under the 1996 Telecom Act, however, the
Federal Communications Commission's authority to regulate cable programming
service tier rates expired on March 31, 1999. The Federal Communications
Commission still adjudicates cable programming service tier complaints filed
prior to that date, but strictly limits its review, and possible refund orders,
to the time period prior to March 31, 1999. The elimination of cable programming
service tier regulation affords us substantially greater pricing flexibility,
subject to competitive factors and customer acceptance.

Premium cable services offered on a per-channel or per-program basis remain
unregulated under both the 1992 Cable Act and the 1996 Telecom Act. 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. 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 and Pole Attachment Rates. The 1996 Telecom
Act creates a more favorable environment for us to provide telecommunications
services beyond traditional video delivery. It provides that no state or local
laws or regulations may prohibit or have the effect of prohibiting any entity
from providing any interstate or intrastate telecommunications service. States
are authorized, however, to impose "competitively neutral" requirements
regarding universal service, public safety and welfare, service quality, and
consumer protection. State and local governments also retain their authority to
manage the public rights-of-way and may require reasonable, competitively
neutral compensation for management of the public rights-of-way when cable
operators provide telecommunications service. The favorable pole attachment
rates afforded cable operators under federal law can be gradually increased by
utility companies owning the poles if the operator provides telecommunications
service, as well as cable service, over its plant. The Federal Communications
Commission clarified that a cable operator's favorable pole rates are not
endangered by the provision of Internet access, and that approach ultimately was
upheld by the United States Supreme Court.

Cable entry into telecommunications will be affected by the rulings and
regulations implementing the 1996 Telecom Act, including the rules governing
interconnection. A cable operator offering telecommunications services generally
needs efficient interconnection with other telephone companies to provide a
viable service. A number of details designed to facilitate interconnection are
subject to ongoing regulatory and judicial review, but the basic obligation of
incumbent telephone companies to interconnect with competitors, such as cable
companies offering telephone service, is well established. Even so, the economic
viability of different interconnection arrangements can be greatly affected by
regulatory changes. Consequently, we cannot predict whether reasonable
interconnection terms will be available in any particular market we may choose
to enter.

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
can now compete with cable operators both inside and outside their telephone
service areas with certain regulatory safeguards. Because of their resources,
local exchange carriers could be formidable competitors to traditional cable
operators. Various local exchange carriers already are providing video
programming services within their telephone service areas through a variety of
distribution methods.

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. Even then, the Federal Communications Commission revised
its open video system policy to leave franchising discretion to state and local
authorities. It is unclear what effect this ruling will have on the entities
pursuing open video system operation.

11

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 cable systems serving an overlapping
territory. Cable operator buyouts of overlapping local exchange carrier systems,
and joint ventures between cable operators and local exchange carriers in the
same market, also are prohibited. The 1996 Telecom Act provides a few limited
exceptions to this buyout prohibition, including a carefully circumscribed
"rural exemption." The 1996 Telecom Act also provides the Federal Communications
Commission with the limited authority to grant waivers of the buyout
prohibition.

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 of 1935. 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 eliminated a statutory
restriction on broadcast network/cable cross-ownership, but left in place
existing Federal Communications Commission regulations prohibiting local
cross-ownership between co-located television stations and cable systems. The
District of Columbia Circuit Court of Appeals subsequently struck down this
remaining broadcast/cable cross-ownership prohibition, and the Federal
Communications Commission has now eliminated the prohibition.

Pursuant to the 1992 Cable Act, the Federal Communications Commission adopted
rules precluding a cable system from devoting more than 40% of its activated
channel capacity to the carriage of affiliated national video program services.
Also pursuant to the 1992 Cable Act, the Federal Communications Commission
adopted rules that preclude any cable operator from serving more than 30% of all
U.S. domestic multichannel video subscribers, including cable and direct
broadcast satellite subscribers. The D.C. Circuit Court of Appeals struck down
these vertical and horizontal ownership limits as unconstitutional, concluding
that the Federal Communications Commission had not adequately justified the
specific rules (i.e., the 40% and 30% figures) adopted. The Federal
Communications Commission is now considering replacement regulations.

Must Carry/Retransmission Consent. The 1992 Cable Act contains broadcast signal
carriage requirements. Broadcast signal carriage is the transmission of
broadcast television signals over a cable system to cable customers. These
requirements, among other things, allow local commercial television broadcast
stations to elect once every three years between "must carry" status or
"retransmission consent" status. Less popular stations typically elect must
carry, which is the broadcast signal carriage rule that allows local commercial
television broadcast stations to require a cable system to carry the station.
More popular stations, such as those affiliated with a national network,
typically elect retransmission consent which is the broadcast signal carriage
rule that allows local commercial television broadcast stations to negotiate for
payments for granting permission to the cable operator to carry the stations.
Must carry requests can dilute the appeal of a cable system's programming
offerings because a cable system with limited channel capacity may be required
to forego carriage of popular channels in favor of less popular broadcast
stations electing must carry. Retransmission consent demands may require
substantial payments or other concessions. Either option has a potentially
adverse effect on our business. The burden associated with must carry may
increase substantially if broadcasters proceed with planned conversion to
digital transmission and the Federal Communications Commission determines that
cable systems simultaneously 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. The Federal
Communications Commission tentatively decided against imposition of dual digital
and analog must carry in a January 2001 ruling. At the same time, however, it
initiated further fact-gathering which ultimately could lead to a
reconsideration of the tentative conclusion. The Federal Communications
Commission is also considering whether it should maintain its initial ruling
that, whenever a digital broadcast signal does become eligible for must carry, a
cable operator's obligation is limited to carriage of a single digital video
signal. If the Commission reverses itself, and cable operators are required to
carry ancillary digital feeds, the burden associated with digital must carry
could be significantly increased.

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

12

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. The Federal
Communications Commission rejected a request that unaffiliated Internet service
providers be found eligible for commercial leased access.

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 position, the 1992 Cable Act
precludes video programmers affiliated with cable companies from favoring cable
operators over new competitors and requires such programmers to sell their
satellite-delivered programming to other multichannel video distributors. This
provision limits the ability of vertically integrated cable programmers to offer
exclusive programming arrangements to cable companies. The Federal
Communications Commission recently extended this exclusivity prohibition to
October 2007. DBS providers have no similar restrictions on exclusive
programming contracts. Pursuant to the Satellite Home Viewer Improvement Act,
the Federal Communications Commission has adopted regulations governing
retransmission consent negotiations between broadcasters and all multichannel
video programming distributors, including cable and DBS.

Inside Wiring; Subscriber Access. In an order dating back to 1997 and largely
upheld in a 2003 reconsideration 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. In another proceeding, the Federal Communications Commission
has preempted restrictions on the deployment of private antennae on property
within the exclusive use of a condominium owner or 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 Communications Act Provisions and Regulations of the Federal
Communications Commission. In addition to the Communications Act provisions and
Federal Communications Commission regulations noted above, there are other
statutory provisions and regulations of the Federal Communications Commission
covering such areas as:

o subscriber privacy,

o programming practices, including, among other things,

(1) blackouts of programming offered by a distant broadcast signal
carried on a cable system which duplicates the programming for
which a local broadcast station has secured exclusive
distribution rights,

(2) local sports blackouts,

(3) indecent programming,

(4) lottery programming,

(5) political programming,

(6) sponsorship identification,

(7) children's programming advertisements, and

(8) closed captioning,

o registration of cable systems and facilities licensing,

o maintenance of various records and public inspection files,

o aeronautical frequency usage,

o lockbox availability,

o antenna structure notification,

o tower marking and lighting,

o consumer protection and customer service standards,

o technical standards,

o equal employment opportunity,

o consumer electronics equipment compatibility, and

o emergency alert systems.

13

The Federal Communications Commission (FCC) ruled that cable customers must be
allowed to purchase set-top terminals from third parties and established a
multi-year phase-in during which security functions (which would remain in the
operator's exclusive control) would be unbundled from basic converter functions,
which could then be provided by third party vendors. The first phase
implementation date was July 1, 2000. As of January 1, 2005, cable operators
will be prohibited from placing in service new set-top terminals that integrate
security functions and basic converter navigation functions.

The FCC is currently conducting a rulemaking in which it is considering adopting
rules to help implement a recent agreement between major cable operators and
manufacturers of consumer electronics on "plug and play" digital televisions.
The proposed rules would require cable operators to provide "point of
deployment" security modules and support to customer-owned digital televisions
and similar devices already equipped with built-in set-top box functionality.
The rules would also permit the offering of digital programming with certain
copy controls built into the programming, subject to limitations on the use of
those copy controls. These proposed restrictions, if adopted as proposed, would
apply equally to cable operators and to other MVPDs, such as DBS.

Additional Regulatory Policies May Be Added in the Future. The Federal
Communications Commission has initiated an inquiry to determine whether the
cable industry's future provision of interactive services should be subject to
regulations ensuring equal access and competition among service vendors. The
inquiry, which grew out of the FCC's review of the AOL-Time Warner merger is yet
another expression of regulatory concern regarding control over cable capacity.

Copyright. Cable television systems are subject to federal copyright licensing
covering carriage of television and radio broadcast signals. In exchange for
filing certain reports and contributing a percentage of their revenues to a
federal copyright royalty pool that varies depending on the size of the system,
the number of distant broadcast television signals carried, and the location of
the cable system, cable operators can obtain blanket permission to retransmit
copyrighted material included in broadcast signals. The possible modification or
elimination of this compulsory copyright license is the subject of continuing
legislative review and could adversely affect our ability to obtain desired
broadcast programming. We cannot predict the outcome of this legislative
activity. Copyright clearances for nonbroadcast programming services are
arranged through private negotiations.

Cable operators distribute locally originated programming and advertising that
use music controlled by the two principal major music performing rights
organizations, the American Society of Composers, Authors and Publishers and
Broadcast Music, Inc. The cable industry has had a long series of negotiations
and adjudications with both organizations. Although we cannot predict the
ultimate outcome of these industry proceedings or the amount of any license fees
we may be required to pay for past and future use of association-controlled
music, we do not believe such license fees will be significant to our business
and operations.

State and Local Regulation. Cable 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 fails to
comply with material provisions.

The specific terms and conditions of franchises vary materially between
jurisdictions. Each franchise generally contains provisions governing cable
operations, 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. Certain
states are considering the imposition of new broadly applied telecommunications
taxes.

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, the local franchising authority may attempt to impose more burdensome
or onerous franchise

14

requirements as a condition for providing its consent. Historically, most
franchises have been renewed for and consents granted to cable operators that
have provided satisfactory services and have complied with the terms of their
franchise.

Under the 1996 Telecom Act, states and local franchising authorities are
prohibited from limiting, restricting, or conditioning the provision of
competitive telecommunications services, except for certain "competitively
neutral" requirements and as necessary to manage the public rights-of-way. This
law should facilitate entry into competitive telecommunications services,
although certain jurisdictions still may attempt to impose rigorous entry
requirements. 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. In a March 2002
decision, the Federal Communications Commission tentatively held that a cable
operator's provision of Internet access service should not subject the operator
to additional franchising requirements. That decision is currently under appeal
to federal court.

EMPLOYEES

The various personnel required to operate the PBD Joint Venture's business are
employed by the PBD Joint Venture, the Corporate General Partner, its subsidiary
corporation and Charter. As of December 31, 2002, the Corporate General Partner
employed two personnel who worked exclusively for the PBD Joint Venture, the
cost of which is charged directly to the PBD Joint Venture. The additional
employment costs incurred by the Corporate General Partner, its subsidiary
corporation and Charter are allocated and charged to the PBD Joint Venture for
reimbursement pursuant to the Amended and Restated Agreement of Limited
Partnership (the "Partnership Agreement") and the management agreement between
the Partnership and Enstar Cable Corporation (the "Management Agreement"). Other
personnel required to operate the PBD Joint Venture's business are employed by
affiliates of the Corporate General Partner. The amounts of these reimbursable
costs are set forth in Item 11. "Executive Compensation."

ITEM 2. PROPERTIES

The PBD Joint Venture owns or leases parcels of real property for signal
reception sites (antenna towers and headends), microwave facilities and business
offices, and owns or leases our service vehicles. The PBD Joint Venture believes
that its properties, both owned and leased, are suitable and adequate for our
business operations. The PBD Joint Venture owns substantially all of the assets
related to its cable television operations, including program production
equipment, headend (towers, antennas, electronic equipment and satellite earth
stations), cable plant (distribution equipment, amplifiers, customer drops and
hardware), converters, test equipment and tools and maintenance equipment.

ITEM 3. LEGAL PROCEEDINGS

We are involved from time to time in routine legal matters and other claims
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.

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

In December 2002, a proxy was filed with the SEC seeking to obtain approval of
the Limited Partners for the sale of the Partnership's remaining cable system
and the subsequent liquidation and dissolution of the Partnership. On March 14,
2003, the SEC review process was completed and proxy statements were mailed to
the holders of the limited partnership units. A majority vote was reached in
March 2003 although the consent solicitation period remains open until May 16,
2003.

15

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S EQUITY SECURITIES AND RELATED SECURITY
HOLDER MATTERS

LIQUIDITY

While our equity securities, which consist of units of limited partnership
interests, are publicly held, there is no established public trading market for
the units and we do not expect that a market will develop. The approximate
number of equity security holders of record was 1,323 as of December 31, 2002.
In addition to restrictions on the transferability of units described in our
Partnership Agreement, the transferability of units may be affected by
restrictions on resales imposed by federal or state law.

DISTRIBUTIONS

The amended Partnership Agreement generally provides that all cash
distributions, as defined, be allocated 1% to the General Partners and 99% to
the Limited Partners until the Limited Partners have received aggregate cash
distributions equal to their original capital contributions ("Capital Payback").
The Partnership Agreement also provides that all partnership profits, gains,
operational losses, and credits, all as defined, be allocated 1% to the General
Partners and 99% to the Limited Partners until the Limited Partners have been
allocated net profits equal to the amount of cash flow required for Capital
Payback. After the Limited Partners have received cash flow equal to their
initial investments, the General Partners will only receive a 1% allocation of
cash flow from sale or liquidation of a system until the Limited Partners have
received an annual simple interest return of at least 12% of their initial
investments less any distributions from previous system sales and cash
distributions from operations after Capital Payback. Thereafter, the respective
allocations will be made 20% to the General Partners and 80% to the Limited
Partners. Any losses from system sales or exchanges shall be allocated first to
all partners having positive capital account balances (based on their respective
capital accounts) until all such accounts are reduced to zero and thereafter to
the Corporate General Partner. All allocations to individual Limited Partners
will be based on their respective limited partnership ownership interests.

Upon the disposition of substantially all of the Partnership's assets, gains
shall be allocated first to the Limited Partners having negative capital account
balances until their capital accounts are increased to zero, next equally among
the General Partners until their capital accounts are increased to zero, and
thereafter as outlined in the preceding paragraph. Upon dissolution of the
Partnership, any negative capital account balances remaining after all
allocations and distributions are made must be funded by the respective
partners.

We began making periodic cash distributions to Limited Partners from operations
during 1986 and distributed $499,800 ($12.50 per unit) in each of 2001 and 2000.
Distributions to Limited Partners totaled $7,161,800 ($179.13 per unit) for the
year ended December 31, 2002. The 2001 and 2000 distributions were primarily
funded from cash flow generated by Partnership operations, which consisted of
cash flow distributions received by the Partnership from the Joint Ventures,
while the 2002 distribution was funded primarily by distributions from the Joint
Ventures resulting in the sale of cable systems. See Item 7. "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources."

Upon the completion of the sale of all of the remaining cable systems to
Telecommunications Management as discussed herein, the Partnership will be
liquidated and all remaining assets distributed to the Limited Partners and the
Corporate General Partner.

16

ITEM 6. SELECTED FINANCIAL DATA

The table below presents selected financial data of the Partnership, Enstar
IV/PBD Systems Venture and Enstar Cable of Macoupin County for the five years
ended December 31, 2002. This data should be read in conjunction with the
Partnership and Joint Ventures' financial statements included in Item 8.
"Financial Statements and Supplementary Data" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included in Item 7.

I. THE PARTNERSHIP

- ----------

(1) Comparability of the above information from year to year is affected by
the disposition of the Joint Ventures' cable systems in March and April
2002. This information excludes the effect of liquidation costs
recorded on December 31, 2002. See Note 2 to our financial statements
included with this Annual Report.

17

II. ENSTAR IV/PBD SYSTEMS VENTURE

- ----------

(1) Comparability of the above information from year to year is affected by
the disposition of the PBD Joint Venture's cable systems in and around
Mt. Carmel, Auburn, Carlinville and Girard, Illinois and Poplar Bluff,
Missouri in March and April 2002. This information excludes the effect
of liquidation costs recorded on December 31, 2002. See Note 2 to the
PBD Joint Venture financial statements included with this Annual
Report.

18

II. ENSTAR CABLE OF MACOUPIN COUNTY

- ----------

(1) Comparability of the above information from year to year is affected by
the disposition of the Macoupin Joint Venture's cable systems in and
around Macoupin, Illinois in April 2002. See Note 2 to the Macoupin
Joint Venture financial statements included with this Annual Report.

19

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

INTRODUCTION

This annual report includes certain forward-looking statements regarding, among
other things, our future results of operations, regulatory requirements,
competition, capital needs and general business conditions applicable to the
Partnership. Such forward-looking statements involve risks and uncertainties
including, without limitation, the uncertainty of legislative and regulatory
changes and the rapid developments in the competitive environment facing cable
television operators such as the Partnership, as discussed more fully elsewhere
in this Report.

All of the Partnership's cable television business operations are conducted
through its participation as a General Partner in both the PBD Joint Venture
and, until the sale of its remaining cable systems in the second quarter of
2002, the Macoupin Joint Venture. The Partnership has a 50% interest in the PBD
Joint Venture and a one-third interest in the Macoupin Joint Venture. The PBD
Joint Venture is owned equally by the Partnership and an affiliated partnership
(Enstar Income Program IV-2, L.P.). The Macoupin Joint Venture was owned equally
by the Partnership and two affiliated partnerships (Enstar Income Program IV-2,
L.P. and Enstar Income Program IV-3, L.P.). The Partnership participates in the
Joint Ventures equally with its co-partners, based on its proportionate
interest, with respect to capital contributions, obligations and commitments,
and results of operations. Accordingly, in considering the financial condition
and results of operations of the Partnership, consideration must also be made of
those matters as they relate to the Joint Ventures. The following discussion
reflects such consideration and a separate discussion of "Results of Operations"
is provided for each entity.

The PBD Joint Venture finalized its proposed plan of liquidation in December
2002 in connection with the Partnership's filing of a proxy to obtain the
approval of the Limited Partners for the sale of the PBD Joint Venture's final
cable system and the subsequent liquidation and dissolution of the PBD Joint
Venture and the Partnership. In April 2003, the required number of votes
necessary to implement the plan of liquidation were obtained. As a result, the
PBD Joint Venture changed its basis of accounting to the liquidation basis as of
December 31, 2002. Upon changing to liquidation basis accounting, the PBD Joint
Venture recorded $30,600 of accrued costs of liquidation in accounts payable and
accrued liabilities representing an estimate of the costs to be incurred after
the sale of the final cable system but prior to dissolution of the PBD Joint
Venture. Because we are unable to develop reliable estimates of future operating
results or the ultimate realizable value of property, plant and equipment due to
the current uncertainties surrounding the final dissolution of the PBD Joint
Venture, no adjustments have been recorded to reflect assets at estimated
realizable values or to reflect estimates of future operating results. These
adjustments will be recorded once a sale is imminent and the net sales proceeds
are reasonably estimable. Accordingly, the assets in the accompanying statement
of net assets in liquidation of the PBD Joint Venture as of December 31, 2002
have been stated at historical book values. In addition, the Partnership changed
its basis of accounting to the liquidation basis and recorded $25,000 of accrued
costs of liquidation. Distributions ultimately made to the partners upon
liquidation will differ from the net assets in liquidation recorded in the
accompanying statement of net assets in liquidation as a result of future
operations, the sale proceeds ultimately received by the PBD Joint Venture and
adjustments if any to estimated costs of liquidation.

CRITICAL ACCOUNTING ESTIMATES

Certain of our accounting policies require our management to make difficult,
subjective or complex judgments. We consider the following policies to be the
most critical in understanding the estimates, assumptions and judgments that are
involved in preparing our financial statements and the uncertainties that could
impact our results of operations, financial condition and cash flows:

o Capitalization of labor and overhead costs;

o Useful lives of property, plant and equipment; and

o Impairment of property, plant and equipment.

Capitalization of labor and overhead costs. The cable industry is highly capital
intensive and a large portion of our resources is spent on capital activities
associated with extending, rebuilding, and upgrading our cable network. As of
December 31, 2002 and 2001, the net carrying amount of the PBD Joint Venture's
property, plant and equipment (consisting primarily of cable network assets) was
$818,400 (representing 12.4% of total assets) and $7,780,000 (representing 92.5%
of total assets). Total capital expenditures for the years ended December 31,
2002, 2001 and 2000 were $179,000, $4,138,600 and $3,091,400, respectively. As
of December 31, 2001, the net carrying amount

20

of the Macoupin Joint Venture's property, plant and equipment (consisting
primarily of cable network assets) was approximately $2,198,500 (representing
68.3% of total assets). Total capital expenditures for the years ended December
31, 2001 and 2000 were approximately $898,600 and $77,400, respectively.

Costs associated with network construction, initial customer installations and
installation refurbishments are capitalized. Costs capitalized as part of
initial customer installations include materials, direct labor, and certain
indirect costs. These indirect costs are associated with the activities of
personnel who assist in connecting and activating the new service and consist of
compensation and overhead costs associated with these support functions. The
costs of disconnecting service at a customer's dwelling or reconnecting service
to a previously installed dwelling are charged to operating expense in the
period incurred. Costs for repairs and maintenance are charged to operating
expense as incurred, while equipment replacement and betterments, including
replacement of cable drops from the pole to the dwelling, are capitalized.

Direct labor costs directly associated with capital projects are capitalized. We
capitalize direct labor costs associated with personnel based upon the specific
time devoted to network construction and customer installation activities.
Capitalizable activities performed in connection with customer installations
include:

o Scheduling a "truck roll" to the customer's dwelling for service
connection;

o Verification of serviceability to the customer's dwelling (i.e.,
determining whether the customer's dwelling is capable of receiving
service by our cable network and/or receiving advanced or data
services);

o Customer premise activities performed by in-house field technicians and
third-party contractors in connection with customer installations,
installation of network equipment in connection with the installation
of expanded services and equipment replacement and betterment; and

o Verifying the integrity of the customer's network connection by
initiating test signals downstream from the headend to the customer's
digital set-top terminal.

We capitalize direct labor costs associated with personnel based upon the
specific time devoted to network construction and installation activities. Some
judgment is involved in the determination of which labor tasks are attributable
to capitalizable activities. The PBD Joint Venture capitalized internal direct
labor costs of $60,500, $126,300 and $33,700, for the years ended December 31,
2002, 2001 and 2000, respectively. The Macoupin Joint Venture capitalized
internal direct labor costs of $6,200, $16,600 and $15,200, for the years ended
December 31, 2002, 2001 and 2000, respectively.

Judgment is required to determine the extent to which indirect costs
("overhead") are incurred as a result of specific capital activities, and
therefore should be capitalized. We capitalize overhead based upon an estimate
of the portion of indirect costs that contribute to capitalizable activities
using an overhead rate applied to the amount of direct labor capitalized. We
have established the overhead rates based on an analysis of the nature of costs
incurred in support of capitalizable activities and a determination of the
portion of costs which is directly attributable to capitalizable activities. The
primary costs that are included in the determination of the overhead rate are
(i) employee benefits and payroll taxes associated with capitalized direct
labor, (ii) direct variable costs associated with capitalizable activities,
consisting primarily of installation and construction vehicle costs, (iii) the
cost of dispatch personnel that directly assist with capitalizable installation
activities, and (iv) indirect costs directly attributable to capitalizable
activities.

While we believe our existing capitalization policies are appropriate, a
significant change in the nature or extent of our development activities could
affect the extent to which we capitalized direct labor or overhead in the
future. The PBD Joint Venture capitalized overhead of $60,500, $113,700 and
$30,400, respectively, for the years ended December 31, 2002, 2001 and 2000. The
Macoupin Joint Venture capitalized overhead of $5,100, $14,900 and $13,600,
respectively, for the years ended December 31, 2002, 2001 and 2000.

Useful lives of property, plant and equipment. In accordance with GAAP, we
evaluate the appropriateness of estimated useful lives assigned to our property,
plant and equipment, and revise such lives to the extent warranted by changing
facts and circumstances. Any change in the estimate of remaining lives would be
recorded prospectively as required by APB No. 20. While we believe our current
useful life estimates are reasonable, a significant change in assumptions about
the extent or timing of future asset retirements and replacements, or in our
upgrade program, could materially affect future depreciation expense.

The PBD Joint Venture's depreciation expense related to property, plant and
equipment totaled $368,600, $812,700 and $369,200, representing approximately
20.4%, 18.7% and 9.7% of operating expenses, for the years ended December 31,
2002, 2001 and 2000, respectively.

21

The Macoupin Joint Venture's depreciation expense related to property, plant and
equipment totaled $83,500, $214,200, and $210,800, representing approximately
19.1%, 15.7% and 14.8% of operating expenses for the period ended April 10, 2002
and for the years ended December 31, 2001 and 2000, respectively. Depreciation
is recorded using the straight-line method over management's estimate of the
estimated useful lives of the related assets as follows:

Cable distribution systems 5-15 years
Vehicles 3 years
Furniture and equipment 5-7 years
Leasehold improvements Shorter of life of lease or useful life of asset

Impairment of property, plant and equipment. As discussed above, the net
carrying value of our property, plant and equipment is significant. We are
required under SFAS No. 144 to evaluate the recoverability of our property,
plant and equipment when events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Such events or changes in
circumstances could include such factors as changes in technological advances,
fluctuations in the market value of such assets, adverse changes in
relationships with local franchise authorities, adverse changes in market
conditions or poor operating results. Under SFAS No. 144, a long-lived asset is
deemed impaired when the carrying amount of such asset exceeds the projected
undiscounted future cash flows associated with the asset.

RESULTS OF OPERATIONS

THE PARTNERSHIP

The Partnership finalized its plan of liquidation in December 2002 in connection
with the filing of a proxy to obtain partner approval for the sale of the Joint
Venture's final cable system and the subsequent liquidation and dissolution of
the Joint Venture and the Partnership. In April 2003, the required number of
votes necessary to implement the plan of liquidation were obtained. As a result,
the Partnership changed its basis of accounting to the liquidation basis as of
December 31, 2002. Upon changing to the liquidation basis of accounting, the
Partnership recorded $25,000 of accrued costs of liquidation representing an
estimate of the costs to be incurred after the sale of the Joint Venture's final
cable system but prior to dissolution of the Partnership. In addition, the
Partnership's equity in net assets of the Joint Ventures decreased by $15,300 as
a result of the accrued costs of liquidation recorded at the Joint Ventures. No
further adjustments have been recorded to reflect the Partnership's equity in
net assets of the Joint Ventures at estimated realizable value. Distributions
ultimately made to the partners upon liquidation will differ from the net assets
in liquidation recorded in the accompanying statement of net assets in
liquidation of the Partnership as a result of adjustments recorded to the
realizable value of the assets of the Joint Venture and adjustments if any to
estimated costs of liquidation.

Interest income increased $1,300 from $100 to $1,400 for the year ended December
31, 2002 compared to 2001, and decreased $7,500 from $7,600 to $100, or 98.7%,
for the year ended December 31, 2001 compared to 2000. The increase in 2002
compared to 2001 was primarily due to an increase in average cash balances
available for investment during the year. The decrease in 2001 compared to 2000
was primarily due to a decrease in average cash balances available for
investment during the year.

Interest expense decreased from $8,700 to $0 for the year ended December 31,
2002 compared to 2001, and decreased $200 from $8,900 to $8,700, or 2.2%, for
the year ended December 31, 2001 compared to 2000. The decrease in 2002 and 2001
was primarily due to the termination of the loan agreement in August 2001. See
"Liquidity and Capital Resources".

Other expense of $215,000, $4,700 and $8,100 for the years ended December 31,
2002, 2001 and 2000, respectively, primarily represents legal and proxy costs
associated with the proposed sale of the Partnership's assets.

22

THE PBD JOINT VENTURE

YEAR ENDED DECEMBER 31, 2002 COMPARED TO YEAR ENDED DECEMBER 31, 2001

On April 10, 2002, pursuant to an asset purchase agreement dated August 29,
2001, the Partnership, together with its affiliates, Enstar Income Program IV-2,
L.P. (Enstar IV-2) and Enstar Income Program IV-3, L.P., completed the sale of
the Macoupin Joint Venture's systems to Charter Communications Entertainment I,
LLC ("CCE-1"), an affiliate of the Corporate General Partner and an indirect
subsidiary of Charter, for a total sale price of approximately $9,076,800, the
Partnership's one-third share of which is approximately $3,025,600, and,
together with Enstar IV-2, the sale to Interlink Communications Partners, LLC of
the PBD Joint Venture's Mt. Carmel system for a total sale price of
approximately $4,994,800, the Partnership's one-half share of which is
approximately $2,497,400 (the "Charter Sale"). The Charter Sale is part of a
larger transaction in which the Partnership and five other affiliated
partnerships (which, together with the Partnership are collectively referred to
as the "Charter Selling Partnerships") sold all of their assets used in the
operation of their respective Illinois cable television systems to CCE-1 and two
of its affiliates (also referred to, with CCE-1, as the "Purchasers") for a
total cash sale price of $63,000,000. Each Charter Selling Partnership received
the same value per customer. In addition, the Limited Partners of each of the
Charter Selling Partnerships approved an amendment to their respective
partnership agreement to allow the sale of assets to an affiliate of such
partnership's General Partner. The Purchasers are each indirect subsidiaries of
the Corporate General Partner's ultimate parent company, Charter, and,
therefore, are affiliates of the Partnership and each of the other Charter
Selling Partnerships.

In addition, on March 21, 2002, pursuant to an asset purchase agreement dated
September 4, 2001, the Partnership, together with Enstar IV-2, completed the
sale of the Poplar Bluff franchise area with the City of Poplar Bluff, Missouri
for a sale price of approximately $8,000,000 (the "Poplar Bluff Sale"), the
Partnership's one-half share of which is approximately $4,000,000.

The PBD Joint Venture's revenues decreased $2,935,500 from $5,088,300 to
$2,152,800, or 57.7%, for the year ended December 31, 2002 as compared to 2001.
The decrease was due to a decline in the number of basic and premium service
customers primarily as a result of the sale of the PBD Joint Venture's cable
systems in March and April 2002. As of December 31, 2002 and 2001, the PBD Joint
Venture had approximately 3,600 and 10,300 basic service customers,
respectively, and 500 and 2,200 premium service customers, respectively. The
Poplar Bluff and Mt. Carmel systems sold in March and April 2002 had
approximately 6,200 basic service customers and 1,500 premium customers.

Service costs decreased $863,200 from $1,712,900 to $849,700, or 50.4%, for the
year ended December 31, 2002 as compared to 2001. Service costs represent costs
directly attributable to providing cable services to customers. The decrease was
primarily due to the sale of the PBD Joint Venture's cable systems in March and
April 2002.

General and administrative expenses decreased $394,400 from $654,800 to
$260,400, or 60.2%, for the year ended December 31, 2002 as compared to 2001,
primarily due to the sale of the PBD Joint Venture's cable systems in March and
April 2002 coupled with a decrease in professional fees.

General partner management fees and reimbursed expenses decreased $837,700 from
$1,162,400 to $324,700, or 72.1%, for the year ended December 31, 2002 as
compared to 2001. These costs represent administrative costs reimbursed to
Charter by the PBD Joint Venture based on Charter's actual costs incurred. The
decrease was primarily due to a decrease in management fees due to a decrease in
revenues as a result of the sale of the PBD Joint Venture's cable systems.

Depreciation and amortization expense decreased $447,800 from $818,300 to
$370,500, or 54.7%, for the year ended December 31, 2002 as compared to 2001,
primarily due to the sale of the PBD Joint Venture's cable systems.

Due to the factors described above, the PBD Joint Venture's operating income
decreased $392,400 from $739,900 to $347,500, or 53.0%, for the year ended
December 31, 2002 as compared to 2001.

Interest income increased $11,200 from $62,600 to $73,800, or 17.9%, for the
year ended December 31, 2002 as compared to 2001. The increase was primarily due
to higher average cash balances available for investment as a result of the sale
of the PBD Joint Venture's cable systems.

23

We recognized a $6,506,300 gain in 2002 on the sale of our Poplar Bluff and Mt.
Carmel cable system in the first half of the year.

Other expense decreased from $110,900 to $0 for the year ended December 31, 2002
as compared to 2001. Other expense in 2001 represents legal and proxy costs
associated with the proposed sales of the PBD Joint Venture's assets.

Due to the factors described above, the PBD Joint Venture's net income increased
$6,236,000 from $691,600 to $6,927,600 for the year ended December 31, 2002 as
compared to 2001.

YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000

The PBD Joint Venture's revenues decreased $261,200 from $5,349,500 to
$5,088,300, or 4.9%, for the year ended December 31, 2001 as compared to 2000.
The decrease was due to a decline in the number of basic and premium service
customers. As of December 31, 2001 and 2000, the PBD Joint Venture had
approximately 10,300 and 12,400 basic service customers, respectively, and 2,200
and 3,500 premium service customers, respectively.

Service costs increased $7,400 from $1,705,500 to $1,712,900, or less than one
percent, for the year ended December 31, 2001 as compared to 2000. Service costs
represent costs directly attributable to providing cable services to customers.
The increase was primarily due to an increase in programming costs as a result
of higher rates offset by a decrease related to the decrease in customers.

General and administrative expenses decreased $68,200 from $723,000 to $654,800,
or 9.4%, for the year ended December 31, 2001 as compared to 2000, primarily due
to a decrease in professional fees.

General partner management fees and reimbursed expenses increased $144,100 from
$1,018,300 to $1,162,400, or 14.2%, for the year ended December 31, 2001 as
compared to 2000. The increase was primarily due to an increase in the level of
such services being provided and billed to the PBD Joint Venture by Charter.

Depreciation and amortization expense increased $442,400 from $375,900 to
$818,300 for the year ended December 31, 2001 as compared to 2000, due to
capital expenditures during 2000 and 2001.

Due to the factors described above, the PBD Joint Venture's operating income
decreased $786,900 from $1,526,800 to $739,900, or 51.5%, for the year ended
December 31, 2001 as compared to 2000.

Interest income decreased $142,600 from $205,200 to $62,600, or 69.5%, for the
year ended December 31, 2001 as compared to 2000. The decrease was primarily due
to lower average cash balances available for investment as a result of the PBD
Joint Venture's capital expenditures.

Other expense increased $78,900 from $32,000 to $110,900 for the year ended
December 31, 2001 as compared to 2000. Other expense represents legal and proxy
costs associated with the proposed sales of the PBD Joint Venture's assets.

Due to the factors described above, the PBD Joint Venture's net income decreased
$1,008,400 from $1,700,000 to $691,600, or 59.3%, for the year ended December
31, 2001 as compared to 2000.

THE MACOUPIN JOINT VENTURE

The Macoupin Joint Venture had no results of operations for the period
subsequent to April 10, 2002 as a result of the sale of its cable systems as
discussed in Note 2 to the accompanying financial statements of the Macoupin
Joint Venture. The Macoupin Joint Venture had net income of $7,010,100 of which
$6,918,500 was the gain on sale of cable systems. Accordingly, no discussion of
operating results for the period from January 1, 2002 to April 10, 2002 and the
year ended December 31, 2001, has been provided as such analysis is not
meaningful.

YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000

The Macoupin Joint Venture's revenues decreased $101,700 from $1,979,600 to
$1,877,900, or 5.1%, for the year ended December 31, 2001 as compared to 2000.
The decrease was due to a decline in basic and premium service customers. As of
December 31, 2001 and 2000, the Macoupin Joint Venture had approximately 3,900
and 4,500 basic customers, respectively, and 1,100 and 1,300 premium service
units, respectively.

24

Service costs decreased $49,700 from $669,500 to $619,800, or 7.4%, for the year
ended December 31, 2001 as compared to 2000. Service costs represent costs
directly attributable to providing cable services to customers. The decrease was
primarily due to a decrease in personnel costs coupled with a decrease in
copyrights and franchise fees due to a decrease in revenues.

General and administrative expenses decreased $2,900 from $218,100 to $215,200,
or 1.3%, for the year ended December 31, 2001 as compared to 2000. The decrease
was due to an increase in bad debt expense, an increase in costs associated with
customer billings and an increase in property and casualty insurance in 2001.

General partner management fees and reimbursed expenses decreased $13,800 from
$313,900 to $300,100, or 4.4%, for the year ended December 31, 2001 as compared
to 2000. General partner management fees decreased primarily due to a decrease
in administrative activities provided by Charter on the Macoupin Joint Venture's
behalf. General partner management fees also decreased in direct relation to
decreased revenues as discussed above.

Depreciation and amortization expense increased $3,400 from $222,900 to
$226,300, or 1.5%, for the year ended December 31, 2001 as compared to 2000, due
to capital expenditures in 2000 and 2001.

Due to the factors described above, the Macoupin Joint Venture's operating
income decreased $38,700 from $555,200 to $516,500, or 7.0%, for the year ended
December 31, 2001 as compared to 2000.

Interest income decreased $34,200 from $116,600 to $82,400, or 29.3%, for the
year ended December 31, 2001 compared to 2000. The decrease was primarily due to
lower average cash balances available for investment during the year.

Other expense increased $12,600 from $2,800 to $15,400 for the year ended
December 31, 2001 as compared to 2000. Other expense represents legal and proxy
costs associated with the proposed sales of the Macoupin Joint Venture's assets.

Due to the factors described above, the Joint Venture's net income decreased
$85,500 from $669,000 to $583,500, or 12.8%, for the year ended December 31,
2001 as compared to 2000.

LIQUIDITY AND CAPITAL RESOURCES

THE PARTNERSHIP

All of our cable television business operations are conducted through our
participation as a partner in the Joint Ventures. The Joint Ventures distributed
$7,305,700, $600,000 and $138,000 to us, representing our pro rata share of the
cash flow distributed from the Joint Ventures' respective operations, during
2002, 2001 and 2000, respectively. We distributed $7,234,100 in 2002 and
$504,800 to our partners in each of 2001 and 2000.

Operating activities used $238,600 more cash during 2002 than in 2001. Changes
in prepaid expenses and liabilities owed to affiliates and third-party creditors
provided $39,300 less cash in 2002 primarily due to differences in the timing of
payments. Investing activities provided $6,705,700 more cash during 2002 than
2001 due to an increase in distributions from Joint Ventures. Financing
activities used $6,729,300 more cash during 2002 than 2001 due to an increase in
distributions to Partners.

Operating activities provided $387,300 less cash during 2001 than in 2000.
Changes in prepaid expenses and liabilities owed to affiliates and third-party
creditors provided $403,100 less cash in 2001 primarily due to differences in
the timing of payments. Investing activities provided $462,000 more cash during
2001 than 2000 due to an increase in distributions from Joint Ventures.
Financing activities used $3,800 less cash during 2001 than 2000 due to a
decrease in payments of deferred loan costs related to the Partnership's loan
facility.

THE PBD JOINT VENTURE

The PBD Joint Venture distributed $8,253,200, $0 and $150,000 equally between
its two partners during 2002, 2001, and 2000, respectively.

25

THE MACOUPIN JOINT VENTURE

The Macoupin Joint Venture distributed $9,537,300, $1,800,000 and $189,000
equally among its three partners in 2002, 2001 and 2000, respectively.

LIQUIDATION BASIS ACCOUNTING AND SALE OF CABLE SYSTEMS

Our Corporate General Partner continues to operate our cable television systems
during our divestiture transactions for the benefit of our unitholders.

On April 10, 2002, pursuant to an asset purchase agreement dated August 29,
2001, the Partnership, together with its affiliates, Enstar Income Program IV-2,
L.P. (Enstar IV-2) and Enstar Income Program IV-3, L.P., completed the sale of
the Macoupin Joint Venture's systems to Charter Communications Entertainment I,
LLC ("CCE-1"), an affiliate of the Corporate General Partner and an indirect
subsidiary of Charter, for a total sale price of approximately $9,076,800, the
Partnership's one-third share of which is approximately $3,025,600, and,
together with Enstar IV-2, the sale to Interlink Communications Partners, LLC of
the PBD Joint Venture's Mt. Carmel system for a total sale price of
approximately $4,994,800, the Partnership's one-half share of which is
approximately $2,497,400 (the "Charter Sale"). The Charter Sale is part of a
larger transaction in which the Partnership and five other affiliated
partnerships (which, together with the Partnership are collectively referred to
as the "Charter Selling Partnerships") sold all of their assets used in the
operation of their respective Illinois cable television systems to CCE-1 and two
of its affiliates (also referred to, with CCE-1, as the "Purchasers") for a
total cash sale price of $63,000,000. Each Charter Selling Partnership received
the same value per customer. In addition, the Limited Partners of each of the
Charter Selling Partnerships approved an amendment to their respective
partnership agreement to allow the sale of assets to an affiliate of such
partnership's General Partner. The Purchasers are each indirect subsidiaries of
the Corporate General Partner's ultimate parent company, Charter, and,
therefore, are affiliates of the Partnership and each of the other Charter
Selling Partnerships.

In addition, on March 21, 2002, pursuant to an asset purchase agreement dated
September 4, 2001, the Partnership, together with Enstar IV-2, completed the
sale of the Poplar Bluff franchise area with the City of Poplar Bluff, Missouri
for a sale price of approximately $8,000,000 (the "Poplar Bluff Sale"), the
Partnership's one-half share of which is approximately $4,000,000.

The Charter Sale and Poplar Bluff Sale resulted from a sale process actively
pursued since 1999, when the Corporate General Partner sought purchasers for all
of the cable television systems of the Selling Partnerships, as well as eight
other affiliated limited partnership cable operators of which the Corporate
General Partner is also the general partner. This effort was undertaken
primarily because, based on the Corporate General Partner's experience in the
cable television industry, it was concluded that generally applicable market
conditions and competitive factors were making (and would increasingly make) it
extremely difficult for smaller operators of rural cable systems (such as the
Joint Ventures and the other affiliated partnerships) to effectively compete and
be financially successful. This determination was based on the anticipated cost
of electronics and additional equipment to enable the Joint Venture's systems to
operate on a two-way basis with improved technical capacity, insufficiency of
Joint Ventures cash reserves and cash flows from operations to finance such
expenditures, limited customer growth potential due to the Joint Venture's
systems' rural location, and a general inability of a small cable system
operator such as the Joint Ventures to benefit from economies of scale and the
ability to combine and integrate systems that large cable operators have. In
addition, the City of Poplar Bluff sold bonds to raise money to construct a
competing cable system. Although limited plant upgrades have been made, the
Corporate General Partner projected that if the Joint Ventures made the
comprehensive additional upgrades deemed necessary to enable enhanced and
competitive services, particularly two-way capability, the Joint Ventures would
not recoup the costs or regain its ability to operate profitably within the
remaining term of its franchises, and as a result, making these upgrades would
not be economically prudent.

As a result of the sale of the Macoupin Joint Venture's systems, the Macoupin
Joint Venture changed its basis of accounting to the liquidation basis on April
10, 2002. Accordingly, the assets in the accompanying statement of net assets in
liquidation as of December 31, 2002 have been stated at estimated realizable
values and the liabilities have been reflected at estimated settlement amounts.
There were no significant adjustments recorded upon changing to liquidation
basis accounting. Net assets in liquidation as of December 31, 2002 represent
the estimated distribution to the joint venturers. In January 2003, all
remaining assets of the Macoupin Joint Venture were distributed including a
final distribution of $126,000 made to the joint venturers, of which the
Partnership's portion is $42,000.

26

On November 8, 2002, the joint venturers entered into an asset purchase
agreement providing for the sale of PBD Joint Venture's remaining cable system
in Dexter, Missouri to Telecommunications Management, LLC (Telecommunications
Management) for a total sale price of approximately $3,148,000, (approximately
$825 per customer acquired). This sale is a part of a larger transaction in
which the joint venturers and eight other affiliated partnerships (which,
together with the Partnership are collectively referred to as the
"Telecommunications Management Selling Partnerships") would sell all of their
remaining assets used in the operation of their respective cable systems to
Telecommunications Management for a total cash sale price of approximately
$15,341,600 (the Telecommunications Management Sale). The Telecommunications
Management Sale is subject to the approval of a majority of the holders of the
Partnership's units and approval of the holders of the other Telecommunications
Management Selling Partnerships. In addition, the transaction is subject to
certain closing conditions, including regulatory and franchise approvals. In
April 2003, a majority of the limited Partners approved the Telecommunications
Management Sale and a plan of liquidation.

On February 6, 2003, the PBD Joint Venture entered into a side letter amending
the asset purchase agreement providing for the sale of its remaining cable
system in Dexter, Missouri to Telecommunications Management. The February 6,
2003 side letter amends the asset purchase agreement and Deposit Escrow
Agreement to extend the date of the second installment of the deposit and the
Outside Closing Date each by 60 days. On April 7, 2003, the second installment
of the escrow deposit was due and was not received. We are currently evaluating
our alternatives with respect to this new development.

The PBD Joint Venture finalized its proposed plan of liquidation in December
2002 in connection with the filing of a proxy to obtain the approval of the
Limited Partners of the joint venturers for the sale of the PBD Joint Venture's
final cable system and the subsequent liquidation and dissolution of the PBD
Joint Venture and the Partnership. In April 2003, the required number of
votes necessary to implement the plan of liquidation were obtained. As a result,
the PBD Joint Venture changed its basis of accounting to the liquidation basis
on December 31, 2002. The statements of operations, venturer's capital and cash
flows for the year ended December 31, 2002 have been presented on a going
concern basis comparable to prior periods. Upon changing to liquidation basis
accounting, the PBD Joint Venture recorded $30,600 of accrued costs of
liquidation in accounts payable and accrued liabilities representing an estimate
of the costs to be incurred after the sale of the final cable system but prior
to dissolution of the PBD Joint Venture. Because we are unable to develop
reliable estimates of future operating results or the ultimate realizable value
of property, plant and equipment due to the current uncertainties surrounding
the final dissolution of the PBD Joint Venture, no adjustments have been
recorded to reflect assets at estimated realizable values or to reflect
estimates of future operating results. These adjustments will be recorded once a
sale is imminent and the net sales proceeds are reasonably estimable.
Accordingly, the assets in the accompanying statement of net assets in
liquidation of the PBD Joint Venture as of December 31, 2002 have been stated at
historical book values. In addition, the Partnership changed its basis of
accounting to liquidation basis and recorded $25,000 of accrued costs of
liquidation in accounts payable and accrued liabilities. Distributions
ultimately made to the partners upon liquidation will differ from the net assets
in liquidation recorded in the accompanying statement of net assets in
liquidation as a result of future operations, the sale proceeds ultimately
received by the PBD Joint Venture and adjustments if any to estimated costs of
liquidation.

The Corporate General Partner's intention is to settle the outstanding
obligations of the Partnership and terminate the Partnership as expeditiously as
possible. Final dissolution of the Partnership and related cash distributions to
the partners will occur upon obtaining final resolution of all liquidation
issues.

INVESTING ACTIVITIES

Significant capital would be required for a comprehensive plant and headend
upgrade, particularly in light of the high cost of electronics to enable two-way
service, to offer high speed cable modem Internet and other interactive
services, as well as to increase channel capacity and allow a greater variety of
video services. The Joint Ventures' capital expenditures for recent upgrades
have been made with available funds, and have enhanced the economic value of the
Joint Ventures' systems and permitted the Joint Ventures to comply with
franchise agreements.

The estimated cost of upgrading the PBD Joint Venture's system to two-way
capability in order to be able to offer high-speed Internet service from the
Dexter, Missouri headend, as well as to increase channel capacity and allow
additional video services, would be approximately $2.4 million (for an upgrade
to 550 megahertz (MHz) capacity) to $2.8 million (for an upgrade to 870 MHz
capacity). Given pending sale transactions, the high cost of such a
comprehensive upgrade effort, the limited funds available to us, and the belief
that a comprehensive plan is not economically prudent, the Corporate General
Partner does not presently anticipate that it will proceed with a

27

comprehensive upgrade plan. The Corporate General Partner has continued to
evaluate alternative, cost-effective solutions to increase channel capacity,
pay-per-view services, and digital services which would enhance the value of our
system, maintain compliance with franchise agreements and be economically
prudent.

FINANCING ACTIVITIES

The Partnership was party to a loan agreement with Enstar Finance Company, LLC,
a subsidiary of Enstar Communication Corporation. The loan agreement provided
for a revolving loan facility of $1,800,000 and matured on August 31, 2001. The
loan facility was not extended or replaced. Cash generated by operations of the
Joint Ventures, together with available cash balances will be used to fund
capital expenditures as required by franchise authorities. However, our cash
reserves will be insufficient to fund our entire upgrade program. If our systems
are not sold, we will need to rely on increased cash flow from operations or new
sources of financing in order to meet our future liquidity requirements and
complete our planned upgrade program. There can be no assurance that such cash
flow increases can be attained, or that additional future financing will be
available on terms acceptable to us. If we are not able to attain such cash flow
increases, or obtain new sources of borrowings, we will not be able to fully
complete our cable systems upgrades. As a result, the value of our systems would
likely be lower than that of systems built to a higher technical standard.

We believe it is critical to conserve cash to fund our future liquidity
requirements and any anticipated capital expenditures as required by franchise
authorities. Accordingly, we do not anticipate distributions to partners at this
time, other than those resulting from the pending sales transactions.

CERTAIN TRENDS AND UNCERTAINTIES

Insurance coverage is maintained for all of the cable television properties
owned or managed by Charter to cover damage to cable distribution systems,
customer connections and against business interruptions resulting from such
damage. This coverage is subject to a significant annual deductible which
applies to all of the cable television properties owned or managed by Charter,
including those of the Joint Ventures.

Charter and our Corporate General Partner have had communications and
correspondence with representatives of certain limited partners, and others,
concerning certain Enstar partnerships of which our Corporate General Partner is
also the Corporate General Partner. While we are not aware of any formal
litigation which has been filed relating to the communications and
correspondence, or the subject matter referred to therein, it is impossible to
predict what actions may be taken in the future or what loss contingencies may
result therefrom.

It is difficult to assess the impact that the general economic slowdown will
have on future operations. This could result in reduced spending by customers
and advertisers, which could reduce the Joint Venture's revenues and operating
cash flow as well as the collectibility of accounts receivable.

As disclosed in Charter Communications, Inc.'s Annual Report on Form 10-K, the
parent of our Corporate General Partner and our Manager is the defendant in
twenty-two class action and shareholder lawsuits and is the subject of a grand
jury investigation being conducted by the United States Attorney's Office for
the Eastern District of Missouri and an SEC investigation. Charter is unable to
predict the outcome of these lawsuits and government investigations. An
unfavorable outcome of these matters could have a material adverse effect on
Charter's results of operations and financial condition which could in turn have
a material adverse effect on us.

INFLATION

Certain of the Joint Venture's expenses, such as those for wages and benefits,
equipment repair and replacement, and billing and marketing generally increase
with inflation. However, we do not believe that our financial results have been,
or will be, adversely affected by inflation in a material way, provided that the
Joint Venture is able to increase our prices periodically, of which there can be
no assurance. See "Regulation and Legislation."

RECENTLY ISSUED ACCOUNTING STANDARDS

Statement of Financial Accounting Standards (SFAS) No. 143, "Accounting for
Asset Retirement Obligations," addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. SFAS No. 143 is effective for fiscal years
beginning after June 15, 2002. The Partnership adopted SFAS No. 143 on January
1, 2003. The adoption of SFAS No. 143 did not have a material impact on the
Partnership's financial condition or results of operations.

28

In April 2002, the Financial Accounting Standards Board (FASB) issued SFAS No.
145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB
Statement No. 13, and Technical Corrections." SFAS No. 145 provides for the
rescission of several previously issued accounting standards, new accounting
guidance for the accounting for certain lease modifications and various
technical corrections that are not substantive in nature to existing
pronouncements. SFAS No. 145 will be adopted by the Partnership beginning
January 1, 2003, except for the provisions relating to the amendment of SFAS No.
13, which will be adopted for transactions occurring subsequent to May 15, 2002.
Adoption of SFAS No. 145 did not have a material impact on the financial
statements of the Joint Venture.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." SFAS No. 146 addresses financial accounting
and reporting for costs associated with exit or disposal activities and
nullifies Emerging Issues Task Force Issue No. 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)." SFAS 146 requires that a
liability for costs associated with an exit or disposal activity be recognized
when the liability is incurred rather than when a company commits to such an
activity and also establishes fair value as the objective for initial
measurement of the liability. SFAS No. 146 will be adopted by the Partnership
for exit or disposal activities that are initiated after December 31, 2002.
Adoption of SFAS No. 146 will not have a material impact on the financial
statements of the Partnership.

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure." SFAS No. 148 amends SFAS No. 123 to
provide alternative methods of transition for a voluntary change to the fair
value based method of accounting for stock-based employee compensation. In
addition, it amends the disclosure requirements of SFAS No. 123 to require
prominent disclosures in both annual and interim financial statements about the
method of accounting for stock-based compensation and the effect of the method
used on reported results. Adoption of SFAS No. 148 did not have a material
impact on the financial statements of the Partnership.

ITEM 7(A). QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are not exposed to material significant risks associated with financial
instruments.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The index to the financial statements and related financial information required
to be filed hereunder is located on Page F-1.

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

Previously reported in our Current Report on Form 8-K, dated June 14, 2002.

29

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The Corporate General Partner of the Partnership may be considered for certain
purposes, the functional equivalent of directors and executive officers. The
Corporate General Partner is ECC.

The directors and executive officers of the Corporate General Partner as of
March 15, 2003, all of whom have their principal employment in a comparable
position with Charter, are named below:

Except for executive officers who joined Charter after November 1999, all
executive officers were appointed to their position with the Corporate General
Partner following Charter's acquisition of control of the Corporate General
Partner in November 1999, have been employees of Charter since November 1999,
and prior to November 1999, were employees of Charter Investment, Inc., an
affiliate of Charter and the Corporate General Partner.

Carl E. Vogel, 45, President and Chief Executive Officer. Mr. Vogel has more
than 20 years of experience in telecommunications and the subscription
television business. Prior to joining Charter in October 2001, he was a Senior
Vice President of Liberty Media Corp., from November 1999 to October 2001, and
Chief Executive Officer of Liberty Satellite and Technology, from April 2000 to
October 2000. Prior to joining Liberty, Mr. Vogel was an Executive Vice
President and Chief Operating Officer of Field Operations for AT&T Broadband and
Internet Services, with responsibility of managing operations of all of AT&T's
cable broadband properties, from June 1999 to November 1999. From June 1998 to
June 1999, Mr. Vogel served as Chief Executive Officer of Primestar, Inc., a
national provider of subscription television services, and from 1997 to 1998, he
served as Chief Executive Officer of Star Choice Communications. From 1994
through 1997, Mr. Vogel served as the President and Chief Operating Officer of
EchoStar Communications. He began his career at Jones Intercable in 1983. Mr.
Vogel serves as a director of OnCommand Corporation, and holds a B.S. degree in
finance and accounting from St. Norbert College.

Margaret A. Bellville, 49, Executive Vice President and Chief Operating Officer.
Before joining Charter in December 2002, Ms. Bellville was President and CEO of
Incanta Inc., a technology-based streaming content company, from 2001 to 2002.
Incanta Inc. filed for bankruptcy in April 2002. From 1995 to 2001, Ms Bellville
worked for Cox Communications, the nation's fourth-largest cable television
company. She joined Cox in 1995 as Vice President of Operations and advanced to
Executive Vice President of Operations. Ms. Bellville joined Cox from Century
Communications, where she served as Senior Vice President of the company's
southwest division. Before that, Ms. Bellville served seven years with GTE
Wireless in a variety of management and executive-level roles. A graduate of the
State University of New York in Binghamton, Ms. Bellville is also a graduate of
Harvard Business School's Advanced Management Program. She currently serves on
the Dan O'Brien Youth Foundation Board, the Public Affairs committee for the
NCTA, the CTAM Board of Directors, and is a trustee and secretary for the
industry association Women in Cable and Telecommunications. Ms. Bellville is an
inaugural fellow of the Betsy Magness Leadership Institute and has been named
"Woman of the Year" by Women in Cable and Telecommunications in California.

Steven A. Schumm, 50, Director of the Corporate General Partner, Executive Vice
President, Chief Administrative Officer and interim Chief Financial Officer.
Prior to joining Charter Investment in 1998, Mr. Schumm was a partner with Ernst
& Young LLP where he worked for 24 years in a variety of professional service
and management roles. At the time he joined Charter, Mr. Schumm was Managing
Partner of the St. Louis office of Ernst & Young LLP and a member of the firm's
National Tax Committee. Mr. Schumm earned a B.S. degree from Saint Louis
University.

30

Steven E. Silva, 43, Executive Vice President - Corporate Development and Chief
Technology Officer. Mr. Silva joined Charter Investment in 1995. Prior to his
promotion to Executive Vice President and Chief Technology Officer in October
2001, he was Senior Vice President - Corporate Development and Technology since
September 1999. Mr. Silva previously served in various management positions at
U.S. Computer Services, Inc., a billing service provider specializing in the
cable industry. He is a member of the board of directors of TV Gateway, LLC.

Curtis S. Shaw, 54, Senior Vice President, General Counsel and Secretary. From
1988 until he joined Charter Investment in 1997, Mr. Shaw served as corporate
counsel to NYNEX. Since 1973, Mr. Shaw has practiced 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.
degree from Trinity College and a J.D. degree from Columbia University School of
Law.

Paul E. Martin, 42, Senior Vice President, Corporate Controller and Principal
Financial Officer for Partnership Matters. Mr. Martin joined Charter as Vice
President and Corporate Controller since March 2000, and became Principal
Financial Officer for Partnership Matters in July 2001 and Senior Vice President
in April 2002. Prior to joining Charter in March 2000, Mr. Martin was Vice
President and Controller for Operations and Logistics for Fort James
Corporation, a manufacturer of paper products. From 1995 to February 1999, Mr.
Martin was Chief Financial Officer of Rawlings Sporting Goods Company, Inc. Mr.
Martin received a B.S. degree in accounting from the University of Missouri -
St. Louis.

The sole director of the Corporate General Partner is elected to a one-year term
at the annual shareholder meeting to serve until the next annual shareholder
meeting and thereafter until his respective successor is elected and qualified.
Officers are appointed by and serve at the discretion of the directors of the
Corporate General Partner.

ITEM 11. EXECUTIVE COMPENSATION

MANAGEMENT FEE

The Partnership has a management agreement (the "Management Agreement") with
Enstar Cable Corporation ("Enstar Cable"), a wholly-owned subsidiary of the
Corporate General Partner, pursuant to which Enstar Cable manages our systems
and provides all operational support for our activities. For these services,
Enstar Cable receives a management fee of 5% of our gross revenues, excluding
revenues from the sale of cable television systems or franchises, which is
calculated and paid monthly. In addition, we reimburse Enstar Cable for
operating expenses incurred by Enstar Cable in the daily operation of our cable
systems. The Management Agreement also requires us to indemnify Enstar Cable
(including its officers, employees, agents and shareholders) against loss or
expense, absent negligence or deliberate breach by Enstar Cable of the
Management Agreement. The Management Agreement is terminable by the Partnership
upon 60 days written notice to Enstar Cable. Enstar Cable had, prior to November
12, 1999, engaged Falcon Communications, L.P. ("Falcon") to provide management
services for us and paid Falcon a portion of the management fees it received in
consideration of such services and reimbursed Falcon for expenses incurred by
Falcon on its behalf. Subsequent to November 12, 1999, Charter, as
successor-by-merger to Falcon, has provided such services and received such
payments. Additionally, we receive system operating management services from
affiliates of Enstar Cable in lieu of directly employing personnel to perform
those services. We reimburse the affiliates for our allocable share of their
operating costs. The Corporate General Partner also performs supervisory and
administrative services for the Partnership, for which it is reimbursed.

For the fiscal year ended December 31, 2002, Enstar Cable charged the Joint
Ventures management fees of approximately $128,600. In addition, the Macoupin
Joint Venture paid the Corporate General Partner approximately $5,300 relative
to its 1% special interest. The Joint Ventures also reimbursed Enstar Cable,
Charter and its affiliates approximately $281,700 for system operating
management services and direct expenses. In addition, programming services are
purchased through Charter. The Joint Ventures were charged approximately
$708,900 for these programming services for fiscal year 2002.

Charter as manager of the Corporate General Partner has adopted a code of
conduct which covers all employees, including all executive officers, and
includes conflict of interest provisions and standards for honest and ethical
conduct, a copy of which is attached as Exhibit 14.1 to this Annual Report.

31

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

As of December 31, 2002, there is no person known by us to own beneficially or
that may be deemed to own beneficially more than 5% of the units.

The Corporate General Partner is a wholly-owned subsidiary of Charter
Communications Holding Company, LLC. As of December 31, 2002, the common
membership units of Charter Communications Holding Company, LLC are owned 46.5%
by Charter, 18.4% by Vulcan Cable III Inc., and 35.1% by Charter Investment,
Inc. (assuming conversion of all convertible securities). Charter controls 100%
of the voting power of Charter Communications Holding Company LLC. Paul G. Allen
owns approximately 7.1% of the outstanding capital stock of Charter and controls
approximately 92.9% of the voting power of Charter's common stock, and he is the
sole equity owner of Charter Investment, Inc. and Vulcan Cable III Inc.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

MANAGEMENT SERVICES

On November 12, 1999, Charter acquired ownership of Enstar Communications
Corporation ("ECC") from Falcon Holding Group, L.P. and assumed the management
services operations previously provided by affiliates Falcon Communications,
L.P. Charter now manages the operations of the partnerships of which ECC is the
Corporate General Partner, including the Partnership. Commencing November 13,
1999, Charter began receiving management fees and reimbursed expenses which had
previously been paid by the Corporate General Partner to Falcon Communications,
L.P.

Pursuant to a management agreement dated November 26, 1985 between the
Partnership and Enstar Cable Corporation, a subsidiary of the Corporate General
Partner, Enstar Cable provides financial, management, supervisory and marketing
services, as necessary to the Partnership's operations. This Management
Agreement provides that the Partnership shall pay management fees equal to 5% of
the Partnership's gross receipts from customers. In addition, Enstar Cable
Corporation is to be reimbursed for amounts paid to third parties, the cost of
administrative services in an amount equal to the lower of actual cost or the
amount the Partnership would be required to pay to independent parties for
comparable administrative services, salaries and benefits of employees necessary
for day-to-day operation of the Partnership's systems, and an allocable shares
of costs associated with facilities required to manage the Partnership's
systems. To provide these management services, Enstar Cable Corporation has
engaged Charter Communications Holding Company, an affiliate of the Corporate
General Partner and Charter, to provide management, consulting, programming and
billing services for the Partnership.

Since November 12, 1999, when Charter acquired control of the Corporate General
Partner and its subsidiary, Enstar Cable Corporation, as well as Falcon
Communications, L.P., the management fees payable have been limited to
reimbursement of an allocable share of Charter's management costs, which is less
than the fee permitted by the existing agreement. As of December 31, 2002,
accrued and unpaid management fees to Charter Communications Holding Company
LLC. from the PBD and Macoupin Joint Ventures were $430,100 and $144,500,
respectively. In addition, the Joint Ventures were charged directly for the
salaries and benefits of employees for daily operations, and where shared by
other Charter systems, an allocable share of facilities costs, with programming
and billing being charged to the Partnership at Charter's actual cost. For the
year ended December 31, 2002 and the period ended April 10, 2002, service costs
directly attributable to providing cable services to customers which were
incurred by Charter and reimbursed by the PBD and Macoupin Joint Ventures, were
$217,100 and $63,900, respectively.

CONFLICTS OF INTEREST

The Partnership and the Joint Ventures rely upon the Corporate General Partner
and certain of its affiliates to provide general management services, system
operating services, supervisory and administrative services and programming. See
Item 11. "Executive Compensation" and Item 7. "Management's Discussion and
Analysis of Financial Condition and Results of Operations." The executive
officers of the Corporate General Partner have their personal employment with
Charter, and, as a result, are involved in the management of other cable
ventures. Charter expects to continue to enter into other cable ventures. These
affiliations subject Charter and the Corporate General Partner and their
management to conflicts of interest. These conflicts of interest relate to the
time and services that management will devote to the Partnership's affairs.

32

FIDUCIARY RESPONSIBILITY AND INDEMNIFICATION OF THE GENERAL PARTNERS

A general partner is accountable to a limited partnership as a fiduciary and
consequently must exercise good faith and integrity in handling partnership
affairs. Where the question has arisen, some courts have held that a limited
partner may institute legal action on his own behalf and on behalf of all other
similarly situated limited partners (a class action) to recover damages for a
breach of fiduciary duty by a general partner, or on behalf of the Partnership
(a partnership derivative action) to recover damages from third parties. Section
14-9-1001 of the Georgia Revised Uniform Limited Partnership Act also allows a
partner to maintain a partnership derivative action if general partners with
authority to do so have refused to bring the action or if an effort to cause
those general partners to bring the action is not likely to succeed. Some cases
decided by federal courts have recognized the right of a limited partner to
bring such actions under the Securities and Exchange Commission's Rule 10b-5 for
recovery of damages resulting from a breach of fiduciary duty by a general
partner involving fraud, deception or manipulation in connection with the
limited partner's purchase or sale of partnership units.

The Partnership Agreement provides that the general partners will be indemnified
by the Partnership for acts performed within the scope of their authority under
the Partnership Agreement if the general partners (i) acted in good faith and in
a manner that it reasonably believed to be in, or not opposed to, the best
interests of the Partnership and the partners, and (ii) had no reasonable
grounds to believe that their conduct was negligent. In addition, the
Partnership Agreement provides that the general partners will not be liable to
the Partnership or its limited partners for errors in judgment or other acts or
omissions not amounting to negligence or misconduct. Therefore, limited partners
will have a more limited right of action than they would have absent such
provisions. In addition, the Partnership maintains, at its expense and in such
reasonable amounts as the Corporate General Partner shall determine, a liability
insurance policy which insures the Corporate General Partner, Charter and its
affiliates, officers and directors and persons determined by the Corporate
General Partner, against liabilities which they may incur with respect to claims
made against them for wrongful or allegedly wrongful acts, including certain
errors, misstatements, misleading statements, omissions, neglect or breaches of
duty.

33

PART IV

ITEM 14. CONTROLS AND PROCEDURES.

(a) Evaluation of disclosure controls and procedures. Within the 90 days
prior to the date of this report, our Corporate General Partner carried
out an evaluation, under the supervision and with the participation of
our management, including our Chief Administrative Officer and
Principal Financial Officer, of the effectiveness of the design and
operation of our disclosure controls and procedures. Based upon that
evaluation, our Chief Administrative Officer and Principal Financial
Officer concluded that our disclosure controls and procedures are
effective to ensure that information that is required to be disclosed
by the Partnership in reports that it files in its periodic SEC reports
is recorded, processed, summarized and reported within the terms
specified in the SEC rules and forms.

(b) Changes in internal controls. There were no significant changes in our
internal controls or in other factors that could significantly affect
those controls subsequent to the date that our Corporate General
Partner carried out this evaluation.

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) 1. Financial Statements

Reference is made to the Index to Financial Statements on page F-1.

2. Financial Statement Schedules

Reference is made to the Index to Financial Statements on page F-1.

3. Exhibits

Reference is made to the Exhibits Index on Page E-1.

(b) Reports on Form 8-K

On February 14, 2003, the registrant filed a current report on Form
8-K dated February 6, 2003 to announce it had entered into a side
letter amending an asset purchase agreement.

34

SIGNATURES

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

ENSTAR INCOME PROGRAM IV-1, L.P.

By: Enstar Communications Corporation,
Corporate General Partner

Dated: April 17, 2003 By: /s/ Steven A. Schumm
--------------------------------
Steven A. Schumm
Director, Executive Vice President,
Chief Administrative Officer and
Interim Chief Financial Officer

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

Dated: April 17, 2003 By: /s/ Steven A. Schumm
----------------------------------------
Steven A. Schumm
Director, Executive Vice President,
Chief Administrative Officer and Interim
Chief Financial Officer
(Principal Executive Officer)*

Dated: April 17, 2003 By: /s/ Paul E. Martin
----------------------------------------
Paul E. Martin
Senior Vice President and Corporate
Controller
(Principal Financial Officer and
Principal Accounting Officer)*

* Indicates position held with Enstar Communications Corporation, the Corporate
General Partner of the registrant.

35

CERTIFICATIONS

Certification of Chief Administrative Officer

I, Steven A. Schumm, certify that:

1. I have reviewed this annual report on Form 10-K of Enstar Income
Program IV-1, L.P.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:

a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this annual report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this annual report (the "Evaluation Date");
and

c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):

a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and

6. The registrant's other certifying officer and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.

Date: April 17, 2003

/s/ Steven A. Schumm
- -----------------------------------
Steven A. Schumm
Executive Vice President, Director,
Chief Administrative Officer and
Interim Chief Financial Officer

36

Certification of Principal Financial Officer

I, Paul E. Martin, certify that:

1. I have reviewed this annual report on Form 10-K of Enstar Income
Program IV-1, L.P.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:

a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this annual report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this annual report (the "Evaluation Date");
and

c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):

a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and

6. The registrant's other certifying officer and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.

Date: April 17, 2003

/s/ Paul E. Martin
- ------------------------------------
Paul E. Martin
Senior Vice President and
Corporate Controller (Principal Financial Officer and
Principal Accounting Officer)

37

INDEX TO FINANCIAL STATEMENTS

All financial statement schedules have been omitted because they are either not
required, not applicable or the information has otherwise been supplied.

INDEPENDENT AUDITORS' REPORT

To the Partners of
Enstar Income Program IV-1, L.P.:

We have audited the accompanying statement of net assets in liquidation of
Enstar Income Program IV-1, L.P. (a Georgia limited partnership) as of December
31, 2002 (see Note 2). We have also audited the statements of operations,
partnership capital (deficit) and cash flows for the year ended December 31,
2002. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audit. The 2001 and 2000 financial statements were
audited by other auditors who have ceased operations. Those auditors expressed
an unqualified opinion on those financial statements in their report dated March
29, 2002.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the 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.

As described in Note 2 to the financial statements, the partners of Enstar
Income Program IV-1, L.P. have approved a plan of liquidation. Accordingly, the
Partnership has changed its basis of accounting from the going concern basis to
a liquidation basis as of December 31, 2002.

In our opinion, the 2002 financial statements referred to above present fairly,
in all material respects, the net assets in liquidation of Enstar Income Program
IV-1, L.P. as of December 31, 2002, and the results of its operations and its
cash flows for the year then ended in conformity with accounting principles
generally accepted in the United States of America applied on the bases
described in the preceding paragraph.

/s/ KPMG, LLP

St. Louis, Missouri
April 11, 2003

F-2

THIS IS A COPY OF A REPORT PREVIOUSLY ISSUED BY ARTHUR ANDERSEN LLP AND
HAS NOT BEEN REISSUED BY ARTHUR ANDERSEN LLP

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Partners of Enstar Income Program IV-1, L.P.:

We have audited the accompanying balance sheets of Enstar Income Program IV-1,
L.P. (a Georgia limited partnership) as of December 31, 2001 and 2000, and the
related statements of operations, partnership capital (deficit) and cash flows
for the years then ended. These financial statements are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our 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 Enstar Income Program IV-1,
L.P. as of December 31, 2001 and 2000, and the results of its operations and its
cash flows for the years then ended in conformity with accounting principles
generally accepted in the United States.

/s/ ARTHUR ANDERSEN LLP

St. Louis, Missouri,
March 29, 2002

F-3

ENSTAR INCOME PROGRAM IV-1, L.P.

STATEMENT OF NET ASSETS IN LIQUIDATION
(SEE NOTE 2)

AS OF DECEMBER 31, 2002

ASSETS:
Cash and cash equivalents $ 208,500
Equity in net assets of Joint Venture 2,879,200
---------------

Total assets 3,087,700
---------------

LIABILITIES:
Accrued liabilities 340,400
Due to affiliate 580,200
---------------

Total liabilities 920,600
---------------

NET ASSETS IN LIQUIDATION:
General Partners (17,200)
Limited Partners 2,184,300
---------------

$ 2,167,100
===============

See accompanying notes to financial statements.

F-4

ENSTAR INCOME PROGRAM IV-1, L.P.

BALANCE SHEET

AS OF DECEMBER 31, 2001

See accompanying notes to financial statements.

F-5

ENSTAR INCOME PROGRAM IV-1, L.P.

STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

See accompanying notes to financial statements.

F-6

ENSTAR INCOME PROGRAM IV-1, L.P.

STATEMENTS OF PARTNERSHIP CAPITAL (DEFICIT)

FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

See accompanying notes to financial statements.

F-7

ENSTAR INCOME PROGRAM IV-1, L.P.

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

See accompanying notes to financial statements.

F-8

ENSTAR INCOME PROGRAM IV-1, L.P.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2002, 2001 AND 2000

(1) ORGANIZATION

Enstar Income Program IV-1, L.P. a Georgia limited partnership (the
"Partnership"), was formed on October 16, 1985 by a partnership agreement, as
amended (the "Partnership Agreement"), to acquire, construct, improve, develop
and operate cable television systems in various locations in the United States.
The Partnership Agreement provides for Enstar Communications Corporation (the
"Corporate General Partner") and Robert T. Graff, Jr. to be the General Partners
and for the admission of Limited Partners through the sale of interests in the
Partnership.

On November 12, 1999, Charter Communications Holdings Company, LLC, an entity
controlled by Charter, acquired both the Corporate General Partner, as well as
Falcon Communications, L.P. ("Falcon"), the entity that provided management and
certain other services to the Partnership. Charter is the nation's third largest
cable operator, serving approximately 6.6 million customers and files periodic
reports with the Securities and Exchange Commission. Charter and its affiliates
(principally CC VII Holdings, LLC, the successor-by-merger to Falcon) provide
management and other services to the Partnership. Charter receives a management
fee and reimbursement of expenses from the Corporate General Partner for
managing the Partnership's cable television operations. The Corporate General
Partner, Charter and affiliated companies are responsible for the management of
the Partnership and its operations.

The financial statements do not give effect to any assets that the partners may
have outside of their interest in the Partnership, nor to any obligations of the
partners, including income taxes.

(2) SALES OF ASSETS AND LIQUIDATION BASIS ACCOUNTING

On April 10, 2002, pursuant to an asset purchase agreement dated August 29,
2001, the Partnership, together with its affiliates, Enstar Income Program IV-2,
L.P. (Enstar IV-2) and Enstar Income Program IV-3, L.P., completed the sale of
the Macoupin Joint Venture's systems to Charter Communications Entertainment I,
LLC ("CCE-1"), an affiliate of the Corporate General Partner and an indirect
subsidiary of Charter Communications, Inc. ("Charter"), for a total sale price
of approximately $9,076,800, the Partnership's one-third share of which is
approximately $3,025,600, and, together with Enstar IV-2, the sale to Interlink
Communications Partners, LLC of the PBD Joint Venture's Mt. Carmel system for a
total sale price of approximately $4,994,800, the Partnership's one-half share
of which is approximately $2,497,400 (the "Charter Sale"). The Charter Sale is
part of a larger transaction in which the Partnership and five other affiliated
partnerships (which, together with the Partnership are collectively referred to
as the "Charter Selling Partnerships") sold all of their assets used in the
operation of their respective Illinois cable television systems to CCE-1 and two
of its affiliates (also referred to, with CCE-1, as the "Purchasers") for a
total cash sale price of $63,000,000. Each Charter Selling Partnership received
the same value per customer. In addition, the Limited Partners of each of the
Charter Selling Partnerships approved an amendment to their respective
partnership agreement to allow the sale of assets to an affiliate of such
partnership's General Partner. The Purchasers are each indirect subsidiaries of
the Corporate General Partner's ultimate parent company, Charter, and,
therefore, are affiliates of the Partnership and each of the other Charter
Selling Partnerships.

In addition, on March 21, 2002, pursuant to an asset purchase agreement dated
September 4, 2001, the Partnership, together with Enstar IV-2, completed the
sale of the Poplar Bluff franchise area with the City of Poplar Bluff, Missouri
for a sale price of approximately $8,000,000 (the "Poplar Bluff Sale"), the
Partnership's one-half share of which is approximately $4,000,000.

The Charter Sale and Poplar Bluff Sale resulted from a sale process actively
pursued since 1999, when the Corporate General Partner sought purchasers for all
of the cable television systems of the Selling Partnerships, as well as eight
other affiliated limited partnership cable operators of which the Corporate
General Partner is also the general partner. This effort was undertaken
primarily because, based on the Corporate General Partner's experience in the
cable television industry, it was concluded that generally applicable market
conditions and competitive factors were making (and would increasingly make) it
extremely difficult for smaller operators of rural cable systems (such as the
Joint Ventures and the other affiliated partnerships) to effectively compete and
be financially successful. This determination was based on the anticipated cost
of electronics and additional equipment to enable the Joint Venture's systems to
operate on a two-way basis with improved technical capacity, insufficiency of
Joint Ventures cash

F-9

ENSTAR INCOME PROGRAM IV-1, L.P.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2002, 2001 AND 2000

reserves and cash flows from operations to finance such expenditures, limited
customer growth potential due to the Joint Venture's systems' rural location,
and a general inability of a small cable system operator such as the Joint
Ventures to benefit from economies of scale and the ability to combine and
integrate systems that large cable operators have. In addition, the City of
Poplar Bluff sold bonds to raise money to construct a competing cable system.
Although limited plant upgrades have been made, the Corporate General Partner
projected that if the Joint Ventures made the comprehensive additional upgrades
deemed necessary to enable enhanced and competitive services, particularly
two-way capability, the Joint Ventures would not recoup the costs or regain its
ability to operate profitably within the remaining term of its franchises, and
as a result, making these upgrades would not be economically prudent.

As a result of the sale of the Macoupin Joint Venture's systems, the Macoupin
Joint Venture changed its basis of accounting to the liquidation basis on April
10, 2002. Accordingly, the assets in the accompanying statement of net assets in
liquidation as of December 31, 2002 have been stated at estimated realizable
values and the liabilities have been reflected at estimated settlement amounts.
There were no significant adjustments recorded upon changing to liquidation
basis accounting. Net assets in liquidation as of December 31, 2002 represent
the estimated distribution to the joint venturers. In January 2003, all
remaining assets of the Macoupin Joint Venture were distributed including a
final distribution of $126,000 made to the joint venturers, of which the
Partnership's portion is $42,000.

On November 8, 2002, the joint venturers entered into an asset purchase
agreement providing for the sale of PBD Joint Venture's remaining cable system
in Dexter, Missouri to Telecommunications Management, LLC (Telecommunications
Management) for a total sale price of approximately $3,148,000, (approximately
$825 per customer acquired). This sale is a part of a larger transaction in
which the joint venturers and eight other affiliated partnerships (which,
together with the Partnership are collectively referred to as the
"Telecommunications Management Selling Partnerships") would sell all of their
remaining assets used in the operation of their respective cable systems to
Telecommunications Management for a total cash sale price of approximately
$15,341,600 (before adjustments) (the Telecommunications Management Sale). The
Telecommunications Management Sale is subject to the approval of a majority of
the holders of the Partnership's units and approval of the holders of the other
Telecommunications Management Selling Partnerships. In addition, the transaction
is subject to certain closing conditions, including regulatory and franchise
approvals. In April 2003, a majority of the limited Partners approved the
Telecommunications Management Sale and a plan of liquidation.

On February 6, 2003, the PBD Joint Venture entered into a side letter amending
the asset purchase agreement providing for the sale of its remaining cable
system in Dexter, Missouri to Telecommunications Management. The February 6,
2003 side letter amends the asset purchase agreement and Deposit Escrow
Agreement to extend the date of the second installment of the deposit and the
Outside Closing Date each by 60 days. On April 7, 2003, the second installment
of the escrow deposit was due and was not received. Management is currently
evaluating the alternatives with respect to this new development.

The Partnership finalized its proposed plan of liquidation in December 2002 in
connection with the filing of a proxy to obtain partner approval for the sale of
the Joint Venture's final cable system and the subsequent liquidation and
dissolution of the Joint Venture and the Partnership. In April 2003, the
required number of votes necessary to implement the plan of liquidation were
obtained. The statements of operations, partnership capital (deficit) and cash
flows for the year ended December 31, 2002 have been presented on a going
concern basis comparable to prior periods. As a result, the Partnership changed
its basis of accounting to the liquidation basis as of December 31, 2002. Upon
changing to the liquidation basis of accounting, the Partnership recorded
$25,000 of accrued costs of liquidation in accounts payable and accrued
liabilities representing an estimate of the costs to be incurred after the sale
of the Joint Venture's final cable system but prior to dissolution of the
Partnership. In addition, the Partnership's equity in net assets of the Joint
Venture decreased by $15,300 as a result of the accrued costs of liquidation
recorded at the Joint Venture. No further adjustments have been recorded to
reflect the Partnership's equity in net assets of the Joint Venture at estimated
realizable value. Distributions ultimately made to the partners upon liquidation
will differ from the net assets in liquidation recorded in the accompanying
statement of net assets in liquidation of the Partnership as a result of
adjustments recorded to the realizable value of the assets of the Joint Venture
and adjustments if any to estimated costs of liquidation.

F-10

ENSTAR INCOME PROGRAM IV-1, L.P.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2002, 2001 AND 2000

The Corporate General Partner's intention is to settle the outstanding
obligations of the Partnership and terminate the Partnership as expeditiously as
possible. Final dissolution of the Partnership and related cash distributions to
the partners will occur upon obtaining final resolution of all liquidation
issues.

(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

As discussed in Note 2, the financial statements as of December 31, 2002 are
presented on a liquidation basis of accounting. Accordingly, the financial
information in the statement of net assets in liquidation for such period is
presented on a different basis of accounting than the financial statements for
the years ended December 31, 2002, 2001 and 2000, which are prepared on the
historical cost basis of accounting.

Cash Equivalents

The Partnership considers all highly liquid investments with original maturities
of three months or less to be cash equivalents. These investments are carried at
cost which approximates market value.

Investment in Joint Ventures

The Partnership's investment and share of the income or loss in the Joint
Ventures is accounted for on the equity method of accounting.

Income Taxes

As a partnership, Enstar Income Program IV-1, L.P. pays no federal income taxes.
All of the income, gains, losses, deductions and credits of the Partnership are
passed through to its partners. The basis in the Partnership's assets and
liabilities differs for financial and tax reporting purposes. As of December 31,
2002, 2001 and 2000, the book basis of the Partnership's investment in the Joint
Ventures exceeds its tax basis by approximately $96,300, $970,400 and $600,600,
respectively. The accompanying financial statements, which are prepared in
accordance with accounting principles generally accepted in the United States,
differ from the financial statements prepared for tax purposes due to the
different treatment of various items as specified in the Internal Revenue Code.
The net effect of these accounting differences is that net income for the year
ended December 31, 2002 in the financial statements is approximately $840,000
less than tax income primarily as a result of differences between tax gain on
sale of cable systems versus book gain on sale of cable systems caused
principally by book and tax basis differences on the assets sold. The net effect
of these accounting differences is that net income for the years ended December
31, 2001 and 2000 in the financial statements is approximately $408,800 and
$41,200 more than tax income for the same period, respectively, caused
principally by timing differences in depreciation expense reported by the Joint
Ventures.

Net Income Per Unit of Limited Partnership Interest

Net income per unit of limited partnership interest is based on the average
number of units outstanding during the periods presented. For this purpose, net
income has been allocated 99% to the Limited Partners and 1% to the General
Partners. The General Partners do not own units of partnership interest in the
Partnership, but rather hold a participation interest in the income, losses and
distributions of the Partnership.

Use of Estimates

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States 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 expenses during the reporting period. The
estimates include useful lives on property, plant and equipment, valuation of
long-lived assets and allocated operating costs. Actual results could differ
from those estimates.

F-11

ENSTAR INCOME PROGRAM IV-1, L.P.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2002, 2001 AND 2000

(4) PARTNERSHIP MATTERS

The amended Partnership Agreement generally provides that all cash
distributions, as defined, be allocated 1% to the General Partners and 99% to
the Limited Partners until the Limited Partners have received aggregate cash
distributions equal to their original capital contributions ("Capital Payback").
The Partnership Agreement also provides that all partnership profits, gains,
operational losses, and credits, all as defined, be allocated 1% to the General
Partners and 99% to the Limited Partners until the Limited Partners have been
allocated net profits equal to the amount of cash flow required for Capital
Payback. After the Limited Partners have received cash flow equal to their
initial investments, the General Partners will receive a 1% allocation of cash
flow from sale or liquidation of a system until the Limited Partners have
received an annual simple interest return of at least 12% of their initial
investments less any distributions from previous system sales and cash
distributions from operations after Capital Payback. Thereafter, the respective
allocations will be made 20% to the General Partners and 80% to the Limited
Partners. Any losses from system sales or exchanges shall be allocated first to
all partners having positive capital account balances (based on their respective
capital accounts) until all such accounts are reduced to zero and thereafter to
the Corporate General Partner. All allocations to individual Limited Partners
will be based on their respective limited partnership ownership interests.

Upon the disposition of substantially all of the Partnership's assets, gains
shall be allocated first to the Limited Partners having negative capital account
balances until their capital accounts are increased to zero, next equally among
the General Partners until their capital accounts are increased to zero, and
thereafter as outlined in the preceding paragraph. Upon dissolution of the
Partnership, any negative capital account balances remaining after all
allocations and distributions are made must be funded by the respective
partners. The Partnership Agreement limits the amount of debt the Partnership
may incur.

The Partnership's operating expenses, interest expense and distributions to
partners are funded primarily from distributions received from the Joint
Ventures.

(5) EQUITY IN NET ASSETS OF JOINT VENTURES

Enstar IV/PBD Systems Venture

The Partnership and an affiliated partnership (Enstar Income Program IV-2, L.P.)
each own 50% of Enstar IV/PBD Systems Venture, a Georgia general partnership
(the "PBD Joint Venture"). The PBD Joint Venture was initially funded through
capital contributions made by each venturer during 1986 of $7,270,000 in cash
and $460,000 in capitalized system acquisition and related costs. In 1986, the
PBD Joint Venture acquired cable television systems in Missouri and Illinois.
Each venturer shares equally in the profits and losses of the PBD Joint Venture.
The PBD Joint Venture generated income of $6,927,600, $691,600 and $1,700,000
for the years ended December 31, 2002, 2001 and 2000, respectively, of which
$3,463,800, $345,800 and $850,000 was allocated to the Partnership,
respectively. The operations of the PBD Joint Venture are significant to the
Partnership and its financial statements included elsewhere in this Annual
Report should be read in conjunction with these financial statements.

Enstar Cable of Macoupin County

The Partnership and two affiliated partnerships (Enstar Income Program IV-2,
L.P. and Enstar Income Program IV-3, L.P.) each own one third of Enstar Cable of
Macoupin County, a Georgia general partnership (the "Macoupin Joint Venture"),
until its sale in the second quarter of 2002. The Macoupin Joint Venture was
initially funded through capital contributions made by each venturer during 1988
of $2,199,700 in cash and $40,000 in capitalized system acquisition and related
costs. In 1988, the Macoupin Joint Venture acquired cable television systems in
Illinois. Each venturer shares equally in the profits and losses of the Macoupin
Joint Venture. The Macoupin Joint Venture generated income of $7,010,100,
$583,500 and $669,000 for the period from January 1, 2002 to April 10, 2002 and
for the years ended December 31, 2001 and 2000, respectively, of which
$2,336,700, $194,500 and $223,000 was allocated to the Partnership,
respectively. In addition, the Macoupin Joint Venturer's net assets in
liquidation increased by $73,500 of which $24,500 was allocated to the
Partnership. The operations of the Macoupin Joint Venture were significant to
the Partnership and its financial statements included elsewhere in this Annual
Report should be read in conjunction with these financial statements.

F-12

ENSTAR INCOME PROGRAM IV-1, L.P.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2002, 2001 AND 2000

(6) CREDIT FACILITY

The Partnership was party to a loan agreement with Enstar Finance Company, LLC,
a subsidiary of Enstar Communications Corporation. The loan agreement provided
for a revolving loan facility of $1,800,000 and matured and was repaid on August
31, 2001. The loan facility was not extended or replaced.

(7) TRANSACTIONS WITH THE GENERAL PARTNERS AND AFFILIATES

The Partnership has a management and service agreement (the "Management
Agreement") with Enstar Cable Corporation (the "Manager"), a wholly owned
subsidiary of the Corporate General Partner, pursuant to which the Partnership
pays a monthly management fee of 5% of gross revenues to the Manager. The
Partnership did not own or operate any cable television operations in 2002, 2001
and 2000 other than through its investment in the Joint Ventures. Accordingly,
no management fees were paid by the Partnership. The Management Agreement also
provides that the Partnership will reimburse the Manager for direct expenses
incurred on behalf of the Partnership and for the Partnership's allocable share
of operational costs. No reimbursable expenses were incurred on behalf of the
Partnership in 2002, 2001 and 2000.

As disclosed in Charter Communications, Inc.'s Annual Report on Form 10-K, the
parent of the Corporate General Partner and our Manager is the defendant in
twenty-two class action and shareholder lawsuits and is the subject of a grand
jury investigation being conducted by the United States Attorney's Office for
the Eastern District of Missouri and an SEC investigation. Charter is unable to
predict the outcome of these lawsuits and government investigations. An
unfavorable outcome of these matters could have a material adverse effect on
Charter's results of operations and financial condition which could in turn have
a material adverse effect on the Partnership.

(8) RECENTLY ISSUED ACCOUNTING STANDARDS

Statement of Financial Accounting Standards (SFAS) No. 143, "Accounting for
Asset Retirement Obligations," addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. SFAS No. 143 is effective for fiscal years
beginning after June 15, 2002. The Partnership adopted SFAS No. 143 on January
1, 2003. The adoption of SFAS No. 143 did not have a material impact on the
Partnership's financial condition or results of operations.

In April 2002, the Financial Accounting Standards Board issued SFAS No. 145,
"Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement
No. 13, and Technical Corrections." SFAS No. 145 provides for the rescission of
several previously issued accounting standards, new accounting guidance for the
accounting for certain lease modifications and various technical corrections
that are not substantive in nature to existing pronouncements. SFAS No. 145 will
be adopted by the Partnership beginning January 1, 2003, except for the
provisions relating to the amendment of SFAS No. 13, which will be adopted for
transactions occurring subsequent to May 15, 2002. Adoption of SFAS No. 145 did
not have a material impact on the financial statements of the Partnership.

In June 2002, the Financial Accounting Standards Board issued SFAS No. 146,
"Accounting for Costs Associated with Exit or Disposal Activities." SFAS No. 146
addresses financial accounting and reporting for costs associated with exit or
disposal activities and nullifies Emerging Issues Task Force Issue No. 94-3,
"Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity (including Certain Costs Incurred in a Restructuring)." SFAS
146 requires that a liability for costs associated with an exit or disposal
activity be recognized when the liability is incurred rather than when a company
commits to such an activity and also establishes fair value as the objective for
initial measurement of the liability. SFAS No. 146 will be adopted by the
Partnership for exit or disposal activities that are initiated after December
31, 2002. Adoption of SFAS No. 146 will not have a material impact on the
financial statements of the Partnership.

F-13

ENSTAR INCOME PROGRAM IV-1, L.P.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2002, 2001 AND 2000

In December 2002, the Financial Accounting Standards Board issued SFAS No. 148,
"Accounting for Stock-Based Compensation - Transition and Disclosure." SFAS No.
148 amends SFAS No. 123 to provide alternative methods of transition for a
voluntary change to the fair value based method of accounting for stock-based
employee compensation. In addition, it amends the disclosure requirements of
SFAS No. 123 to require prominent disclosures in both annual and interim
financial statements about the method of accounting for stock-based compensation
and the effect of the method used on reported results. Adoption of SFAS No. 148
did not have a material impact on the financial statements of the Partnership.

F-14

INDEPENDENT AUDITORS' REPORT

To the Venturers of
Enstar IV/PBD Systems Venture:

We have audited the accompanying statement of net assets in liquidation of
Enstar IV/PBD Systems Venture (a Georgia general partnership) as of December 31,
2002 (see Note 2). We have also audited the statements of operations, venturers'
capital and cash flows for the year ended December 31, 2002. These financial
statements are the responsibility of the Venture's management. Our
responsibility is to express an opinion on these financial statements based on
our audit. The 2001 and 2000 financial statements were audited by other auditors
who have ceased operations. Those auditors expressed an unqualified opinion on
those financial statements in their report dated March 29, 2002.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the 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.

As described in Note 2 to the financial statements, the partners of Enstar
Income Program IV-1, L.P. and Enstar Income Program IV-2, L.P. have approved a
plan of liquidation. Accordingly, the Venture has changed its basis of
accounting from the going concern basis to a liquidation basis as of December
31, 2002.

In our opinion, the 2002 financial statements referred to above present fairly,
in all material respects, the net assets in liquidation of Enstar IV/PBD Systems
Venture as of December 31, 2002, and the results of its operations and its cash
flows for the year then ended in conformity with accounting principles generally
accepted in the United States of America applied on the bases described in the
preceding paragraph.

/s/ KPMG, LLP

St. Louis, Missouri
April 11, 2003

F-15

THIS IS A COPY OF A REPORT PREVIOUSLY ISSUED BY ARTHUR ANDERSEN LLP AND HAS NOT
BEEN REISSUED BY ARTHUR ANDERSEN LLP

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Venturers of Enstar IV/PBD Systems Venture:

We have audited the accompanying balance sheets of Enstar IV/PBD Systems Venture
(a Georgia general partnership) as of December 31, 2001 and 2000, and the
related statements of operations, venturers' capital and cash flows for the
years then ended. These financial statements are the responsibility of the
Venture's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our 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 Enstar IV/PBD Systems Venture
at December 31, 2001 and 2000, and the results of its operations and its cash
flows for the years then ended in conformity with accounting principles
generally accepted in the United States.

/s/ ARTHUR ANDERSEN LLP

St. Louis, Missouri,
March 29, 2002

F-16

ENSTAR IV/PBD SYSTEMS VENTURE

STATEMENT OF NET ASSETS IN LIQUIDATION
(SEE NOTE 2)

AS OF DECEMBER 31, 2002

ASSETS:

Cash and cash equivalents $5,788,900
Prepaid expenses 5,200
Property, plant and equipment 818,400
Franchise cost 3,500
----------

Total assets 6,616,000
----------

LIABILITIES:
Accounts payable 21,400
Accrued liabilities 106,800
Due to affiliates 813,200
----------

Total liabilities 941,400
----------

NET ASSETS IN LIQUIDATION
Enstar Income Program IV-1, L.P. 2,837,300
Enstar Income Program IV-2, L.P. 2,837,300
----------

$5,674,600
==========

See accompanying notes to financial statements.

F-17

ENSTAR IV/PBD SYSTEMS VENTURE

BALANCE SHEET

AS OF DECEMBER 31, 2001

ASSETS

ASSETS:
Cash $ 511,200
Accounts receivable, net 67,800
Prepaid expenses and other assets 18,500
Property, plant and equipment, net of accumulated depreciation of $11,130,500 7,780,000
Franchise cost, net of accumulated amortization of $26,900 31,700
Deferred charges, net 400
------------

Total assets $ 8,409,600
============

LIABILITIES AND VENTURERS' CAPITAL

LIABILITIES:
Accounts payable $ 68,300
Accrued liabilities 181,800
Due to affiliates 1,128,700
------------

Total liabilities 1,378,800
------------

VENTURERS' CAPITAL:
Enstar Income Program IV-1, L.P. 3,515,400
Enstar Income Program IV-2, L.P. 3,515,400
------------

Total venturers' capital 7,030,800
------------

Total liabilities and venturers' capital $ 8,409,600
============

See accompanying notes to financial statements.

F-18

ENSTAR IV/PBD SYSTEMS VENTURE

STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

See accompanying notes to financial statements.

F-19

ENSTAR IV/PBD SYSTEMS VENTURE

STATEMENTS OF VENTURERS' CAPITAL

FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

See accompanying notes to financial statements.

F-20

ENSTAR IV/PBD SYSTEMS VENTURE

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

See accompanying notes to financial statements.

F-21

ENSTAR IV/PBD SYSTEMS VENTURE

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2002, 2001 AND 2000

(1) ORGANIZATION

Enstar IV/PBD Systems Venture, a Georgia general partnership (the "Venture"),
was formed under the terms of a general partnership agreement effective July 23,
1986, between the Venturers, two limited partnerships sponsored by Enstar
Communications Corporation (the "Corporate General Partner"). The Venture was
formed to pool the resources of the two limited partnerships to acquire, own,
operate and dispose of certain cable television systems. In 1986, the Venture
acquired cable television systems in Missouri and Illinois.

On September 30, 1988, Falcon Cablevision, a California limited partnership,
purchased all of the outstanding capital stock of the Corporate General Partner.
On September 30, 1998, Falcon Holding Group, L.P. ("FHGLP") acquired ownership
of the Corporate General Partner from Falcon Cablevision. Simultaneously with
the closing of that transaction, FHGLP contributed all of its existing cable
television system operations to Falcon Communications, L.P. ("FCLP"), a
California limited partnership and successor to FHGLP. FHGLP served as the
managing partner of FCLP, and the General Partner of FHGLP was Falcon Holding
Group, Inc., a California corporation ("FHGI"). On November 12, 1999, Charter
Communications Holding Company, LLC, ("Charter"), acquired the ownership of FCLP
and the Corporate General Partner.

The financial statements do not give effect to any assets that Enstar Income
Program IV-1, L.P. and Enstar Income Program IV-2, L.P. (the "Venturers" or
"Partnerships") may have outside of their interest in the Venture, nor to any
obligations of the Venturers, including income taxes.

(2) SALES OF ASSETS AND LIQUIDATION BASIS ACCOUNTING

On April 10, 2002, pursuant to an asset purchase agreement dated August 29,
2001, the Venturers completed the sale to Interlink Communications Partners, LLC
of the Venture's Mt. Carmel system for a total sale price of approximately
$4,994,800 (the "Charter Sale"). The Charter Sale is part of a larger
transaction in which the Venturers and five other affiliated partnerships
(which, together with the Venturers are collectively referred to as the "Charter
Selling Partnerships") sold all of their assets used in the operation of their
respective Illinois cable television systems to CCE-1 and two of its affiliates
(also referred to, with CCE-1, as the "Purchasers") for a total cash sale price
of $63,000,000. Each Charter Selling Partnership received the same value per
customer. In addition, the Limited Partners of each of the Charter Selling
Partnerships approved an amendment to their respective partnership agreement to
allow the sale of assets to an affiliate of such partnership's General Partner.
The Purchasers are each indirect subsidiaries of the Corporate General Partner's
ultimate parent company, Charter, and, therefore, are affiliates of the
Partnership and each of the other Charter Selling Partnerships.

In addition, on March 21, 2002, pursuant to an asset purchase agreement dated
September 4, 2001, the Venturers completed the sale of the Poplar Bluff
franchise area with the City of Poplar Bluff, Missouri for a sale price of
approximately $8,000,000 (the "Poplar Bluff Sale"), the Partnership's one-half
share of which is approximately $4,000,000.

The Charter Sale and Poplar Bluff Sale resulted from a sale process actively\
pursued since 1999, when the Corporate General Partner of the Ventures sought
purchasers for all of the cable television systems of the Selling Partnerships,
as well as eight other affiliated limited partnership cable operators of which
the Corporate General Partner is also the general partner. This effort was
undertaken primarily because, based on the Corporate General Partner's
experience in the cable television industry, it was concluded that generally
applicable market conditions and competitive factors were making (and would
increasingly make) it extremely difficult for smaller operators of rural cable
systems (such as the Venture and the other affiliated partnerships) to
effectively compete and be financially successful. This determination was based
on the anticipated cost of electronics and additional equipment to enable the
Joint Venture's systems to operate on a two-way basis with improved technical
capacity, insufficiency of the Venture's cash reserves and cash flows from
operations to finance such expenditures, limited customer growth potential due
to the Venture's systems' rural location, and a general inability of a small
cable system operator such as the Venture to benefit from economies of scale and
the ability to combine and integrate systems that large cable operators have. In
addition, the City of Poplar Bluff sold bonds to raise money to construct a
competing cable system. Although

F-22

ENSTAR IV/PBD SYSTEMS VENTURE

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2002, 2001 AND 2000

limited plant upgrades have been made, the Corporate General Partner projected
that if the Venture made the comprehensive additional upgrades deemed necessary
to enable enhanced and competitive services, particularly two-way capability,
the Venture would not recoup the costs or regain its ability to operate
profitably within the remaining term of its franchises, and as a result, making
these upgrades would not be economically prudent.

On November 8, 2002, the Venturers entered into an asset purchase agreement
providing for the sale of the Venture's remaining cable system in Dexter,
Missouri to Telecommunications Management, LLC (Telecommunications Management)
for a total sale price of approximately $3,148,000, (approximately $825 per
customer acquired). This sale is a part of a larger transaction in which the
Venturers and eight other affiliated partnerships (which, together with the
Venturers are collectively referred to as the "Telecommunications Management
Selling Partnerships") would sell all of their remaining assets used in the
operation of their respective cable systems to Telecommunications Management for
a total cash sale price of approximately $15,341,600 (before adjustments) (the
Telecommunications Management Sale). The Telecommunications Management Sale is
subject to the approval of a majority of the holders of the Partnerships' units
and approval of the holders of the other Telecommunications Management Selling
Partnerships. In addition, the transaction is subject to certain closing
conditions, including regulatory and franchise approvals. In March and April
2003, a majority of the Limited Partners of the Venturers approved the
Telecommunications Management Sale and a plan of liquidation.

On February 6, 2003, the Venture entered into a side letter amending the asset
purchase agreement providing for the sale of its remaining cable system in
Dexter, Missouri to Telecommunications Management. The February 6, 2003 side
letter amends the asset purchase agreement and Deposit Escrow Agreement to
extend the date of the second installment of the deposit and the Outside Closing
Date each by 60 days. On April 7, 2003, the second installment of the escrow
deposit was due and was not received. Management is currently evaluating the
alternatives with respect to this new development.

The Venture finalized its proposed plan of liquidation in December 2002 in
connection with the Partnership's filing of a proxy to obtain the approval of
the Limited Partners for the sale of the Venture's final cable system and the
subsequent liquidation and dissolution of the Venture and the Partnerships. In
March and April 2003, the required number of votes necessary to implement the
plan of liquidation were obtained. As a result, the Venture changed its basis of
accounting to the liquidation basis as of December 31, 2002. The statements of
operations, venturers' capital and cash flows for the year ended December 31,
2002 have been presented on a going concern basis comparable to prior periods.
Upon changing to liquidation basis accounting, the Venture recorded $30,600 of
accrued costs of liquidation in accounts payable and accrued liabilities
representing an estimate of the costs to be incurred after the sale of the final
cable system but prior to dissolution of the Venture. Because management is
unable to develop reliable estimates of future operating results or the ultimate
realizable value of property, plant and equipment due to the current
uncertainties surrounding the final dissolution of the Venture, no adjustments
have been recorded to reflect assets at estimated realizable values or to
reflect estimates of future operating results. These adjustments will be
reflected once a sale is imminent and the net sales proceeds are reasonably
estimable. Accordingly, the assets in the accompanying statement of net assets
in liquidation of the Venture as of December 31, 2002 have been stated at
historical book values. Distributions ultimately made to the Venturers upon
liquidation will differ from the net assets in liquidation recorded in the
accompanying statement of net assets in liquidation as a result of future
operations, the sale proceeds ultimately received by the Venture and adjustments
if any to estimated costs of liquidation.

The Corporate General Partner's intention is to settle the outstanding
obligations of the Venture and terminate the Venture as expeditiously as
possible. Final dissolution of the Venture and related cash distributions to the
partners will occur upon obtaining final resolution of all liquidation issues.

(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

As discussed in Note 2, the financial statements as of December 31, 2002 are
presented on a liquidation basis of accounting. Accordingly, the financial
information in the statement of net assets in liquidation for such period is

F-23

ENSTAR IV/PBD SYSTEMS VENTURE

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2002, 2001 AND 2000

presented on a different basis of accounting than the financial statements for
the years ended December 31, 2002, 2001 and 2000, which are prepared on the
historical cost basis of accounting.

Cash Equivalents

The Venture considers all highly liquid investments with original maturities of
three months or less to be cash equivalents. These investments are carried at
cost which approximates market value.

Property, Plant and Equipment

Costs associated with initial customer installations and the additions of
network equipment are capitalized. The costs of disconnecting service at a
customer's dwelling or reconnecting service to a previously installed dwelling
are charged to operating expense in the period incurred. Costs for repairs and
maintenance are charged to operating expense as incurred, while equipment
replacement and betterments, including replacement of drops, are capitalized.

Cable distribution systems 5-15 years
Vehicles 3 years
Furniture and equipment 5-7 years
Leasehold improvements Shorter of life of lease or useful life of asset

Franchise Cost

Costs incurred in obtaining and renewing cable franchises are deferred and
amortized over the lives of the franchises. Franchise rights acquired through
the purchase of cable systems represent management's estimate of fair value and
are generally amortized using the straight-line method over a period of up to 15
years. This period represents management's best estimate of the useful lives of
the franchises and assumes substantially all of those franchises that expire
during the period will be renewed by the Venture. Amortization expense related
to franchises for the years ended December 31, 2002, 2001 and 2000 was $1,900,
$4,400 and $4,800, respectively.

Deferred Charges

Deferred charges are amortized using the straight-line method over two years.

Long-Lived Assets

The Venture reviews its long-lived assets for impairment whenever events or
circumstances indicate that the carrying amount of an asset may not be
recoverable. If the sum of the expected cash flows, undiscounted and without
interest is less than the carrying amount of the asset, the carrying amount of
the asset is reduced to its estimated fair value and an impairment loss is
recognized.

Revenue Recognition

Cable television revenues from basic and premium services are recognized when
the related services are provided. Advertising revenues are recognized when
commercials are broadcast. 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 system. As of December 31, 2002, 2001 and 2000, no
installation revenues have been deferred, as direct selling costs have exceeded
installation revenues.

Local governmental authorities impose franchise fees on the Venture ranging up
to a federally mandated maximum of 5% of gross revenues. Such fees are collected
on a monthly basis from the Venture's customers and are periodically remitted to
local franchise authorities. Franchise fees collected and paid are reported as
revenues and expenses.

F-24

ENSTAR IV/PBD SYSTEMS VENTURE

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2002, 2001 AND 2000

Income Taxes

The Venture pays no federal income taxes. All of the income, gains, losses,
deductions and credits of the Venture are passed through to the Venturers. The
basis in the Venture's assets and liabilities differs for financial and tax
reporting purposes. As of December 31, 2002, 2001 and 2000, the book basis of
the Venture's net assets exceeds its tax basis by approximately $0, $1,345,000
and $693,600, respectively. The accompanying financial statements, which are
prepared in accordance with accounting principles generally accepted in the
United States, differ from the financial statements prepared for tax purposes
due to the different treatment of various items as specified in the Internal
Revenue Code. The net effect of these accounting differences is that net income
for the year ended December 31, 2002 in the financial statements is
approximately $1,119,400 less than tax income primarily as a result of
differences between tax gain on sale of cable systems versus book gain on sale
of cable systems caused principally by book and tax basis differences on the
assets sold. The net effect of these accounting differences is that net income
for the years ended December 31, 2001 and 2000 in the financial statements is
approximately $724,300 and $42,900 more than tax income or loss for the same
period, respectively, caused principally by timing differences in depreciation
and amortization expense.

Use of Estimates

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States 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. The estimates include useful lives on property, plant and
equipment valuation of long-lived assets and allocated operating costs. Actual
results could differ from those estimates.

(4) JOINT VENTURE MATTERS

The Corporate General Partner, Charter and affiliated companies are responsible
for the day-to-day management of the Venture and its operations.

Under the terms of the general partnership agreement, the Venturers share
equally in profits, losses, allocations and assets. Capital contributions, as
required, are also made equally.

(5) PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment at historical cost consists of the following as of
the dates presented:

Depreciation expense for the years ended December 31, 2002, 2001 and 2000 was
$368,600, $812,700 and $369,200, respectively.

F-25

ENSTAR IV/PBD SYSTEMS VENTURE

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2002, 2001 AND 2000

No adjustments have been made to record assets at estimated realizable value as
required in liquidation basis accounting due to uncertainties surrounding the
sales of the final systems and final dissolution of the Venture.

(6) COMMITMENTS AND CONTINGENCIES

As of December 31, 2002, franchise agreements have expired in two of the
Venture's franchise areas where it serves approximately 1,300 basic customers.
The Venture continues to serve these customers while it is in negotiations to
renew the franchise agreements and continues to pay franchise fees to the local
franchise authorities.

Litigation

The Venture is a party to lawsuits and claims 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 and claims will not have a material
adverse effect on the Venture's financial position or result of operations.

Regulation in the Cable Television Industry

The operation of a cable system is extensively regulated by the Federal
Communications Commission (FCC), some state governments and most local
governments. The FCC has the authority to enforce its regulations through the
imposition of substantial fines, the issuance of cease and desist orders and/or
the imposition of other administrative sanctions, such as the revocation of FCC
licenses needed to operate certain transmission facilities used in connection
with cable operations. The 1996 Telecommunications Act (the "1996 Telecom Act")
altered the regulatory structure governing the nation's communications
providers. It removed barriers to competition in both the cable television
market and the local telephone market. Among other things, it reduced the scope
of cable rate regulation and encouraged 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 required the FCC to undertake a host of implementing
rulemakings. Moreover, Congress and the FCC have frequently revisited the
subject of cable regulation. Future legislative and regulatory changes could
adversely affect the Venture's operations.

Insurance

Insurance coverage is maintained for all of the cable television properties
owned or managed by Charter to cover damage to cable distribution systems,
customer connections and against business interruptions resulting from such
damage. This coverage is subject to a significant annual deductible which
applies to all of the cable television properties owned or managed by Charter,
including those of the Venture.

(7) EMPLOYEE BENEFIT PLAN

The Venture participates in a cash or deferred profit sharing plan (the "Profit
Sharing Plan") sponsored by a subsidiary of the Corporate General Partner, which
covers substantially all of its employees. The Profit Sharing Plan provides that
each participant may elect to make a contribution in an amount up to 15% of the
participant's annual compensation which otherwise would have been payable to the
participant as salary. Effective January 1, 1999, the Profit Sharing Plan was
amended, whereby the Venture would make an employer contribution equal to 100%
of the first 3% and 50% of the next 2% of the participants' contributions. A
contribution of $2,800, $2,100 and $2,300 was made during 2002, 2001 and 2000,
respectively.

(8) TRANSACTIONS WITH THE GENERAL PARTNERS AND AFFILIATES

The Venture has a management and service agreement (the "Management Agreement")
with Enstar Cable Corporation (the "Manager"), a wholly owned subsidiary of the
Corporate General Partner, pursuant to which the Venture pays a monthly
management fee of 5% of revenues to the Manager, excluding revenues from the
sale of

F-26

ENSTAR IV/PBD SYSTEMS VENTURE

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2002, 2001 AND 2000

cable television systems or franchises. Management fee expense approximated
$107,600, $254,400 and $267,500 for the years ended December 31, 2002, 2001 and
2000, respectively. Management fees are non-interest bearing.

In addition to the monthly management fee, the Management Agreement also
provides that the Venture reimburse the Manager for direct expenses incurred on
behalf of the Venture and for the Venture's allocable share of operational costs
associated with services provided by the Manager. Additionally, Charter and its
affiliates provide other management and operational services for the Venture.
These expenses are charged to the properties served based primarily on the
Venture's allocable share of the operational costs associated with the services
provided. The total amount charged to the Venture for these services and direct
expenses approximated $217,100, $908,000 and $750,800 for the years ended
December 31, 2002, 2001 and 2000, respectively.

Substantially all programming services are purchased through Charter. Charter
charges the Venture for these costs based on its costs. The Venture recorded
programming fee expense of $589,400, $1,184,700 and $1,064,100 for the years
ended December 31, 2002, 2001 and 2000, respectively. Programming fees are
included in service costs in the accompanying statements of operations.

As disclosed in Charter Communications, Inc.'s Annual Report on Form 10-K, the
parent of the Corporate General Partner and our Manager is the defendant in
twenty-two class action and shareholder lawsuits and is the subject of a grand
jury investigation being conducted by the United States Attorney's Office for
the Eastern District of Missouri and an SEC investigation. Charter is unable to
predict the outcome of these lawsuits and government investigations. An
unfavorable outcome of these matters could have a material adverse effect on
Charter's results of operations and financial condition which could in turn have
a material adverse effect on the Venture.

(9) RECENTLY ISSUED ACCOUNTING STANDARDS

Statement of Financial Accounting Standards (SFAS) No. 143, "Accounting for
Asset Retirement Obligations," addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. SFAS No. 143 is effective for fiscal years
beginning after June 15, 2002. The Venture adopted SFAS No. 143 on January 1,
2003. The adoption of SFAS No. 143 did not have a material impact on the
Venture's financial condition or results of operations.

In April 2002, the Financial Accounting Standards Board issued SFAS No. 145,
"Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement
No. 13, and Technical Corrections." SFAS No. 145 provides for the rescission of
several previously issued accounting standards, new accounting guidance for the
accounting for certain lease modifications and various technical corrections
that are not substantive in nature to existing pronouncements. SFAS No. 145 will
be adopted by the Venture beginning January 1, 2003, except for the provisions
relating to the amendment of SFAS No. 13, which will be adopted for transactions
occurring subsequent to May 15, 2002. Adoption of SFAS No. 145 did not have a
material impact on the financial statements of the Venture.

In June 2002, the Financial Accounting Standards Board issued SFAS No. 146,
"Accounting for Costs Associated with Exit or Disposal Activities." SFAS No. 146
addresses financial accounting and reporting for costs associated with exit or
disposal activities and nullifies Emerging Issues Task Force Issue No. 94-3,
"Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity (including Certain Costs Incurred in a Restructuring)." SFAS
146 requires that a liability for costs associated with an exit or disposal
activity be recognized when the liability is incurred rather than when a company
commits to such an activity and also establishes fair value as the objective for
initial measurement of the liability. SFAS No. 146 will be adopted by the
Venture for exit or disposal activities that are initiated after December 31,
2002. Adoption of SFAS No. 146 will not have a material impact on the financial
statements of the Venture.

In December 2002, the Financial Accounting Standards Board issued SFAS No. 148,
"Accounting for Stock-Based Compensation - Transition and Disclosure." SFAS No.
148 amends SFAS No. 123 to provide alternative methods of transition for a
voluntary change to the fair value based method of accounting for stock-based
employee compensation. In addition, it amends the disclosure requirements of
SFAS No. 123 to require prominent disclosures in both annual

F-27

ENSTAR IV/PBD SYSTEMS VENTURE

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2002, 2001 AND 2000

and interim financial statements about the method of accounting for stock-based
compensation and the effect of the method used on reported results. Adoption of
SFAS No. 148 did not have a material impact on the financial statements of the
Venture.

F-28

INDEPENDENT AUDITORS' REPORT

To the Venturers of
Enstar Cable of Macoupin County:

We have audited the accompanying statement of net assets in liquidation of
Enstar Cable of Macoupin County (a Georgia general partnership) as of December
31, 2002, and the related statement of changes in net assets in liquidation for
the period from April 11, 2002 to December 31, 2002 (see Note 2). We have also
audited the statements of operations, venturers' capital and cash flows for the
period from January 1, 2002 to April 10, 2002. These financial statements are
the responsibility of the Venture's management. Our responsibility is to express
an opinion on these financial statements based on our audit. The 2001 and 2000
financial statements were audited by other auditors who have ceased operations.
Those auditors expressed an unqualified opinion on those financial statements in
their report dated March 29, 2002.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the 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.

As described in Note 2 to the financial statements, as a result of the sale of
the Venture's systems, the Venture has changed its basis of accounting from the
going concern basis to a liquidation basis as of April 10, 2002.

In our opinion, the 2002 financial statements referred to above present fairly,
in all material respects, the net assets in liquidation of Enstar Cable of
Macoupin County as of December 31, 2002, the changes in net assets in
liquidation for the period from April 11, 2002 to December 31, 2002, and the
results of its operations and its cash flows for the period from January 1, 2002
to April 10, 2002 in conformity with accounting principles generally accepted in
the United States of America applied on the bases described in the preceding
paragraph.

/s/ KPMG, LLP

St. Louis, Missouri
April 11, 2003

F-29

THIS IS A COPY OF A REPORT PREVIOUSLY ISSUED BY ARTHUR ANDERSEN LLP AND HAS NOT
BEEN REISSUED BY ARTHUR ANDERSEN LLP

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Venturers of
Enstar Cable of Macoupin County:

We have audited the accompanying balance sheets of Enstar Cable of Macoupin
County (a Georgia general partnership) as of December 31, 2001 and 2000, and the
related statements of operations, venturers' capital and cash flows for the
years then ended. These financial statements are the responsibility of the
Venture's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our 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 Enstar Cable of Macoupin County
as of December 31, 2001 and 2000, and the results of its operations and its cash
flows for the years then ended in conformity with accounting principles
generally accepted in the United States.

/s/ ARTHUR ANDERSEN LLP

St. Louis, Missouri,
March 29, 2002

F-30

ENSTAR CABLE OF MACOUPIN COUNTY

STATEMENT OF NET ASSETS IN LIQUIDATION
(SEE NOTE 2)

AS OF DECEMBER 31, 2002

ASSETS:
Cash and cash equivalents $ 171,700
------------

Total assets 171,700
------------

LIABILITIES:
Due to affiliates 45,700
------------

Total liabilities 45,700
------------

NET ASSETS IN LIQUIDATION:
Enstar Income Program IV-1, L.P. 42,000
Enstar Income Program IV-2, L.P. 42,000
Enstar Income Program IV-3, L.P. 42,000
------------

$ 126,000
============

See accompanying notes to financial statements.

F-31

ENSTAR CABLE OF MACOUPIN COUNTY

BALANCE SHEET

AS OF DECEMBER 31, 2001

See accompanying notes to financial statements.

F-32

ENSTAR CABLE OF MACOUPIN COUNTY

STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION

FOR THE PERIOD FROM APRIL 11, 2002 TO DECEMBER 31, 2002

Additions:
Reduction in accrued expenses $ 23,000
Interest income 50,500
-----------

73,500

Deductions:
Distribution to joint venturers 9,537,300
-----------

9,537,300

Net decrease in net assets in liquidation (9,463,800)

NET ASSETS IN LIQUIDATION, beginning of period 9,589,800
-----------

NET ASSETS IN LIQUIDATION, end of period $ 126,000
===========

See accompanying notes to financial statements.

F-33

ENSTAR CABLE OF MACOUPIN COUNTY

STATEMENTS OF OPERATIONS

See accompanying notes to financial statements.

F-34

ENSTAR CABLE OF MACOUPIN COUNTY

STATEMENTS OF VENTURERS' CAPITAL

FOR THE PERIOD FROM JANUARY 1, 2002 TO APRIL 10, 2002 AND
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000

See accompanying notes to financial statements.

F-35

ENSTAR CABLE OF MACOUPIN COUNTY

STATEMENTS OF CASH FLOWS

See accompanying notes to financial statements.

F-36

ENSTAR CABLE OF MACOUPIN COUNTY

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2002 AND 2001

(1) ORGANIZATION

Enstar Cable of Macoupin County, a Georgia general partnership (the "Venture"),
owns and operates cable television systems in small to medium-sized communities
in Illinois.

The financial statements do not give effect to any assets that Enstar Income
Program IV-1, L.P., Enstar Income Program IV-2, L.P. and Enstar Income Program
IV-3, L.P. (the "Venturers" or "Partnerships") may have outside of their
interest in the Venture, nor to any obligations of the Venturers, including
income taxes.

(2) SALES OF ASSETS AND LIQUIDATION BASIS ACCOUNTING

On April 10, 2002, pursuant to an asset purchase agreement dated August 29,
2001, the Venturers completed the sale of the Venture's systems to Charter
Communications Entertainment I, LLC ("CCE-1"), an affiliate of the Corporate
General Partner and an indirect subsidiary of Charter Communications, Inc.
("Charter"), for a total sale price of approximately $9,076,800 (the "Charter
Sale"). The Charter Sale is part of a larger transaction in which the Venturers
and three other affiliated partnerships (which, together are collectively
referred to as the "Selling Partnerships") sold all of their assets used in the
operation of their respective Illinois cable television systems to CCE-1 and two
of its affiliates (also referred to, with CCE-1, as the "Purchasers") for a
total cash sale price of $63,000,000. Each Selling Partnership received the same
value per customer. In addition, the Limited Partners of each of the Selling
Partnerships approved an amendment to their respective partnership agreement to
allow the sale of assets to an affiliate of such partnership's General Partner.
The Purchasers are each indirect subsidiaries of the Corporate General Partner's
ultimate parent company, Charter, and, therefore, are affiliates of the
Venturers and each of the other Selling Partnerships.

The Charter Sale resulted from a sale process actively pursued since 1999, when
the Corporate General Partner of the Venturers sought purchasers for all of the
cable television systems of the Selling Partnerships, as well as eight other,
affiliated limited partnership cable operators of which the Corporate General
Partner is also the general partner. This effort was undertaken primarily
because, based on the Corporate General Partner's experience in the cable
television industry, it was concluded that generally applicable market
conditions and competitive factors were making (and would increasingly make) it
extremely difficult for smaller operators of rural cable systems (such as the
Venture and the other affiliated partnerships) to effectively compete and be
financially successful. This determination was based on the anticipated cost of
electronics and additional equipment to enable the Venture's systems to operate
on a two-way basis with improved technical capacity, insufficiency of Venture
cash reserves and cash flows from operations to finance such expenditures,
limited customer growth potential due to the Venture's systems' rural location,
and a general inability of a small cable system operator such as the Venture to
benefit from economies of scale and the ability to combine and integrate systems
that large cable operators have. Although limited plant upgrades have been made,
the Corporate General Partner projected that if the Venture made the
comprehensive additional upgrades deemed necessary to enable enhanced and
competitive services, particularly two-way capability, the Venture would not
recoup the costs or regain its ability to operate profitably within the
remaining term of its franchises, and as a result, making these upgrades would
not be economically prudent.

As a result of the sale of the Venture's systems, the Venture changed its basis
of accounting to the liquidation basis on April 10, 2002. Accordingly, the
assets in the accompanying statement of net assets in liquidation as of December
31, 2002 are stated at estimated realizable values and the liabilities are
reflected at estimated settlement amounts. There were no significant adjustments
recorded upon changing to liquidation basis accounting. Net assets in
liquidation as of December 31, 2002 represent the estimated distribution to the
Venturers. In January 2003, all remaining assets of the Venture were distributed
including a final distribution of $126,000 made to the Venturers.

The Corporate General Partner's intention is to settle the outstanding
obligations of the Venture and terminate the Venture as expeditiously as
possible. Final dissolution of the Venture and related cash distributions to the
Venturers will occur upon obtaining final resolution of all liquidation issues.

F-37

ENSTAR CABLE OF MACOUPIN COUNTY

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2002 AND 2001

(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

As discussed in Note 2, the financial statements as of December 31, 2002 are
presented on a liquidation basis of accounting. Accordingly, the financial
information in the statement of net assets in liquidation for such period is
presented on a different basis of accounting than the financial statements for
the years ended December 31, 2002, 2001 and 2000, which are prepared on the
historical cost basis of accounting.

Cash Equivalents

The Venture considers all highly liquid investments with original maturities
of three months or less to be cash equivalents. These investments are carried at
cost which approximates market value.

Property, Plant and Equipment

Costs associated with initial customer installations and the additions of
network are capitalized. The costs of disconnecting service at a customer's
dwelling or reconnecting service to a previously installed dwelling are charged
to operating expense in the period incurred. Costs for repairs and maintenance
are charged to operating expense as incurred, while equipment replacement and
betterments, including replacement of drops, are capitalized.

Cable distribution systems 5-15 years
Vehicles 3 years
Furniture and equipment 5-7 years
Leasehold improvements Shorter of life of lease or useful life of
asset

Franchise Cost

Costs incurred in obtaining and renewing cable franchises are deferred and
amortized over the lives of the franchises. 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 up to 15 years. This period represents management's best estimate of the
useful lives of the franchises and assumes substantially all of those franchises
that expire during the period will be renewed by the Venture. Amortization
expense related to franchises for the period from January 1, 2002 to April 10,
2002 and years ended December 31, 2001 and 2000 was $3,100, $11,500 and $11,000,
respectively.

Deferred Charges

Deferred charges are amortized using the straight-line method over two years.

Long-Lived Assets

The Venture reviews its long-lived assets for impairment whenever events or
circumstances indicate that the carrying amount of an asset may not be
recoverable. If the sum of the expected cash flows, undiscounted and without
interest is less than the carrying amount of the asset, the carrying amount of
the asset is reduced to its estimated fair value and an impairment loss is
recognized.

Revenue Recognition

Cable television revenues from basic and premium services are recognized when
the related services are provided. Advertising revenues are recognized when
commercials are broadcast. 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 system. As of December 31, 2002, 2001 and 2000, no
installation revenues have been deferred, as direct selling costs have exceeded
installation revenues.

F-38

ENSTAR CABLE OF MACOUPIN COUNTY

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2002 AND 2001

Local governmental authorities impose franchise fees on the Venture ranging up
to a federally mandated maximum of 5.0% of gross revenues. Such fees are
collected on a monthly basis from the Venture's customers and are periodically
remitted to local franchise authorities. Franchise fees collected and paid are
reported as revenues and expenses.

Income Taxes

The Venture pays no federal income taxes. All of the income, gains, losses,
deductions and credits of the Venture are passed through to its Venturers. The
basis in the Venture's assets and liabilities differs for financial and tax
reporting purposes. As of December 31, 2002, 2001 and 2000, the book basis of
the Venture's net assets exceeds its tax basis by approximately $0, $893,700 and
$761,400, respectively. The accompanying financial statements, which are
prepared in accordance with accounting principles generally accepted in the
United States, differ from the financial statements prepared for tax purposes
due to the different treatment of various items as specified in the Internal
Revenue Code. The net effect of these accounting differences is that net income
for the year ended December 31, 2002 in the financial statements is
approximately $880,100 less than tax income primarily as a result of differences
between tax gain on sale of cable systems versus book gain on sale of cable
systems caused principally by book and tax basis differences on the assets sold.
The net effect of these accounting differences is that net income for the years
ended December 31, 2001 and 2000 in the financial statements is approximately
$132,300 and $84,500 more than tax income for the same period, respectively,
caused principally by timing differences in depreciation and amortization
expense.

Use of Estimates

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States 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. The estimates include useful lives of property, plant and
equipment, valuation of long-lived assets and allocated operating costs. Actual
results could differ from those estimates.

(4) JOINT VENTURE MATTERS

The Venture was formed under the terms of a joint venture agreement effective
December 30, 1987, among the Venturers, three limited partnerships sponsored by
Enstar Communications Corporation (the "Corporate General Partner"). The Venture
was formed to pool the resources of the three limited partnerships to acquire,
own, operate, and dispose of certain cable television systems. In 1988, the
Venture acquired two cable television systems in Illinois.

On September 30, 1988, Falcon Cablevision, a California limited partnership,
purchased all of the outstanding capital stock of the Corporate General Partner.
On September 30, 1998, Falcon Holding Group, L.P. ("FHGLP") acquired ownership
of the Corporate General Partner from Falcon Cablevision. Simultaneously with
the closing of that transaction, FHGLP contributed all of its existing cable
television system operations to Falcon Communications, L.P. ("FCLP"), a
California limited partnership and successor to FHGLP. FHGLP served as the
managing partner of FCLP, and the General Partner of FHGLP was Falcon Holding
Group, Inc., a California corporation ("FHGI"). On November 12, 1999, Charter
Communications Holding Company, LLC, ("Charter"), acquired the ownership of FCLP
and the Corporate General Partner. The Corporate General Partner, Charter and
affiliated companies are responsible for the day-to-day management of the
Venture and its operations.

Under the terms of the joint venture agreement, the Venturers share equally in
profits, losses, allocations, and assets. Capital contributions, as required,
are also made equally.

F-38

ENSTAR CABLE OF MACOUPIN COUNTY

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2002 AND 2001

(5) PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment at historical cost consists of the following as of
December 31, 2001:

Cable distribution systems $ 4,982,300
Land and improvements 26,300
Vehicles, furniture and equipment 223,000
-----------

5,231,600

Less: accumulated depreciation (3,033,100)
-----------

$ 2,198,500
===========

Depreciation expense for the period from January 1, 2002 to April 10, 2002 and
the years ended December 31, 2001 and 2000, was $83,500, $214,200 and $210,800,
respectively.

(6) COMMITMENTS AND CONTINGENCIES

Litigation

The Venture is a party to lawsuits and claims 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 and claims will not have a material
adverse effect on the Venture's financial position or results of operations.

Regulation in the Cable Television Industry

The operation of a cable system is extensively regulated by the Federal
Communications Commission (FCC), some state governments and most local
governments. The FCC has the authority to enforce its regulations through the
imposition of substantial fines, the issuance of cease and desist orders and/or
the imposition of other administrative sanctions, such as the revocation of FCC
licenses needed to operate certain transmission facilities used in connection
with cable operations. The 1996 Telecommunications Act (the "1996 Telecom Act")
altered the regulatory structure governing the nation's communications
providers. It removed barriers to competition in both the cable television
market and the local telephone market. Among other things, it reduced the scope
of cable rate regulation and encouraged 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 required the FCC to undertake a host of implementing
rulemakings. Moreover, Congress and the FCC have frequently revisited the
subject of cable regulation. Future legislative and regulatory changes could
adversely affect the Venture's operations.

Insurance

Insurance coverage is maintained for all of the cable television properties
owned or managed by Charter to cover damage to cable distribution systems,
customer connections and against business interruptions resulting from such
damage. This coverage is subject to a significant annual deductible which
applies to all of the cable television properties owned or managed by Charter,
including those of the Venture.

(7) EMPLOYEE BENEFIT PLAN

The Venture participated in a cash or deferred profit sharing plan (the "Profit
Sharing Plan") sponsored by a subsidiary of the Corporate General Partner, which
covers substantially all of its employees. The Profit Sharing Plan provides that
each participant may elect to make a contribution in an amount up to 15% of the
participant's annual compensation which otherwise would have been payable to the
participant as salary. Effective January 1,

F-40

ENSTAR CABLE OF MACOUPIN COUNTY

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2002 AND 2001

1999, the Profit Sharing Plan was amended, whereby the Venture would make an
employer contribution equal to 100% of the first 3% and 50% of the next 2% of
the participants' contributions. A contribution of $200, $300 and $0 was made
during 2002, 2001 and 2000, respectively.

(8) TRANSACTIONS WITH THE GENERAL PARTNERS AND AFFILIATES

The Venture has a management and service agreement (the "Management Agreement")
with Enstar Cable Corporation (the "Manager"), a wholly owned subsidiary of the
Corporate General Partner, pursuant to which the Venture pays a monthly
management fee of 4% of gross revenues to the Manager. Management fee expense
for the period from January 1, 2002 to April 10, 2002 and the years ended
December 31, 2001 and 2000, approximated $21,000, $75,100 and $79,200,
respectively. In addition, the Venture is also required to distribute to the
Corporate General Partner an amount equal to 1% of its gross revenues
representing its interest as the Corporate General Partner. Management fee
expense for the period from January 1, 2002 to April 10, 2002 and the years
ended December 31, 2001 and 2000, approximated $5,300, $18,800 and $19,800,
respectively. Management fees are non-interest bearing.

In addition to the monthly management fee, the Management Agreement also
provides that the Venture reimburse the Manager for direct expenses incurred on
behalf of the Venture and for the Venture's allocable share of operational costs
associated with services provided by the Manager. Additionally, Charter and its
affiliates provide other management and operational services for the Venture.
These expenses are charged to the properties served based primarily on the
Venture's allocable share of operational costs associated with the services
provided. The total amounts charged to the Venture for these services and direct
expenses approximated $63,900, $206,200 and $214,900 for the period from January
1, 2002 to April 10, 2002 and the years ended December 31, 2001 and 2000,
respectively.

Substantially all programming services are purchased through Charter. Charter
charges the Venture for these costs based on its costs. Programming fee expense
was $119,500, $400,500 and $401,500 for the period from January 1, 2002 to April
10, 2002 and the years ended December 31, 2001 and 2000, respectively.
Programming fees are included in service costs in the accompanying statements of
operations.

(9) RECENTLY ISSUED ACCOUNTING STANDARDS

Statement of Financial Accounting Standards (SFAS) No. 143, "Accounting for
Asset Retirement Obligations," addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. SFAS No. 143 is effective for fiscal years
beginning after June 15, 2002. The Venture adopted SFAS No. 143 on January 1,
2003. The adoption of SFAS No. 143 did not have a material impact on the
Venture's financial condition or results of operations.

In April 2002, the Financial Accounting Standards Board issued SFAS No. 145,
"Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement
No. 13, and Technical Corrections." SFAS No. 145 provides for the rescission of
several previously issued accounting standards, new accounting guidance for the
accounting for certain lease modifications and various technical corrections
that are not substantive in nature to existing pronouncements. SFAS No. 145 will
be adopted by the Venture beginning January 1, 2003, except for the provisions
relating to the amendment of SFAS No. 13, which will be adopted for transactions
occurring subsequent to May 15, 2002. Adoption of SFAS No. 145 did not have a
material impact on the financial statements of the Venture.

In June 2002, the Financial Accounting Standards Board issued SFAS No. 146,
"Accounting for Costs Associated with Exit or Disposal Activities." SFAS No. 146
addresses financial accounting and reporting for costs associated with exit or
disposal activities and nullifies Emerging Issues Task Force Issue No. 94-3,
"Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity (including Certain Costs Incurred in a Restructuring)." SFAS
146 requires that a liability for costs associated with an exit or disposal
activity be recognized when the liability is incurred rather than when a company
commits to such an activity and also establishes fair value as the objective for
initial measurement of the liability. SFAS No. 146 will be adopted by the

F-41

ENSTAR CABLE OF MACOUPIN COUNTY

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2002 AND 2001

Venture for exit or disposal activities that are initiated after December 31,
2002. Adoption of SFAS No. 146 will not have a material impact on the financial
statements of the Venture.

In December 2002, the Financial Accounting Standards Board issued SFAS No. 148,
"Accounting for Stock-Based Compensation - Transition and Disclosure." SFAS No.
148 amends SFAS No. 123 to provide alternative methods of transition for a
voluntary change to the fair value based method of accounting for stock-based
employee compensation. In addition, it amends the disclosure requirements of
SFAS No. 123 to require prominent disclosures in both annual and interim
financial statements about the method of accounting for stock-based compensation
and the effect of the method used on reported results. Adoption of SFAS No. 148
did not have a material impact on the financial statements of the Venture.

F-42

EXHIBIT INDEX

E-1

10.1 Amended and Restated Partnership Agreement of Enstar IV/PBD
Systems Venture, as of December 15, 1986. (Incorporated by
reference to the exhibits to the registrant's Annual Report on
Form 10-K, File No. 0-15705 for the fiscal year ended December
31, 1986.)

10.2 Management Agreement between Enstar IV/PBD Systems Venture and
Enstar Cable Corporation. (Incorporated by reference to the
exhibits to the registrant's Annual Report on Form 10-K, File
No. 0-15705 for the fiscal year ended December 31, 1986.)

10.3 Management Agreement between Enstar Income Program IV-1, L.P.
and Enstar Cable Corporation. (Incorporated by reference to
the exhibits to the registrant's Annual Report on Form 10-K,
File No. 0-15705 for the fiscal year ended December 31, 1986.)

10.4 Partnership Agreement of Enstar Cable of Macoupin County,
dated as of December 30, 1987. (Incorporated by reference to
the exhibits to the registrant's Annual Report on Form 10-K,
File No. 0-15705 for the fiscal year ended December 31, 1987.)

10.5 Amended and Restated Partnership Agreement of Enstar Cable of
Macoupin County, as of October 1, 1993. (Incorporated by
reference to the exhibits to the registrant's Quarterly Report
on Form 10-Q, File No. 0-15705 for the quarter ended March 31,
1995.)

10.6 Management Agreement between Enstar Cable of Macoupin County
and Enstar Cable Corporation. (Incorporated by reference to
the exhibits to the registrant's Annual Report on Form 10-K,
File No. 0-15705 for the fiscal year ended December 31, 1988.)

10.7 Management Services Agreement between Enstar Cable Corporation
and Falcon Communications, L.P. dated as of September 30, 1998
(Incorporated by reference to the exhibits to the Annual
Report on Form 10-K of Enstar Income Program II-1, L.P., File
No. 000-14508 for the fiscal year ended December 31, 2001.)

10.8 Service agreement between Enstar Communications Corporation,
Enstar Cable Corporation and Falcon Communications, L.P. dated
as of September 30, 1998 (Incorporated by reference to the
exhibits to the Annual Report on Form 10-K of Enstar Income
Program II-1, L.P., File No. 000-14508 for the fiscal year
ended December 31, 2001.)

10.9 Consulting Agreement between Enstar Communications Corporation
and Falcon Communications, L.P. dated as of September 30, 1998
(Incorporated by reference to the exhibits to the Annual
Report on Form 10-K of Enstar Income Program II-1, L.P., File
No. 000-14508 for the fiscal year ended December 31, 2001.)

10.10a Resolution No. 1443 extending the cable television franchise
for the City of Poplar Bluff, MO.

10.10b Franchise Ordinance and related documents thereto granting a
non-exclusive community antenna television system franchise
for the City of Poplar Bluff, MO. (Incorporated by reference
to the exhibits to the registrant's Annual Report on Form10-K,
File No. 0-15705 for the fiscal year ended December 31, 1988.)

10.11 Franchise Ordinance and related documents thereto granting a
non-exclusive community antenna television system franchise
for the City of Dexter, MO. (Incorporated by reference to the
exhibits to the registrant's Annual Report on Form 10-K, File
No. 0-15705 for the fiscal year ended December 31, 1988.)

10.12 Franchise Ordinance and related documents thereto granting a
non-exclusive community antenna television system franchise
for the City of Mt. Carmel, IL.

10.13 Franchise Ordinance and related documents thereto granting a
non-exclusive community antenna television system franchise
for the City of Auburn, IL. (Incorporated by reference to the
exhibits to the registrant's Quarterly Report on Form 10-Q,
File No. 0-15705 for the quarter ended September 30, 1997.)

10.14 Franchise Ordinance granting a non-exclusive community antenna
television system franchise for the City of Carlinville, IL.
(Incorporated by reference to the exhibits to the registrant's
Annual Report on Form 10-K, File No. 0-15705 for the fiscal
year ended December 31, 1998.)

21.1 Subsidiaries: Enstar IV/PBD Systems Venture and Enstar Cable
of Macoupin County.

E-2

14.1 Code of Conduct adopted January 28, 2003. (Incorporated by
reference to the exhibits to the Registrant's Annual Report on
Form 10-K, File No. 000-13333 for the fiscal year ended
December 31, 2002.)

** 99.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Chief Administrative Officer).

** 99.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Principal Financial Officer).

** filed herewith

E-3