Registration Number 33-49598
Rule 424 (b)(3)

PROSPECTUS SUPPLEMENT

Dated: March 31, 1998

to the Prospectus, Dated July 17, 1997

UNITED ARTISTS THEATRE CIRCUIT, INC.

OSCAR I CORPORATION

Form of prospectus is attached hereto

UNITED STATES SECURITIES AND EXCHANGE

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

(Mark One) 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, 1997 Commission file number 33-49598
333-1024

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

For the transition period from ____________ to ________________

UNITED ARTISTS THEATRE CIRCUIT, INC.
(exact name of registrant as specified in charter)

Maryland 13-1424080
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

9110 E. Nichols Avenue, Suite 200
Englewood, CO 80112
- --------------------------------- -----
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code (303) 792-3600

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

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

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

State the aggregate market value of the voting stock held by non-affiliates of
the registrant. N/A.

The number of shares outstanding of $1.00 par value common stock at March 20,
1998 was 100 shares.

UNITED ARTISTS THEATRE CIRCUIT, INC.

Annual Report on Form 10-K

December 31, 1997

Table of Contents
-----------------

PART I

Page
----

Item 1 Business 3

Item 2 Properties 13

Item 3 Legal Proceedings 13

Item 4 Submission of Matters to a Vote of Security Holder 13

PART II

Item 5 Market for Registrant's Common Equity and
Related Stockholder Matters 14

Item 6 Selected Financial Data 14

Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations 15

Item 8 Financial Statements and Supplementary Data 24

Item 9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 24

PART III

Item 10 Directors and Executive Officers of the Registrant 61

Item 11 Executive Compensation 62

Item 12 Security Ownership of Certain Beneficial Owners
and Management 66

Item 13 Certain Relationships and Related Transactions 68

PART IV

Item 14 Exhibits, Financial Statement Schedules, and
Reports on Form 8-K 69

Signatures

CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS

CERTAIN OF THE MATTERS DISCUSSED IN THIS FORM 10-K MAY CONSTITUTE FORWARD-
LOOKING STATEMENTS FOR PURPOSES OF THE SECURITIES ACT AND THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"). SUCH FORWARD-LOOKING
STATEMENTS INVOLVE UNCERTAINTIES AND OTHER FACTORS AND THE ACTUAL RESULTS AND
PERFORMANCE OF THE COMPANY MAY BE MATERIALLY DIFFERENT FROM FUTURE RESULTS OR
PERFORMANCE EXPRESSED OR IMPLIED BY SUCH STATEMENTS. CAUTIONARY STATEMENTS
REGARDING THE RISKS ASSOCIATED WITH SUCH FORWARD-LOOKING STATEMENTS INCLUDE,
WITHOUT LIMITATION, THOSE STATEMENTS INCLUDED UNDER "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND "BUSINESS."
CERTAIN OF SUCH RISKS AND UNCERTAINTIES RELATE TO THE HIGHLY LEVERAGED NATURE OF
THE COMPANY, THE RESTRICTIONS IMPOSED ON THE COMPANY BY CERTAIN INDEBTEDNESS,
THE SENSITIVITY OF THE COMPANY TO ADVERSE TRENDS IN THE GENERAL ECONOMY, THE
HIGH DEGREE OF COMPETITION IN INDUSTRY, THE VOLATILITY OF THE COMPANY'S
QUARTERLY RESULTS AND THE COMPANY'S SEASONALITY, THE DEPENDENCE OF THE COMPANY
ON FILMS AND DISTRIBUTORS ON ITS ABILITY TO OBTAIN POPULAR MOTION PICTURES, THE
CONTROL OF THE COMPANY BY THE MERRILL LYNCH CAPITAL PARTNERS, INC. ("MLCP") AND
THE DEPENDENCE OF THE COMPANY ON KEY PERSONNEL, AMONG OTHERS.

ALL WRITTEN OR ORAL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO THE COMPANY ARE
EXPRESSLY QUALIFIED BY THE FOREGOING CAUTIONARY STATEMENTS.

PART I

Item 1. Business
- ------- --------

(a) General Development of Business
-------------------------------

United Artists Theatre Circuit, Inc. ("UATC" or the "Company"), a Maryland
corporation, was initially founded in 1926 by shareholders including Mary
Pickford, Douglas Fairbanks, Sam Goldwyn and Joe Schenck. From its founding
through its first 40 years, the Company developed its theatre operations. In
the early 1960's, the Company, through a separate subsidiary, invested in the
cable television business. In 1986, an indirect subsidiary of Tele-
Communications, Inc. ("TCI") acquired a controlling interest in the Company's
then parent company, United Artists Communications, Inc. ("UACI"), which owned
both the theatre and cable businesses. UACI subsequently changed its name in
1989 to United Artists Entertainment Company ("UAE") in conjunction with the
acquisition of United Cable Television Corporation. In December 1991, TCI's
indirect subsidiary acquired the remaining outstanding shares of UAE.

On May 12, 1992, an investment fund managed by MLCP and certain institutional
investors (the "Non-Management Investors"), certain executives of UAE and
certain members of the Company's management formed OSCAR I Corporation ("OSCAR
I") to acquire all of the outstanding shares of capital stock of the Company
from TCI (the "Acquisition"). The aggregate purchase price for the Acquisition,
including liabilities assumed, was approximately $543.8 million.

Simultaneously with the Acquisition, the Non-Management Investors formed OSCAR
II Corporation ("OSCAR II"), a Delaware corporation, which separately acquired
from an affiliate of TCI all of the outstanding capital stock of United Artists
Realty Company ("UAR"), a Delaware corporation. UAR and its subsidiaries,
United Artists Properties I Corp. ("Prop I") and United Artists Properties II
Corp. ("Prop II"), were the owners and lessors of certain operating theatre
properties leased to and operated by the Company and its subsidiaries. Certain
mortgage debt of UAR, Prop I and Prop II (approximately $142.3 million) which
was secured by their theatre properties remained outstanding after the
acquisition of UAR by OSCAR II.

On February 28, 1995, OSCAR II was merged into OSCAR I through a one-for-one
share exchange. As a result of this merger OSCAR II ceased to exist and OSCAR I
became the parent company of both UATC and UAR.

During December 1995, as part of a sale and leaseback transaction completed by
the Company, ten theatres owned by the Company, 17 theatres owned by Prop II and
four theatres being developed by the Company were sold and leased back to the
Company (the "1995 Sale and Leaseback") for approximately $47.1 million.
Simultaneously with the 1995 Sale and Leaseback transaction, Prop II contributed
to the Company its remaining 11 theatres and the equipment from the Prop II
theatres which were sold. That contribution was accounted for in a manner
similar to a pooling of interests.

As a result of the transactions described above, the corporate structure of
OSCAR I and UATC are as follows:

-------
OSCAR I
-------
---------------
--- ----
UAR UATC
--- ----
Affiliate Leases
------
PROP I
------

(b) Narrative Description of Business
---------------------------------

The Company is a leading motion picture exhibitor in North America and, in the
United States, operates 2,165 screens at 335 theatres located in 25 states. The
Company licenses films from all major and substantially all independent film
distributors and derives revenues primarily from theatre admissions and
concession sales. Through its geographically diverse theatre locations, the
Company operates screens in seven of the ten largest demographic market areas
("DMAs") in the United States and approximately 50.0% of the Company's screens
are located in the top 20 DMAs. In addition, approximately 27.5% of the
Company's screens (596 screens) have been constructed since January 1, 1992.
The Company believes that it is the largest single exhibitor, based on number of
screens, in many of its core areas of operation and that the location of its
theatres represents a competitive advantage in many of these areas. Six states
(California, New York, Florida, Texas, Pennsylvania and Louisiana) accounted for
approximately 58.0% and 57.0% of the Company's total theatres and screens,
respectively, at December 31, 1997 and 61.0% of the Company's theatrical revenue
for the year ended December 31, 1997.

In December 1996, the Company implemented a corporate restructuring and
refocused its investment strategy on its core U.S. business. Since that time,
the Company has: (i) reduced its corporate general and administrative expenses
by 31.3%, or approximately $10.8 million for the year ended December 31, 1997 as
compared to the year ended December 31, 1996; (ii) increased its presence in its
core areas of operation through the development of new theatres and the
refurbishing or expansion of selected existing key theatres; (iii) implemented
operational improvements; and (iv) accelerated the divestitures of
underperforming and non-strategic theatres.

The Company has invested more than $332.0 million since January 1, 1992 toward
improving the quality of its asset base by, among other things, renovating
existing theatres and constructing new state-of-the-art theatres. The Company
believes that this level of investment compares favorably with other major North
American theatre exhibitors. Almost all of the theatres the Company currently
plans to build are state-of-the-art, 12 to 18 screen multiplex theatres with
stadium seating, high-backed rocking seats, digital sound, expanded concession
areas and other state-of-the-art design features and amenities. As compared to
the prior generation of theatres, these theatres provide a higher quality
entertainment experience for patrons and significant operating efficiencies and
improved economics for the Company. At December 1997, approximately 86.0% of
the Company's screens were located in theatres with five or more screens. The
Company's average number of screens per theatre has increased 35.4% from 4.8 at
January 1, 1992 to 6.5 at December 31, 1997.

Industry Overview
- -----------------

More than 460 participants in the domestic motion picture theatre exhibition
business operate in excess of 31,000 screens in North America. In 1996 the top
ten companies operated approximately 56.0% of the total screens as compared to
31.0% in 1986. The remainder of the domestic motion picture theatre exhibition
industry is highly fragmented, with the remaining 44.0% of the screens being
operated by approximately 450 exhibitors. The Company has one of the largest
shares of total screens with approximately 7.0% of all screens in North America.

The number of screens operated nationally has increased at an annual average
rate of approximately 4.8% since 1978, while the number of seats has increased
at a much slower rate. Exhibitors generally turned to multi-screen formats with
smaller auditoriums. Typically, multi-screen theatres ("multiplexes") have six
or more screens per theatre, although in some instances multiplexes may have as
many as 30 screens in a single theatre. The multiplex format provides numerous
benefits for theatre operators, including allowing facilities, (concession
stands and restrooms) and operating costs (lease rentals, utilities and
personnel) to be allocated over a larger base of screens and patrons.
Multiplexes have varying seating capacities (typically from 100 to 500 seats)
that allow for multiple showtimes of the same film and a variety of films with
differing audience appeal to be shown. They also provide the flexibility to
shift films to larger or smaller auditoriums depending on their popularity. To
limit crowd congestion and maximize the efficiency of floor and concession
staff, the starting times of films at multiplexes are staggered.

Certain trends in the theatre exhibition industry favor larger, better
capitalized companies, creating an environment for new construction and
consolidation. Foremost among these trends is larger exhibitors actively
seeking and building multiplexes or megaplexes. Moreover, many smaller theatre
owners who operate older cinemas without state-of-the-art stadium seating and
projection and sound equipment may not have the capital required to maintain or
upgrade their circuits. The growth of the number of screens, strong domestic
consumer demand, and growing foreign theatrical and domestic and foreign
ancillary revenue opportunities have led to an increase in the volume of major
film releases. The greater number of screens has allowed films to be produced
for and marketed to specific audience segments (e.g., horror films for
teenagers) without using capacity required for mainstream product.

The greater number of screens has also prompted distributors to increase
promotion of new films. Not only are there more films in the market at any
given time, but the multiplex format allows for much larger simultaneous
national theatrical release. In prior years a studio might have released 1,000
prints of a major film, initially releasing the film only in major metropolitan
areas, then gradually releasing it in smaller cities and towns nationwide. Today
studios might release over 3,000 prints of a major film and open it nationally
in one weekend. These national openings have made up-front promotion of films
critical to attract audiences and stimulate word of mouth advertising.

Motion pictures are generally made available through various distribution
methods at various dates after the theatrical release date. The release dates
of motion pictures in these other "distribution windows" begin four to six
months after the theatrical release date with video cassette rentals, followed
generally by off-air or cable television programming including pay-per-view, pay
television, other basic cable and broadcast network syndicated programming.
These new distribution windows have given producers the ability to generate a
greater portion of a film's revenues through channels other than theatrical
release. This increased revenue potential after a film's initial domestic
release has enabled major studios and certain independent producers to increase
film production and theatrical advertising. The additional non-theatrical
revenue has also allowed for higher individual film production and marketing
costs. The total cost of producing and distributing a picture averaged
approximately $53.4 million in 1997 compared with approximately $17.5 million in
1986. The average cost to advertise and promote a picture averaged
approximately $22.2 million in 1997 as compared with $5.4 million in 1986.

These higher costs have made a large successful theatrical release more
important. Distributors strive for a successful opening run at the theatre to
establish a film and substantiate the film's revenue potential both
internationally and through other release windows. The value of home video and
pay cable distribution agreements frequently depends on the success of a film's
theatrical release. Furthermore, the studios' revenue-sharing percentage and
ability to control who views the product within each of the distribution windows
generally declines as one moves farther from the theatrical release window.
Because theatrical distribution remains the cornerstone of a film's financial
success, it is the focal distribution window for the public's evaluation of
films and motion picture promotion.

Management expects that the overall supply of films will continue to increase,
although no assurance exists concerning any such increase. Over the past three
years there has been an increase of approximately 18.0% in the number of motion
pictures rated by the Classification and Rating Administration. There has also
been an increase in the number of major studios and reissues of films as well as
an increased popularity of films made by independent producers. During the past
three years the number of large budget films and the level of marketing support
provided by the production companies has risen, as evidenced by the increase in
average production costs and average advertising costs per film of 55.7% and
38.2%, respectively.

Business and Operating Strategy
- -------------------------------

The Company's business and operating strategy is to continue focusing on its
core U.S. business and improving theatre level operating efficiencies. Key
elements of this strategy include:

REFOCUS OVERHEAD AND CAPITAL INVESTMENT STRATEGY: In December 1996, the Company
implemented a corporate restructuring and refocused its investment strategy on
its core U.S. business. The Company's core business strategy focuses
management's attention and capital resources on those geographic areas where the
Company intends to strengthen and defend its current position. The Company has
also implemented operational improvements and overhead reductions intended to
increase the Company's results of operations and has already sold or closed
several underperforming or non-strategic theatres. The corporate restructuring
plan resulted in a higher level of focus by the Company on its domestic
theatrical business and a reduction of corporate general and administrative
expenses of 31.3%, or approximately $10.8 million for the year ended December
31, 1997, as compared to the year ended December 31, 1996. These savings were
achieved primarily through headcount reductions and a consolidation of regional
administrative offices.

DEVELOP NEW THEATRES AND REBUILD OR EXPAND EXISTING KEY THEATRE LOCATIONS. The
Company plans to continue increasing its number of screens and operating margins
by focusing its capital investment activities on developing new theatre
locations in the Company's core areas of operation and leveraging its favorable
theatre locations through the renovation, rebuilding or expansion of existing
theatres in those key locations. The Company is developing higher margin
multiplexes of 12 to 18 screens and is seeking to increase concession sales
through, among other things, more efficient theatre design. The Company is also
constructing its new theatres with stadium seating, digital sound, more
comfortable seats and other state-of-the-art design features and amenities. The
Company believes that these theatres will have an optimal relationship between
the number of screens (12 to 18) and the size of the auditoriums (125 to 400
seats). These theatres are designed to increase the revenue per square foot
generated by the facility and reduce the cost per square foot of constructing
and operating the theatres. This multiplex strategy, in combination with an
emphasis on concession sales, is designed to improve revenue and profitability
by enhancing attendance and concession sales, theatre utilization and operating
efficiencies and provide more efficient clustering around regional and district
management centers. During 1997, the Company developed and opened 13 theatres
(132 screens). During 1998 and 1999, the Company plans to open ten new theatres
(119 screens), rebuild six existing theatres (70 screens) and renovate or add
stadium seating to six other theatres.

DIVESTITURE OF UNDERPERFORMING THEATRES. The Company's 1996 corporate
restructuring was also designed to rationalize underperforming or non-strategic
assets by: (i) terminating leases for theatres that are underperforming; (ii)
selling real estate underlying non-strategic or underperforming theatres; (iii)
divesting theatres in non-core areas; and (iv) exchanging theatres in non-core
areas for theatres in core areas. During 1997, the Company received
approximately $59.5 million for the sale of substantially all of its
international assets and certain non-operating real estate assets and closed or
sold 44 underperforming or non-strategic theatres (170 screens). Many of the
theatres closed or sold were not profitable or were located in areas that are
not part of the Company's long-term strategic plans. The Company has identified
47 theatres (241 screens) that are not considered strategically important or are
underperforming. The Company currently plans to sell or close these theatres
during the next two years, although there can be no assurance that the Company
will be able to accomplish such divestitures or closings.

IMPLEMENT OPERATIONAL IMPROVEMENTS. In the past two years the Company has
recognized theatre and concession operating efficiencies through an increased
focus on increasing concession sales, managing theatre payrolls and other
variable costs and increased staff training. The Company increased concession
sales per capita by approximately 7.8% in 1997 versus 1996 and 5.0% annually on
average from 1993 to 1997. Management believes that there are opportunities to
achieve additional operating efficiencies by disposing of less efficient
theatres, developing new multiplex theatres, and continuing to improve theatre
level operating expenses. Areas of focus for 1998 will include lowering
concession costs, improving entertainment center operations and implementing new
theatre point of sale computer systems and corporate level information
management systems.

MANAGE INDIVIDUAL THEATRE CAPITAL REQUIREMENTS. While the Company plans to
continue to develop several new state-of-the-art theatres each year, the Company
intends to seek to reduce individual theatre financial leverage and capital
requirements by also focusing on expanding, renovating and rebuilding many of
its key locations. In many cases, these existing key locations can be
transformed into state-of-the-art multiplex stadium theatres without competing
against other operators for the location and incurring higher rent excessive
higher preconstruction costs. Furthermore, existing structures can be utilized
while being refurbished to help reduce overall construction costs. In addition,

the Company's renovation of theatres in desirable locations eliminates much of
the geographic risk related to a project's success. In order to reduce the
overall investment by the Company in new theatres, the Company has entered into
"build to suit" and other landlord leasing arrangements or sale and leaseback
transactions. The Company also intends to continue to sell non-strategic and
underperforming assets (such as the sale during 1997 of the majority of its
international investments) and expects to redeploy capital to its core U.S.
business. This strategy is intended to provide increased liquidity from the
disposal of non-cash flow producing investments and theatres with limited growth
potential.

ENHANCE STUDIO/DISTRIBUTOR RELATIONSHIPS. Management intends to continue to
enhance and balance its studio relationships to obtain the optimal number of
marketable motion pictures. The Company believes that it will continue to
increase the number of prints it obtains from each studio as it increases the
number of its screens in selected key locations and leverages its attractive
theatre locations through the development of new, larger (in terms of screens),
higher margin theatres. To the extent that theatrical exhibition remains the
primary distribution channel for new motion picture releases and the overall
number of movies produced continues to increase, management believes that the
Company's focus on its core areas will provide it with access to more prints of
each motion picture.

DEVELOP ANCILLARY REVENUE OPPORTUNITIES. The Company believes that there are
opportunities to increase its ancillary revenue from its Satellite Theatre
Network by renting theatres for seminars and business meetings, product and
customer research and other entertainment uses. Through its VIP/Premier
program, the Company seeks to enhance theatre attendance by selling large groups
of tickets to businesses and groups through coupon books as well as gift
certificates. On-screen advertising also provides an additional opportunity to
increase revenue and profitability.

Operations
- ----------

Overview
The following table summarizes the screens and theatres in which the Company
owns more than a 50% interest at the end of each of the last five years:

December 31,
---------------------------------
1993 1994 1995 1996 1997
----- ----- ----- ----- -----

Number of Theatres 419 413 406 366 335
Number of Screens 2,192 2,254 2,310 2,203 2,165
Average Screens per Theatre 5.2 5.5 5.7 6.0 6.5

Through various joint venture companies, in which the Company owns a 50% or less
interest, the Company also manages six theatres (19 screens) in the United
States and operates six theatres (25 screens) in various foreign countries.

Almost all of the Company's theatres are multiplexes, with an average of 6.5
screens per theatre. In comparison to a single screen theatre, multiplex
theatres allocate facilities such as concession stands and restroom facilities,
and operating costs such as rent, utilities and personnel, over a larger base of
screens and patrons. Multiplexes allow for a variety of films with different
audience appeal to be shown in the same theatre and permit multiple showtimes of
popular films. Multiplexes also provide the flexibility to shift films to larger
or smaller auditoriums depending on the film's popularity. To limit crowd
congestion and maximize staff efficiency, the Company's theatres stagger the
starting times of films. The Company believes that multiplex theatres designed
with 12 to 18 screens generally provide the optimal balance of return on
invested capital and adequate screen numbers for patrons and film distribution
companies, as compared to even larger "megaplex" theatres (20 or more screens).

As set forth in the following table, even though the Company operates several
smaller theatres (in terms of number of screens), approximately 86.0% of the
Company's screens as of December 31, 1997 were in theatres containing five or
more screens:

Number of Screens Number of % of Cumulative % of
per Theatre Theatres Total Screens Total Screens
-------------------------- --------- -------------- ----------------

Greater than 10 28 16% 16%
9 - 10 53 24 40
7 - 8 65 23 63
5 - 6 86 23 86
3 - 4 68 11 97
1 - 2 35 3 100

Revenue
- -------
The Company's principal sources of revenue from its theatres are derived from
theatrical admissions and concession sales. For the year ended December 31,
1997, theatrical admissions and concession sales comprised approximately 69.0%
and 28.0% of the Company's revenue is derived from theatrical admissions and
concession sales, respectively. The remaining 3.0% of revenue for this period
was derived primarily from on-screen advertising, electronic video games located
in theatre lobbies, theatre rentals, and other miscellaneous sources. Theatre
rental revenue relates primarily to the Satellite Theatre Network business unit
that rents theatres on a networked and non-networked basis for corporate
meetings, seminars and other training/educational uses.

The Company's admissions revenue is based on the level of theatrical attendance
and the mix of tickets sold. Theatre attendance is dependent primarily upon the
ability to license the most popular films. The Company's ticket prices vary
throughout the circuit depending upon such things as local competition, whether
the theatre is showing first run or second run movies, and the local economy in
which the theatre operates. Reduced ticket prices are typically charged for
senior citizens, children and matinee showings. The mix of tickets sold is
primarily related to the types of movies available to and exhibited by the
Company. Admissions revenue is recorded net of applicable sales taxes.

Concession sales are a significant important factor in the overall profitability
of a theatre. The Company's primary concession products are varying sizes of
popcorn, soft drinks, candy and certain other products such as nachos and hot
dogs. The Company also sells pizza, pretzels, cookies, ice cream, bottled water,
fruit juices and other specialty items in many of its theatres. Popcorn, soft
drinks and packaged candy are generally sold in three or four (including
children's) sizes. Retail prices for concession items vary by the size of the
offering and are generally market sensitive. Concession sales are recorded net
of applicable sales taxes.

To further increase its concession sales, the Company has introduced new
products and initiated programs intended to increase the percentage of patrons
who purchase concessions and increase the amount of concessions purchased by
each patron. To achieve these goals the Company has implemented training
programs for all concession employees, remodeled concession stands at certain
existing theatres to make them more visible, attractive and efficient,
constructed new theatres with increased concession capacity, expanded concession
menus in selected locations, installed bulk candy stands in most theatres and
adopted certain seasonal and event-oriented promotional programs. In addition,
theatre managers and assistant managers are incentivized through concession
commission programs that represent a significant portion of their total
compensation.

Marketing and Advertising
- -------------------------

The Company relies principally upon newspaper advertisements, newspaper film
schedules and word of mouth to inform its patrons of film titles and exhibition
times. The Company utilizes local newspaper advertisements to promote its
theatres and inform its patrons of the films being played and show times. The
Company typically pays for this type of advertisement. In most areas, multi-
media advertisements for upcoming film releases are paid by the film's
distributor. In selected areas there is a "co-op" arrangement whereby the
exhibitors and distributors share in the cost of film advertisement in
newspapers. Film distributors will also typically pay for radio and television
spots to promote certain motion pictures and special events.

Prior to the opening of a new theatre, the Company typically initiates a
marketing campaign that advertises and promotes the new theatre for several
weeks to several months prior to the new theatre's opening date. The costs
associated with such marketing campaigns are capitalized and expensed as other
operating expenses over the twelve months subsequent to the new theatre's
opening date. In addition, in instances in which a theatre is

performing below management's expectations, the Company may initiate a newspaper
marketing campaign with the objective of increasing attendance at the theatre.

Film Licensing
- --------------

The Company obtains licenses to exhibit films by directly negotiating with film
distributors on a film-by-film and theatre-by-theatre basis. The Company
licenses films through its booking offices located in New York and Los Angeles.
Individuals in the booking offices are responsible for booking films for
theatres in their assigned regions. This regional film booking structure allows
the Company to maintain better relationships with the film distributors'
regional representatives and provides better insight to the film tastes of its
patrons. The Company licenses films from all of the major and independent film
distributors and is not overly dependent on any one film distributor for film
product.

The Company licenses the majority of its first run films from distributors owned
by the major and independent film production companies. Each film distributor
establishes geographic areas known as "film zones," and typically allocates each
of its films to only one theatre within each film zone. In most cases where
there is more than one exhibitor in a film zone this allocation process is based
on long standing relationships between the distributor and exhibitor or is done
on an alternating basis. In certain very limited cases where several exhibitors
operate in a single film zone, films are allocated based on an exhibitor bidding
process. The size of a film zone is based primarily upon population density.
The Company operates in a total of 275 film zones and believes that it is the
only exhibitor in 108 of these zones, and, therefore does not currently compete
with other exhibitors for licensing specific film product at a give time in such
film zones.

Film licenses typically specify rental fees equal to the higher of a percentage
of (i) gross box office receipts or (ii) adjusted box office receipts. Under
the gross box office receipts formula, the film distributor receives a specified
weekly percentage of the gross box office receipts. Under the adjusted box
office receipts formula, the film distributor receives a specified percentage of
the excess of box office receipts over a periodically negotiated amount of
theatre expenses. In a very limited number of cases, the Company may be
required to pay a non-refundable guarantee or make film rental advances in order
to obtain certain film licenses.

Most terms of the film licenses (and hence the film rental costs) with many film
distributors are historically finalized after exhibition of the film in a
process known as "settlement." The settlement process considers, among other
things, the actual success of a film relative to original expectations, an
exhibitor's commitment to the film, and the exhibitor's relationship with the
film distributor. The Company has historically been able to license a majority
of the motion pictures available, however, there is no guarantee that this will
continue in the future.

Theatre Properties
- ------------------

The majority of the Company's theatres are located in free-standing buildings or
are "anchor" tenants in regional malls or strip centers. Typically, the
Company's third-party leases have remaining terms ranging from 10 to 25 years
and provide for options to extend for up to 20 additional years at the Company's
election. The leases provide for annual base rent and many require additional
rent based upon a percentage of the leased theatres' revenue over a certain
breakpoint. Certain of the leases provide for escalating minimum annual rentals
during the term of the lease. The leases typically require the Company to pay
for property taxes, insurance, and certain of the lessors' overhead costs. The
Company expects that in the normal course of business, desirable leases that
expire will be renewed or replaced by other leases, although such renewals or
replacements may be on materially different terms. The Company owns directly or
through its subsidiaries substantially all of the theatre equipment used in all
of its theatres.

Construction. The Company's construction strategy focuses on selecting sites in
its existing core areas of operation and enhancing the theatre-goer's experience
by building state-of-the-art theatres. Each new location is selected after
considering the Company's relative strength in the particular area, the number
of existing competitive screens, growth potential of the area and the minimum
threshold population within a certain radius of the theatre. As part of its
construction strategy, the Company intends to construct or lease theatres that
have a favorable balance between the number of screens (12 to 18) and the size
of the auditoriums (125 to 400 seats). The Company believes that this balance
will allow the Company to provide an adequate number of screens for film
distributors and increased entertainment value to patrons afforded by larger
auditoriums. In addition to increasing the number of screens in certain
locations, the Company is also constructing theatres with stadium seating, more
comfortable seats, analog and digital stereo sound systems and other state-of-
the-art design features and amenities.

As a result of new construction and the sale or closure of older, smaller
theatres, approximately 27.5% of the Company's screens have been constructed
since January 1, 1992 and approximately 44.0% of theatres operated on January 1,
1992 have been sold or closed. As a result of this new construction and the
sale or closure of older, smaller theatres, the Company's average number of
screens per theatre has increased 35.4% from 4.8 screens at January 1, 1992 to
6.5 screens at December 31, 1997.

The Company has historically financed, and plans to continue to finance, a
significant portion of the cost of construction of new theatres by entering into
long-term leases or sale and leaseback transactions. The Company's long-term
leases typically have initial terms of 15 to 25 years with renewal options and
require the landlord to provide a significant portion of the up-front
construction costs. As a result, capital expenditures are often only required
for equipment and certain tenant finishes thereby reducing the net capital
expenditures required for new leased theatres. Although in certain circumstances
the Company may choose to acquire an existing theatre, the Company believes that
it is generally more cost effective to add a new theatre location through
construction.

In addition to new construction, the Company also intends to devote significant
resources to adding additional screens to existing theatres and, refurbishing or
rebuilding existing theatres to strengthen its position in existing areas. The
Company believes that renovating, expanding or completely rebuilding certain of
its existing theatre locations provides it with a significant competitive
advantage in many of the large metropolitan areas where the availability of
suitable theatre sites is limited.

Geographic Positioning. Geographic positioning and operating efficiencies are
key elements of the Company's operating strategy. Geographic clustering at both
the regional and local levels is important in providing the Company with access
to attractive new theatre development opportunities and enhancing film buying
and operating efficiencies. The Company achieves operating efficiencies by
concentrating regional corporate operations around fewer strategic markets and
reducing its number of less profitable, non-strategic theatres.

Theatrical exhibitors depend upon strong geographic positioning to obtain the
most attractive film rental arrangements because film bookings are negotiated on
a market by market basis. Strong geographic positioning in terms of both number
of screens and locations enhances the attractiveness of a theatre exhibitor to
film distributors, in part due to the exhibitor's ability to influence the local
success of a film release.

The Company's theatres are located in large and medium sized metropolitan areas
in California, southern New York (primarily New York City and Long Island), New
Jersey, Florida, Texas, eastern Pennsylvania (including Philadelphia),
Louisiana, Colorado (primarily Denver), Georgia, and certain areas in North and
South Carolina. The Company believes that it has strong positions in many of
these major metropolitan areas. The states that represent the largest geographic
concentration of theatres and screens operated accounted for approximately 58%
and 57% of the Company's total theatres and screens, respectively, at December
31, 1997 and approximately 61% of the Company's theatrical revenue for the year
ended December 31, 1997 and were as follows:

Total Number Total Number % of
of Theatres of Screens Theatrical Revenue
------------ ------------ -------------------

California 64 358 20%
New York 33 177 14
Florida 25 217 8
Pennsylvania 27 142 8
Texas 26 195 7
Louisiana 19 142 4

Competition
- -----------

The Company competes for the public's leisure time and disposable income with
all forms of entertainment including sporting events, concerts, live theatre,
and restaurants. The Company is also subject to varying degrees of competition
from other theatre circuits and independent theatres, some of which may have
greater access to capital resources. The motion picture exhibition industry is
highly competitive, particularly with respect to film licensing, attracting
patrons and acquiring or leasing new theatre sites. Some of the Company's
competitors may be better established in certain areas where the Company's
theatres are located. Competition for patrons occurs locally and depends upon
factors such as: (i) which films a particular theatre is showing; (ii) location
of theatres; (iii) comfort and quality of theatres; and (iv) ticket prices. Film
patrons are not "brand" conscious and generally choose a theatre because of film
selection, location and quality of the theatre.

Competition among theatre circuits for licensing popular films occurs locally
and is based on the prestige and location of an exhibitor's theatres, quality of
the theatres (especially projection and sound quality), seating capacity, and
the exhibitor's ability and willingness to promote the films. The Company
believes that promoting good relations with film distribution and production
companies is important to consistently obtain the best mix of available films.

Where real estate is readily available, there are few barriers preventing
competitors from opening theatres near one of the Company's theatres, which may
have a material adverse effect on the Company's theatre. In addition,
"megaplexes" (theatres with 20 or more screens) have been built or are planned
to be built by competitors in certain areas in which the Company operates, which
may result in excess capacity and adversely affect attendance and pricing at
other theatres in such areas.

Alternative motion picture exhibition delivery systems, including cable
television, video cassettes, satellite and pay per view, also exhibit filmed
entertainment after its theatrical release. While the further expansion of such
delivery systems (such as video on demand) could have a material adverse effect
upon the Company's business and results of operations, no such adverse effect
has yet been experienced.

Recent consolidation in the industry has included the anticipated merger of Sony
Corp.'s Loews Theatres Exhibit Group with Cineplex Odeon Corp. announced in
October 1997; the acquisition by Kohlberg Kravis Roberts & Co., ("KKR") of Act
III Cinemas Inc., also announced in October 1997 and consummated in December
1997; and the anticipated joint acquisition of Regal Cinemas Inc. by affiliates
of KKR and Hicks, Muse, Tate and Furst, Incorporated ("Hicks Muse") announced in
January 1998. Such consolidation could increase the level of competition for the
industry.

Satellite Theatre Network/TM/
- -----------------------------

In an effort to utilize its existing theatres more effectively during periods of
low attendance (such as mornings and weekdays), the Company has developed a
business unit called the Proteus Network/TM/ or Satellite Theatre Network/TM/.
The Satellite Theatre Network/TM/ rents theatre auditoriums for seminars,
corporate training, business meetings and other educational or communication
uses, product and customer research and other entertainment uses. Theatre
auditoriums are rented individually or on a networked basis. To provide the
"broadcasting" network or "teleconferencing" equipment, a network of theatres
has been created by installing high quality (high definition-like) video
projection equipment within theatres that are networked via the combination of
satellite delivery from a single location or multiple location and telephonic
communication.

As of December 31, 1997, the Satellite Theatre Network/TM/ included 31 theatres
equipped with electronic video capability and additional 304 theatres that were
being rented for individual non-networked uses. All of the Company's theatres
can be "networked" through the use of temporary equipment. Because the
Satellite Theatre Network/TM/ operations within the theatre are managed by
existing personnel, very little incremental personnel expenditures are required.
Marketing of the Satellite Theatre Network/TM/ services is performed on a
national basis by staff located in Englewood, Colorado. The Company recorded
$6.2 million, $6.0 million and $1.6 million of revenue from the Satellite
Theatre Network/TM / for the years ended December 31, 1997, 1996 and 1995,
respectively.

Management
- ----------

The Company operates its theatres from its Englewood, Colorado corporate
headquarters, three regional operating offices, thirteen district operating
offices and two film booking offices. All of the Company's district offices and
two of the regional operating offices are located within theatres.

There is active communication between the theatres and division management and
corporate management, which allows management to react on a daily basis to
revenue and staffing information. Division management provides guidance in
scheduling, staffing, screen allocation, and other operating decisions.
Management personnel with the Company's marketing and concessions operations are
also continually involved with theatre management to promote strong performance
in those areas. This structure allows the theatre manager to focus solely on
the day-to-day operations of the theatre. A primary responsibility of the
theatre manager is improving efficiency and managing costs at the local theatre
level.

Corporate and divisional management assists in the daily operations of the
Company's theatres by booking and settling films, training new and existing
employees, setting admission and concessions pricing policies, selecting
concession products, advertising theatres and showtimes, selecting new theatre
sites and negotiating

national purchasing contracts. Corporate management also assists in theatre
development and construction and capital raising activities and provides cash
management, accounting, tax and management information services.

The Company's reporting systems provide management and each theatre manager with
weekly and monthly operating reports for individual theatres. This allows
management to monitor theatre manager performance and progress in attaining
certain identifiable goals. The Company's computer system, installed in all of
its theatres, allows the Company to centralize all theatre-level administrative
functions at its three regional operating offices and corporate headquarters.
The system allows regional and corporate management to monitor ticket revenue
and concession sales. All accounting, reporting and management information
systems are centralized at the Company's corporate headquarters. The Company is
currently upgrading its corporate and theatre level computer systems to improve
its reporting and point of sale capabilities.

As of December 31, 1997, the Company employed approximately 10,000 employees, of
which approximately 1,300 were full-time. Approximately 45.0% of the Company's
employees (substantially all of whom are part-time employees who work in the
theatres) are paid based on the applicable state and Federal minimum wage
regulations. Approximately 100 employees (primarily consisting of film
projectionists) are covered by collective bargaining agreements.

Seasonality
- -----------

The Company's theatrical results of operations are subject to seasonal
fluctuations in theatre attendance, which corresponds to holiday school vacation
periods, and a greater availability of popular motion pictures during the period
from Memorial Day through Labor Day and during the Easter, Thanksgiving and
Christmas holidays.

Government Regulation
- ---------------------

The distribution of motion pictures is regulated by Federal and state anti-trust
laws and has been the subject of numerous anti-trust cases. Consent decrees
resulting from one of the most significant cases, to which the Company was not a
party, have an impact on the theatrical exhibition business. Those consent
decrees bind certain major film distributors and require the films of such
distributors to be offered and licensed to exhibitors, including the Company, on
a theatre-by-theatre basis. Consequently, the Company cannot assure itself of a
supply of films by entering into long-term agreements with major film
distributors, but must compete for its film licenses on a film-by-film and
theatre-by-theatre basis.

The Americans With Disabilities Act of 1990 ("ADA"), and certain state statutes
among other things, require that places of public accommodation, including
theatres (both existing and newly constructed), be accessible to and that
assistive listening devices be available for use by certain patrons with
disabilities. With respect to access to theatres, the ADA may require that
certain modifications be made to existing theatres to make such theatres
accessible to certain theatre patrons and employees who are disabled. The ADA
requires that theatres be constructed in such a manner that persons with
disabilities have full use of the theatre and its facilities and reasonable
access to work stations. The ADA provides for a private right of action and
reimbursement of plaintiff's attorneys' fees and expenses under certain
circumstances. The Company has established a program to review and evaluate the
Company's theatres and to make any changes that may be required by the ADA. In
1995, the Company settled the lawsuit styled Connie Arnold et al. vs. UATC,
filed in 1991. This lawsuit involved allegations that certain of the Company's
theatres lacked accessibility to persons with mobility disabilities in violation
of the ADA. In the settlement agreement, the Company, the plaintiffs and the
Department of Justice established standards of modifications that must be made
to the Company's theatres throughout the United States to make them more
accessible to persons with disabilities. The Company believes that the cost of
complying with the ADA and the settlement agreement in the Connie Arnold case
will not have a material adverse effect on the Company's financial position,
liquidity or results of operations.

Other
- -----
The Company has not expended material amounts on research and development during
the past three years.

There is no customer or affiliated group of customers to which sales are made in
an amount that exceeds 10% of the Company's consolidated revenue.

Compliance with Federal, state and local laws and regulations which have been
enacted or adopted regulating the discharge of materials into the environment,
or otherwise relating to the protection of the environment, has had no material
effect upon the Company's financial position, liquidity or results of
operations.

Item 2. Properties
- ------- ----------

The Company leases its executive office located in Englewood, Colorado and
certain of its regional operating and film booking offices. The following table
summarizes the theatres operated by the Company at December 31, 1997:

Total Number Total Number
of Theatres of Screens
------------ ------------

Owned and Operated Theatres:
Fee-Owned 9 34
Leased:
From third parties 290 1,918
From UAR and Prop I 36 213
--- -----
Total owned and leased theatres 335 2,165
Managed theatres 12 44
--- -----
Total theatres operated 347 2,209
=== =====

Of the 335 owned and operated theatres, nine theatres (30 screens) are held
through two corporations that are owned 75% by the Company and two theatres (19
screens) are held by two partnerships, each owned 51% by the Company. The
remaining owned and operated theatres are held directly by the Company or its
wholly-owned subsidiaries. The managed theatres include six theatres (19
screens) located in the United States and the rest are in countries outside of
the United States and are all held by corporations owned 50% or less by the
Company. Subsequent to December 31, 1997, the Company opened one theatre (nine
screens) in Thailand.

The Company leases the land, building and equipment in the theatres owned by UAR
and its wholly-owned subsidiaries, Prop I and Prop II (prior to December 1995),
in accordance with two master affiliate leases. In conjunction with the 1995
Sale and Leaseback, the Prop II master lease was canceled. The UAR and Prop I
master leases expire in 2003 and provide for options to extend the leases at the
Company's option for up to an additional ten years.

The Company owns directly or through its subsidiaries substantially all of the
theatre equipment used in its fee-owned theatres and theatres leased from
unaffiliated third parties.

Item 3. Legal Proceedings
- -------------------------

The Company is involved in various pending and threatened legal proceedings
involving allegations concerning contract breaches, torts, employment matters,
environmental issues, anti-trust violations, local tax disputes and
miscellaneous other matters. In addition, there are other various claims against
the Company relating to certain of the leases held by the Company. Although it
is not possible to predict the outcome of these proceedings, the Company
believes that such legal proceedings will not have a material adverse effect on
the Company's financial position, liquidity or results of operations.

Item 4. Submission of Matters to a Vote of Security Holder
- ----------------------------------------------------------

There were no matters submitted to a vote of the security holder during the
quarter ended December 31, 1997.

PART II

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

The Company's common stock is held entirely by OSCAR I and there is no market
for the common stock.

The Company has not paid a cash dividend on its common stock during the past two
years. The Company is restricted by its senior credit facilities as to the
amount of dividends that it can declare and pay on its common stock.

Item 6. Selected Financial Data
- ------- -----------------------

The following table presents selected financial data relating to the results of
operations for the years ended December 31, 1997, 1996, 1995, 1994 and 1993 and
balance sheets as of December 31, 1997, 1996, 1995, 1994 and 1993 (dollars in
millions, except revenue per weighted average operating theatre and screen):

Years Ended December 31,
--------------------------------------
1997 1996 1995 1994 1993
------- ----- ----- ----- -----

SUMMARY OF OPERATIONS DATA:
- --------------------------
Revenue $685.1 677.5 648.6 623.1 643.8
====== ===== ===== ===== =====
Revenue per weighted average:
Operating theatre (000's) $1,935 1,715 1,586 1,505 1,480
====== ===== ===== ===== =====

Operating screen (000's) $ 311 295 286 283 287
====== ===== ===== ===== =====

Depreciation and amortization $ 57.9 72.0 66.0 63.1 68.0
====== ===== ===== =====

Operating income before provision
for asset impairments $ 25.8 1.6 9.1 18.5 12.2
====== ===== ===== ===== =====

Provision for asset impairments $ 31.4 8.7 21.0 0 0
====== ===== ===== ===== =====

Operating income (loss) $ (5.6) (7.1) (11.9) 18.5 12.2
====== ===== ===== ===== =====

Gain (loss) on disposition of assets $ 21.9 1.3 (13.9) (9.7) (8.7)
====== ===== ===== =====

Net loss $(27.8) (46.6) (68.9) (27.9) (31.6)
====== ===== ===== ===== =====

Net loss available to common
stockholder $(51.6) (67.5) (87.2) (44.0) (45.6)
====== ===== ===== ===== =====

Capital expenditures $ 58.4 67.3 84.2 45.6 28.0
====== ===== ===== ===== =====

Balance sheet data at year end:
Total assets $506.0 548.1 594.2 602.6 618.1
====== ===== ===== ===== =====

Total debt $362.2 389.0 383.2 320.2 327.0
====== ===== ===== ===== =====

Weighted avg. operating screens/(1)/ 2,204 2,299 2,270 2,202 2,242
====== ===== ===== ===== =====

Weighted avg. operating theatres/(1)/ 354 395 409 414 435
====== ===== ===== ===== =====
Weighted avg. operating screens
Per operating theatre 6.2 5.8 5.6 5.3 5.2
====== ===== ===== ===== =====

/(1)/ Weighted average operating theatres and screens represent the number of
theatres and screens operated weighted by the number of days operated
during the period.

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

The following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with the Company's
Consolidated Financial Statements and related notes thereto. Such financial
statements provide additional information regarding the Company's financial
activities and condition.

RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

The following table summarizes certain operating data of the Company's theatres
(dollars in millions, except admissions per weighted average operating theatre,
admissions per weighted average operating screen and concession sales per
weighted average operating theatre):

Years Ended Years Ended
December 31, % December 31, %
------------------------ Increase -------------------------- Increase
1997 1996 (Decrease) 1996 1995 (Decrease)
------------- --------- ---------- ----------- ------------- ----------

Operating theatres /(1)/
Revenue:
Admissions $ 473.9 466.5 1.6% 466.5 457.1 2.1%
Concession sales 189.6 185.1 2.4 185.1 178.2 3.9
Other 21.6 25.9 (16.6) 25.9 13.3 94.7
Operating expenses:
Film rental and advertising expenses 262.5 257.2 2.1 257.2 248.6 3.5
Concession costs 30.2 29.3 3.1 29.3 29.5 (0.7)
Other operating expenses:
Personnel expense 95.5 96.4 (0.9) 96.4 95.2 1.3
Occupancy expense:
Rent excluding sale and leaseback 77.4 74.6 3.8 74.6 72.9 2.3
Sale and leaseback rentals 13.4 11.6 15.5 11.6 0.5 N/M
Misc. operating expenses 97.9 98.4 (0.5) 98.4 92.2 6.7

Weighted avg. operating theatres/(2)/ 354 395 (10.4) 395 409 (3.4)
Weighted avg. operating screens/(2)/ 2,204 2,299 (4.1) 2,299 2,270 1.3
Weighted avg. screens per
avg. theatre 6.2 5.8 6.9 5.8 5.6 3.6
Admissions per weighted avg.
operating theatre $1,338,701 1,181,013 13.4 1,181,013 1,117,604 5.7
Admissions per weighted avg.
operating screen $ 215,018 202,914 6.0 202,914 201,366 0.8
Concession sales per weighted
avg. operating theatre $ 535,593 468,608 14.3 468,608 435,697 7.6

/(1)/ The operating theatres include revenue and expenses of all theatres
operated by the Company that are more than 50% owned.
/(2)/ Weighted average operating theatres and screens represent the number of
theatres and screens operated weighted by the number of days operated
during the period.

REVENUE FROM OPERATING THEATRES FOR THE YEAR ENDED DECEMBER 31, 1997
--------------------------------------------------------------------
COMPARED TO THE YEAR ENDED DECEMBER 31, 1996

ADMISSIONS: Admissions revenue increased 1.6% during 1997 as compared to 1996,
despite a 10.4% decline in the average number of theatres operated. This
increase was primarily due to a 7.0% increase in the average ticket price,
partially offset by a 5.0% decrease in attendance. The increase in the average
ticket price for 1997 was primarily due to an increase in the percentage of full
priced tickets purchased and certain selective increases in ticket prices during
1997 and late 1996. The decrease in attendance for 1997 was primarily due to
decreases in the number of weighted average theatres and screens operated during
the year. Admissions per weighted average operating theatre and screen
increased 13.4% and 6.0%, respectively, during 1997 as compared to 1996. These
admissions increases were primarily due to an increase in the number of films
released and the success of those films and the opening of several new theatres,
which have higher admissions per theatre and screen, the sale or closure of
several less productive theatres, and the 1997 and late 1996 increases in ticket
prices, partially offset by decreased attendance.

CONCESSION SALES: Concession sales revenue increased 2.4% during 1997 as
compared to 1996. This increase was primarily due to a 7.8% increase in the
average concession sale per patron, partially offset by the decreased attendance
discussed above. Concession sales per weighted average operating theatre
increased 14.3% during 1997 as compared to 1996. The increases in the average
concession sale per patron and concession sales per weighted average operating
theatre were primarily due to certain selective price increases during 1997 and
late 1996, the Company's increased emphasis on sales staff training, the opening
of several new theatres with more efficient concession operations, the sale or
closure of several less productive theatres and the introduction of new
concession menu items at certain theatres.

The following table sets forth the admissions and concession sales revenue for
theatres operated throughout all of 1997 and 1996 (dollars in millions):

Theatres Screens 1997 1996 % Increase
-------- ------- ----- ---- ----------

Theatres operated throughout
both periods 312 1,922
Admissions $412.1 410.8 0.3%
Concession sales 162.0 160.5 0.9

This "same theatre" analysis eliminates the effect of new theatre openings,
sales or closures during 1997 or 1996.

OTHER: Other revenue is derived primarily from on-screen advertising,
electronic video games located in theatre lobbies, theatre rentals, the rental
of theatres on a networked and non-networked basis for corporate meetings,
seminars and other training/educational uses by the Satellite Theatre Network,
and other miscellaneous sources. Other revenue decreased 16.6% during 1997 as
compared to 1996 primarily as a result of the Company operating fewer weighted
average operating theatres and a decrease in revenue from on-screen advertising.

REVENUE FROM OPERATING THEATRES FOR THE YEAR ENDED DECEMBER 31, 1996
COMPARED TO THE YEAR ENDED DECEMBER 31, 1995

ADMISSIONS: Admissions revenue increased 2.1% during 1996 as compared to 1995.
This increase was primarily the result of a 2.7% increase in average ticket
prices, partially offset by a 0.6% decrease in attendance. The increase in
average ticket prices was due primarily to a decline in the number of tickets
sold for lower priced matinee shows and to an increase in ticket prices during
late 1996. The decrease in attendance for 1996 was primarily related to the
release of a fewer number of "blockbuster" films during the Summer Olympic Games
and the adverse effect of the Olympics on films which were being shown. While
Independence Day and A Time to Kill performed very well during the Olympics, the
attendance for several other films in the marketplace during July and August
appeared to be adversely impacted. Admissions per weighted average operating
theatre and screen increased 5.7% and 0.8%, respectively, during 1996 as
compared to 1995 primarily as a result of several new theatres opened by the
Company which have higher admissions per screen, the sale or closure of several
smaller (in terms of screens) less productive theatres, and the average ticket
prices and attendance fluctuations discussed above.

CONCESSION SALES: Concession sales revenue increased 3.9% during 1996 as
compared to 1995 primarily as a result of a 4.5% increase in the average
concession sale per patron, partially offset by the decreased attendance
discussed above. Concession sales per weighted average operating theatre
increased 7.6% during 1996 as compared to 1995. The increases in average
concession sales per patron and concession sales per weighted average operating
theatre were primarily attributable to certain selective price increases in late
1996, the Company's increased emphasis on training, the installation of bulk
candy stands in May 1995, the renovation of concession stands at certain
existing theatres, the opening of several new theatres and the closure of
certain less efficient older, smaller theatres.

The following table sets forth the admissions and concession sales revenue for
theatres operated throughout all of 1996 and 1995 (dollars in millions):

Theatres Screens 1996 1995 % Increase
-------- ------- ---- ---- ----------

Theatres operated throughout
both periods 350 2,005
Admissions $417.6 407.4 2.5%
Concession sales 163.1 157.2 3.8

OTHER: Other revenue increased 94.7% (or $12.6 million) during 1996 as compared
to 1995 primarily as a result of increased revenue from the Company's on-screen
advertising and Satellite Theatre Network.

OPERATING EXPENSES FOR THE YEAR ENDED DECEMBER 31, 1997
COMPARED TO THE YEAR ENDED DECEMBER 31, 1996

FILM RENTAL AND ADVERTISING EXPENSES: Film rental and advertising expenses
increased 2.1% during 1997 as compared to 1996. Film rental and advertising
expenses as a percentage of admissions revenue were 55.4% for 1997 and 55.1% for
1996. The increase in film rental and advertising expenses as a percentage of
admissions revenue for 1997 was primarily due to the shorter run of several
major films released in the second quarter of 1997, partially offset by slightly
lower advertising expenses. Typically, film rental as a percentage of
admissions revenue increases when a higher percentage of a film's total
admissions is collected in the opening weeks of a film's run. Advertising
expenses were lower as a result of more efficient buying of print advertising by
the Company and distributors and to fewer number of theatres operated.

CONCESSION COSTS: Concession costs include direct concession product costs and
concession promotional expenses. Such costs increased 3.1% during 1997 as
compared to 1996. Concession costs as a percentage of concession sales were
15.9% for 1997 and 15.8% for 1996. The slight increase in concession costs as a
percentage of concession sales for 1997 was primarily due to an increase in the
cost of certain commodity priced items such as corn seed and oil.

PERSONNEL EXPENSE: Personnel expense includes the salary and wages of the
theatre manager and all theatre staff, commissions on concession sales, payroll
taxes and employee benefits. Personnel expense decreased 0.9% during 1997 as
compared to 1996. This decrease in personnel expense in 1997 was primarily due
to more efficient theatre staffing and fewer weighted average operating
theatres, partially offset by the increases in the Federal (and certain state)
minimum wage in late 1996 and late 1997. These increases resulted in a 7.4%
increase in the average hourly wage paid to theatre staff in 1997 versus 1996.
Despite the increases in the Federal minimum wage in 1997 and 1996, personnel
expense as a percentage of admissions and concession sales revenue decreased to
14.4% in 1997 from 14.8% in 1996. These improved payroll statistics relate to
more efficient staffing and some increases in ticket and concession sales.
Additionally, the Company's personnel expense efficiencies have been positively
impacted by the closure or sale of several less efficient theatres and the
opening of several new larger, more efficient multiplex theatres and reduced
expenses for fringe benefits.

OCCUPANCY EXPENSE: The Company's typical theatre lease arrangement provides for
a base rental as well as contingent rental that is a function of the underlying
theatre's revenue over an agreed upon breakpoint. Total occupancy expense
increased 5.3% during 1997 as compared to 1996. This increase in 1997 relates
to higher contingent rentals, rentals on newly opened theatres and rentals
related to the sale and leaseback transaction completed in late 1996, partially
offset by the decrease in the number of weighted average operating theatres.
Occupancy expense includes non-cash charges relating to the effect of escalating
leases which have been "straight lined" for accounting purposes of $3.7 million
and $3.1 million for 1997 and 1996, respectively.

MISCELLANEOUS OPERATING EXPENSES: Miscellaneous operating expenses consist of
utilities, repairs and maintenance, insurance, real estate and other taxes,
supplies and other miscellaneous operating expenses. Miscellaneous operating
expenses decreased 0.5% during 1997 as compared to 1996. This decrease in 1997
relates primarily to reduced utilities, repairs and maintenance and insurance
associated with fewer weighted average theatres, partially offset by additional
expenses associated with the Company's Satellite Theatre Network.

OPERATING EXPENSES FOR THE YEAR ENDED DECEMBER 31, 1996
COMPARED TO THE YEAR ENDED DECEMBER 31, 1995

FILM RENTAL AND ADVERTISING EXPENSES: Film rental and advertising expenses
increased 3.5% during 1996 as compared to 1995. Film rental and advertising
expenses as a percentage of admissions revenue were 55.1% for 1996 and 54.4% for
1995. The increase in film rental and advertising expense as a percentage of
admissions revenue for 1996 related primarily to an increase in the percentage
of revenue from higher cost "blockbuster" films released during 1996 and the
absence of many very successful lower budget films. In addition, due to an
increase in the number of films released and the effect of the Summer Olympic
Games during the summer of 1996, several films had shorter runs with a higher
percentage of their total admissions falling during the opening weeks.

DIRECT CONCESSION COSTS: Direct concession costs decreased 0.7% during 1996 as
compared to 1995. Direct concession costs as a percentage of concession sales
revenue were 15.8% for 1996 and 16.6% for 1995. The decrease in direct
concession costs during 1996 was primarily due to the sale of advertising on
popcorn and soft drink containers, partially offset by higher concession sales
revenue and costs attributable to increased sales of bulk candy.

PERSONNEL EXPENSE: Personnel expense increased 1.3% during 1996 as compared to
1995. The increase in personnel expense in 1996 is primarily attributable to
the increase of the Federal minimum wage law increase which went into effect on
October 1, 1996 and to an increase in the number of weighted average operating
screens, offset by more efficient theatre staffing. While the increase in the
Federal minimum wage affected a large number of the Company's theatres, it had a
significant impact on the average hourly wage paid to the Company's theatre
employees located in smaller and mid-sized markets. Personnel expense as a
percentage of admissions and concession sales revenue declined in 1996 to 14.8%
as compared to 15.0% in 1995. This decrease was primarily attributable to
changes in the theatre manager commission structure, which focused on more
efficient staffing of theatres.

OCCUPANCY EXPENSE: Total occupancy expense increased 17.4% during 1996 as
compared to 1995. This increase in 1996 relates primarily to $11.1 million of
incremental rent in 1996 associated with those theatres that were part of the
1995 Sale and Leaseback and the 1996 sale and leaseback transaction and
incremental base rentals associated with newly opened theatres, partially offset
by fewer weighted average operating theatres. Additionally, occupancy expense
includes non-cash charges relating to the effect of escalating leases which have
been "straight-lined" for accounting purposes of $3.1 million and $2.0 million
for 1996 and 1995, respectively. Excluding the rent associated with the 1995
Sale and Leaseback and the 1996 sale and leaseback transaction and the non-cash
rent, occupancy expense would have increased only 0.8% during 1996 as compared
to 1995.

MISCELLANEOUS OPERATING EXPENSES: Miscellaneous operating expenses increased
6.7% during 1996 as compared to 1995. This increase relates primarily to
increased operating expenses associated with the Satellite Theatre Network and
normal inflationary increases.

OTHER EXPENSES FOR THE YEARS ENDED DECEMBER 1997, 1996 AND 1995

GENERAL AND ADMINISTRATIVE EXPENSE AND RESTRUCTURING CHARGE
- -----------------------------------------------------------

General and administrative expense consists primarily of costs associated with
corporate theatre administrative and operating personnel, international staff,
Satellite Theatre Network sales and marketing staff and other support functions
located at the Company's corporate headquarters, two film booking and three
regional operating offices and 13 district theatre operations offices (generally
located in theatres). At the end of 1996, the Company initiated a corporate
restructuring plan intended to provide a higher level of focus on the Company's
domestic theatrical business at a lower annual cost. As a result of this
corporate restructuring plan, which was substantially completed in January 1997,
general and administrative expenses decreased $10.8 million in 1997, or 31.3%,
as compared to 1996. During 1996, administrative costs decreased $0.1 million

primarily as a result of $2.1 million of non-recurring severance and litigation
charges accrued in 1995, partially offset by normal annual salary adjustments,
as well as increased professional and legal fees. During 1997 and 1996, the
Company recorded $0.8 million and $1.9 million, respectively, of restructuring
charges relating to severance and other related expenses associated with the
Company's corporate restructuring.

DEPRECIATION AND AMORTIZATION AND PROVISIONS FOR ASSET IMPAIRMENTS
- ------------------------------------------------------------------

Depreciation and amortization expense includes the depreciation of theatre
buildings and equipment, the amortization of theatre lease costs and certain
non-compete agreements and non-cash provisions for asset impairments. The
provision for asset impairments relates to non-cash charges for the difference
between the historical book value of individual theatres (in some cases, groups
of theatres) and the net discounted cash flow expected to be received from the
operation or future sale of the individual theatre (or groups of theatres).
Depreciation and amortization increased $8.6 million in 1997 as compared to 1996
and decreased $6.3 million in 1996 as compared to 1995. The 1997 increase was
primarily due to $31.4 million of non-cash provisions for asset impairments
offset by lower amortization of non-compete agreements. The 1996 decrease was
primarily due to a decline in the amount of non-cash provisions for asset
impairments from $21.0 million in 1995 to $8.7 million in 1996, offset by
depreciation charges on the Company's newly opened theatres. Included in
depreciation and amortization expense for each of the years ending December 31,
1997, 1996 and 1995 was $9.0 million, $24.0 million and $24.0 million,
respectively, relating to certain assets, non-compete agreements and other
assets acquired as part of the Acquisition which were being amortized over a
five year life. In May 1997, such assets were fully amortized and, as a result,
no further amortization expense will be recorded related to those assets.

OPERATING LOSS
- --------------

The Company incurred operating losses of $5.6 million, $7.1 million, and $11.9
million for the years ended December 31, 1997, 1996 and 1995, respectively. As
shown in the table below, prior to the Company recording non-cash provisions for
asset impairments, the Company recognized operating income of $25.8 million,
$1.6 million and $9.1 million for the years ended December 31, 1997, 1996 and
1995, respectively ($ in millions).

1997 1996 1995
------- ----- ------

Operating loss $(5.6) (7.1) (11.9)
Non-cash provisions for
asset impairments 31.4 8.7 21.0
----- ---- -----
Operating income before non-cash
provisions for asset impairments $25.8 1.6 9.1
===== ==== =====

The increase in operating income before non-cash provisions for asset
impairments in 1997 was primarily due to the operating improvements discussed
above, savings associated with the Company's corporate restructuring in December
1996 and reduced depreciation and amortization expenses in 1997 versus 1996.
The reduction in operating income before non-cash provisions for asset
impairments in 1996 was primarily due to $11.1 million of incremental rent
associated with the 1995 Sale and Leaseback, partially offset by increased
operating margins.

INTEREST, NET
- -------------

Interest, net increased $0.2 million in 1997 as compared to 1996 and decreased
$2.3 million in 1996 as compared to 1995. The 1997 increase was primarily due
to a slightly higher average outstanding debt balance. The 1996 decrease was
primarily due to lower market interest rates on floating rate borrowings
partially offset by a slightly higher average outstanding debt balance.

GAIN (LOSS) ON DISPOSITION OF ASSETS, NET
- -----------------------------------------

During April 1997, the Company sold its 50% interest in a Hong Kong theatre
company to its partner for approximately $17.5 million and during September
1997, the Company sold its theatre investments in Mexico and the majority of its
theatre assets in Argentina for approximately $25.0 million. In addition,
various non-strategic or underperforming operating theatres and real estate
assets were sold for net cash proceeds of approximately $17.0 million. In
conjunction with these sales, the Company recognized $21.9 million of gains.
During 1996, the Company sold certain theatres for which cash proceeds of $20.5
million were received. In conjunction with these sales, the Company recognized
$1.3 million of gains. During 1995, the Company incurred losses on the
disposition of assets of $13.9 million. These losses relate primarily to the
sale of certain theatres for which net cash proceeds of $7.7 million were
received, and the termination or non-renewal of leases related to theatres,
which were closed. The theatres sold and closed were primarily non-strategic or
underperforming.

INCOME TAX EXPENSE
- ------------------
Income tax expense consists of current state and Federal income taxes of the
Company's less than 80%-owned consolidated subsidiaries. At December 31, 1997,
the Company has a net operating loss carryforward of approximately $214.0
million. The income tax returns of OSCAR I are currently being audited by the
Internal Revenue Service. The outcome of this audit may reduce the amount of
OSCAR I's net operating loss carryforward and/or change the basis (and thus
future tax depreciation) related to certain assets. The Company believes that
the result of the audit will not have a material adverse effect on the financial
condition or results of operations of the Company.

NET LOSS
- --------
During 1997, the Company incurred a net loss of $27.8 million as compared to
$46.6 million in 1996. This decrease in net loss was primarily attributable to
an increase in the operating margins at the Company's theatres and the gain
recognized on the sale of certain of the Company's international theatre
operations and certain other operating theatres and real estate assets, offset
by non-cash provisions for asset impairments. During 1996, the Company incurred
a net loss of $46.6 million as compared to $68.9 million in 1995. This decrease
in net loss was due to a decrease in operating loss and to $13.9 million of
losses recognized on the disposition of assets during 1995. Despite the $11.1
million increase in occupancy costs during 1996 associated with various sale
leaseback transactions, operating loss decreased primarily as a result of a 4.5%
increase in total operating revenue and a $6.3 million decrease in depreciation
and amortization.

LIQUIDITY AND CAPITAL RESOURCES

For the year ended December 31, 1997, net cash provided by the Company's
operating activities increased to $48.7 million from $28.4 million for the year
ended December 31, 1996. This net cash provided by operating activities was
$34.0 million in excess of cash used in investing activities, which provided for
a $28.3 million reduction in net debt balances. During 1996, the net cash
provided by operating activities was $30.3 million less than cash used in
investing activities.

Substantially all of the Company's admissions and concession sales revenue is
collected in cash. Due to the unfavorable interest rate spread between bank
facility borrowings and cash investments, the Company seeks to use all of its
available cash to repay its revolving bank borrowings and borrow under those
facilities as cash is required. The Company benefits from the fact that film
expenses (except for films that require advances) are usually paid 15 to 45 days
after the admissions revenue is collected.

On December 13, 1995, the Company entered into the 1995 Sale and Leaseback
pursuant to which ten of its operating theatres and the associated land and
buildings and four theatres and a four screen addition under development were
sold to, and leased back from, an unaffiliated third party for approximately
$47.1 million. At December 31, 1996, approximately $7.8 million of sales
proceeds were held in escrow for the final theatre and the screen addition under
construction. These proceeds were paid to the Company in 1997 when construction
of the remaining theatre and the screen addition was completed.

In November 1996, the Company entered into a sale and leaseback transaction
pursuant to which three of its operating theatres and the associated land and
buildings and two theatres under development were sold to, and leased back from,
an unaffiliated third party for approximately $21.5 million. The sales proceeds
related to the two theatres under development (approximately $12.3 million) were
deposited into an escrow account to be used to fund the related construction
costs. During 1997, the Company opened one of the theatres under development
and received approximately $10.8 million of proceeds from the escrow account.

On December 31, 1997, the Company entered into a sale and leaseback transaction
whereby two theatres currently under development were sold to, and leased back
from, an unaffiliated third party for approximately $18.1 million. At December
31, 1997, approximately $13.5 million of the sales proceeds were deposited into
an escrow account and are to be paid under the terms of the sale and leaseback
to fund certain of the construction costs associated with the two theatres.

In December 1996, the Company initiated a new investment strategy that focuses
on the development of new theatres and renovation and expansion of existing high
revenue theatres in the United States where the Company has a significant
operating presence. As part of this increased focus on its U.S. operations, the
Company restructured and realigned its corporate overhead functions and has sold
most of its international investments. The proceeds received from the sale of
international investments and corporate overhead savings were redeployed into
new theatre developments or the renovation of existing key theatres in the
Company's core markets and used to repay existing debt. The international
investments sold included the Company's Hong Kong, Mexico and certain of its
Argentina theatre investments. Proceeds related to these sales were
approximately $42.5 million. The Company currently has an agreement to sell a
portion of its investments in Singapore and Thailand for $8.1 million. After the
consummation of such sale, the Company will retain a 10.0% interest in four
theatres in Singapore and Thailand.

As part of its strategic plan, the Company intends to continue to dispose of,
through sale or lease terminations, certain of its non-strategic or
underperforming operating theatres and real estate. Net proceeds, if any, from
these increased disposition efforts are also expected to be used to repay
existing debt or to be redeployed into new, larger (in terms of screens), higher
margin theatres. While there can be no assurance that such sales or lease
termination efforts will be successful, negotiations are ongoing with respect to
several other theatres and parcels of real estate. During the year ended
December 31, 1997, the Company closed or sold 44 theatres (170 screens). The
theatres that were closed or sold were primarily non-strategic or
underperforming.

In an effort to limit the amount of investment exposure on any one project, the
Company typically develops theatre projects where both the land and building are
leased through long-term operating leases. Where such lease transactions are
unavailable, however, the Company will invest in the land and development of the
entire theatre facility (fee owned) and then seek to enter into a sale and
leaseback transaction. Regardless of whether the theatre is leased or fee
owned, in most cases the equipment and other theatre fixtures are owned by the
Company. For the year ended December 31, 1997, the Company invested
approximately $65.8 million on the development of 13 new theatres (132 screens)
that opened during the period, construction on ten new theatres (119 screens)
and screen additions or renovations to 12 theatres expected to open during 1998
or 1999 and recurring maintenance on certain existing theatres.

At December 31, 1997, the Company had entered into construction or lease
agreements for ten new theatres and for screen additions or renovations to 12
existing theatres that the Company intends to open or renovate during the next
two years. The Company estimates that capital expenditures associated with these
theatres will aggregate approximately $100.0 million. Such amounts relate only
to projects in which the Company has executed a definitive lease and all
significant lease contingencies have been satisfied. The Company expects
additional capital expenditures to be made as other projects are finalized. Of
the committed amount, approximately $15.0 million will be funded from proceeds
of certain sale and leaseback transactions currently held in escrow.

At December 31, 1997, the Company had approximately $226.5 million of
indebtedness outstanding under its bank credit facility and approximately $55.8
million of unused revolving loan commitments thereunder (of which $11.1 million
of which had been used for the issuance of letters of credit).

The Company is party to interest rate cap agreements on $100.0 million of
floating rate debt which provide for a LIBOR interest rate cap of 7 1/2% per
annum and expire at various dates through 1999. The terms of the Company's bank
credit facility require the Company to obtain interest rate hedges on a certain
portion of its indebtedness thereunder. The Company amortizes the cost of its
interest rate cap agreements to interest expense over the life of the underlying
agreement. Amounts received from the counterparties to the interest rate cap
agreements are recorded as a reduction of interest expense.

The level of continued investing activities by the Company is dependent on,
among other factors, its on-going operating liquidity and other sources of
liquidity. One measure commonly used in the theatrical industry to measure
operating liquidity is referred to as "Interest Coverage." Interest Coverage is
the ratio of Operating Cash Flow or EBITDA (earnings before interest, taxes,
depreciation, amortization and other non-recurring or non-cash operating credits
or charges) to interest expense (excluding amortization of deferred loan costs).
As described previously, several non-recurring or non-cash operating charges
were recorded in the Consolidated Statements of Operations during 1997, 1996 and
1995 which adversely affected the Company's Operating Income for such years.
Following is a calculation of Operating Cash Flow and Interest Coverage for each
of the last three years, including a reconciliation of Operating Income to
Operating Cash Flow ($ in millions):

1997 1996 1995
------ ----- ------

Operating loss $(5.6) (7.1) (11.9)
Depreciation and amortization and provisions for
asset impairments 89.3 80.7 87.0
Non-cash rent 3.7 3.1 2.0
Severance, litigation and restructuring expenses 0.8 1.9 2.1
----- ---- -----
Operating Cash Flow $88.2 78.6 79.2
===== ==== =====

Interest Expense $36.9 36.1 39.0
===== ==== =====

Interest Coverage Ratio 2.4 2.2 2.0
===== ==== =====

As shown above, the Company's interest coverage increased during 1997 as
compared to 1996 primarily because of increased Operating Cash Flow. The
Company's interest coverage increased during 1996 as compared to 1995 due
primarily to lower interest expense, despite $11.1 million of incremental sale
and leaseback rentals. The lower interest expense in 1996 was due to lower
market interest rates.

Operating Cash Flow is one measure of value and borrowing capacity commonly used
in the theatrical exhibition industry and is not intended to be a substitute for
Operating Cash Flow as defined in the Company's debt agreements or for cash
flows provided by operating activities, a measure of performance provided herein
in accordance with generally accepted accounting principles, and should not be
relied upon as such. The Operating Cash Flow as set forth above does not take
into consideration certain costs of doing business, and as such, should not be
considered in isolation to other measures of performance.

Another measure of liquidity is net cash provided by operating activities as
reflected in the accompanying Consolidated Statements of Cash Flow. Net cash
provided by operating activities was $48.7 million, $28.4 million and $42.0
million for the years ended December 31, 1997, 1996 and 1995, respectively.
This measurement sets forth the net cash from the operations of the Company
which was available for the Company's liquidity needs after taking into
consideration certain additional costs of doing business which are not reflected
in the Operating Cash Flow calculations discussed above.

For the year ended December 31, 1997, net cash provided by operating activities
exceed net cash used in investing activities by $34.0 million, as compared to
deficits of $30.3 million and $12.3 million for the years ended December 31,
1996 and 1995, respectively.

Certain notes of Prop I outstanding pursuant to an Indenture of Mortgage, dated
October 1, 1988 ("the "Prop I Mortgage Notes"), will mature on November 1, 1998.
The outstanding principal balance of the Prop I Mortgage Notes on the maturity
date will be approximately $45.7 million. Management believes that the proceeds
necessary to repay the Prop I Mortgage Notes at the maturity date will be
provided by the Company's operating activities or such Prop I Mortgage Notes may
be refinanced by a new debt facility or a new sale and leaseback transaction or
otherwise.

The Company believes that the net cash provided by operations and borrowings
available under bank credit facilities will be sufficient to fund its future
cash requirements. The Company expects that future cash requirements will
principally be for repayments of indebtedness, working capital requirements and
capital expenditures. The Company's future operating performance and ability to
service or refinance its current indebtedness will be subject to future economic
conditions and to financial, business and other factors, many of which are
beyond the Company's control. Additionally, the Company's ability to incur
additional indebtedness may be limited by the 1995 Sale and Leaseback
agreements.

From time to time, the Company evaluates the value of its theatres and other
assets in accordance with SFAS No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed Of." To the extent such
values are less than the recorded amounts for such assets, the Company may
recognize a non-cash charge to reflect an impairment.

RECENT DEVELOPMENTS

On November 19, 1997, OSCAR I entered into a definitive recapitalization
agreement (the "Recapitalization Agreement") with an affiliate of Hicks Muse.
The Recapitalization Agreement provided for (i) the sale of newly-issued common
stock of OSCAR I to Hicks Muse for $266.0 million and the simultaneous
repurchase by OSCAR I of approximately the same number of shares of common stock
of OSCAR I owned by its existing stockholders (including management), after
which sale and repurchase Hicks Muse would own approximately

88.8% of the outstanding common stock of OSCAR I; (ii) the redemption of OSCAR
I's preferred stock; (iii) the redemption of the Company's senior secured notes
(the "Senior Secured Notes") with a new subordinated debt issue; and (iv) the
establishment of a new bank credit facility to refinance the Company's existing
bank credit facility and provide additional working capital. In late January
1998, just prior to the scheduled closing date, Hicks Muse indicated that they
were unwilling to close on the terms of the Recapitalization Agreement. Due to
the failure by Hicks Muse to close on the agreed terms, MLCP terminated the
Recapitalization Agreement on February 20, 1998.

After the termination, the Company decided to pursue a refinancing of its
existing bank credit facility and the redemption of the Senior Secured Notes and
the preferred stock of OSCAR I. This refinancing is expected to involve the
issuance of $275.0 million of new senior subordinated debt securities and a new
senior bank credit facility of $400-$450 million. It is expected that these new
debt securities will be issued by OSCAR I with a guarantee by the Company of the
new senior bank credit facility. There can be no assurance as to whether or when
any such refinancing and redemption will be completed. While it is not possible
to predict the final terms of the new debt securities or new bank credit
facility, the Company expects the new bank credit facility will provide the
Company with additional borrowing availability and expects them to have a lower
overall interest rate than the interest rate on the Company's current bank
credit facility and dividend rate on the OSCAR I preferred stock. While there
can be no assurance as to the timing of the refinancing and redemption, the
Company expects to complete such transactions during the second quarter of 1998.
The offering of such new debt securities will not be registered under the
Securities Act and such new debt securities may not be offered or sold in the
United States absent registration or an applicable exemption from registration
requirements.

OTHER

The Company's revenues have been seasonal, coinciding with the timing of
releases of motion pictures by the major distributors. Generally, the most
successful motion pictures have been released during the summer extending from
Memorial Day to Labor Day and the holiday season extending from Thanksgiving
through year-end. The unexpected emergence of a hit film during other periods
can alter this traditional trend. The timing of such film releases can have a
significant effect on the Company's results of operations, and the results of
one quarter are not necessarily indicative of results for the next quarter or
for the same period in the following year. In the first quarter of 1997, the
Company experienced favorable operating results compared to the prior period,
principally due to the release of several popular motion pictures and the
occurrence of Easter in such quarter. Although the Company's operating results
for the first two months of 1998 exceeded those for the first two months of 1997
the Company does not expect its operating results for the first quarter of 1998
to equal those achieved in the first quarter of 1997. Historically, the
principal impact of inflation and changing prices upon the Company has been with
respect to the construction of new theatres, the purchase of theatre equipment
and the utility and labor costs incurred in connection with continuing theatre
operations. Film rental fees, which are the largest operating expense incurred
by the Company, are customarily paid as a percentage of admissions revenue and
hence while the film rental fees may increase on an absolute basis the
percentages are not directly affected by inflation. Inflation and changing
prices have not had a significant impact on the Company's total revenues and
results of operations.

The Company has initiated a review of its internal information systems for Year
2000 transition problems and, although such review is still in progress,
believes that conversion requirements will not result in significant disruption
of the Company's business operations or have a material adverse effect on its
future liquidity or results of operations. The Company has not extensively
investigated the Year 2000 compliance of its customers, suppliers and other
third parties with whom it has business relationships, but intends to make
selected inquiries. Compliance by such third parties is voluntary and failures
could occur, in which case there is the possibility of a material adverse effect
on the Company. However, the nature of the Company's business and its business
relationships are not such that the Company considers the potential Year 2000
compliance failure of a third party with whom it has a direct business
relationship likely to have a material adverse effect on the Company.

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

The consolidated financial statements of the Company and OSCAR I are filed under
this item beginning on page 25.

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

None.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------

TO UNITED ARTISTS THEATRE CIRCUIT, INC.:

We have audited the accompanying consolidated balance sheets of United Artists
Theatre Circuit, Inc. and subsidiaries (the "Company") as of December 31, 1997
and 1996, and the related consolidated statements of operations, stockholder's
equity (deficit) and cash flow for the years then ended. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of United Artists
Theatre Circuit, Inc. and subsidiaries as of December 31, 1997 and 1996 and the
results of their operations and their cash flow for the years then ended in
conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Denver, Colorado
March 23, 1998

INDEPENDENT AUDITORS' REPORT
----------------------------

THE BOARD OF DIRECTORS AND STOCKHOLDER
UNITED ARTISTS THEATRE CIRCUIT, INC.:

We have audited the accompanying consolidated statements of operations,
stockholder's equity and cash flow of United Artists Theatre Circuit, Inc. and
subsidiaries (the "Company") for the year ended December 31, 1995. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the results of operations and cash flow of
United Artists Theatre Circuit, Inc. and subsidiaries for the year ended
December 31, 1995, in conformity with generally accepted accounting principles.

As discussed in note 12 to the consolidated financial statements, the Company
adopted the provisions of Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of," in 1995.

KPMG PEAT MARWICK LLP

Denver, Colorado
March 27, 1996

UNITED ARTISTS THEATRE CIRCUIT, INC.
AND SUBSIDIARIES

Consolidated Balance Sheets
(Amounts in Millions)

December 31,
----------------
1997 1996
------- ------

Assets
- ------
Cash and cash equivalents.................................... $ 10.6 9.6
Receivables, net:
Notes............................................... 1.3 1.7
Related party (note 9).............................. 17.6 15.3
Other............................................... 13.3 29.5
------- ------
32.2 46.5
------- ------

Prepaid expenses and concession inventory.................... 18.4 15.4
Investments and related receivables.......................... 15.4 30.2
Property and equipment, at cost (note 12):
Land................................................ 26.0 31.6
Theatre buildings, equipment and other.............. 440.4 395.1
------- ------
466.4 426.7
Less accumulated depreciation and amortization...... (145.1) (119.8)
------- ------
321.3 306.9
------- ------
Intangible assets, net (notes 3 and 12)...................... 101.5 127.5
Other assets, net (note 3)................................... 6.6 12.0
------- ------

$ 506.0 548.1
======= ======

Liabilities and Stockholder's Equity (Deficit)
- ----------------------------------------------
Accounts payable:
Film rentals........................................ $ 29.8 28.0
Other............................................... 57.2 51.9
------- ------
87.0 79.9
------- ------
Accrued liabilities:
Salaries and wages.................................. 7.9 9.4
Interest............................................ 5.1 5.0
Other............................................... 13.2 12.9
------- ------
26.2 27.3
------- ------

Other liabilities 32.6 24.4
Debt (note 5) 362.2 389.0
------- ------
Total liabilities................................... 508.0 520.6

Minority interests in equity of consolidated subsidiaries.... 7.2 7.0

Stockholder's Equity (Deficit):
Preferred stock (note 7)............................ 193.9 170.1
Common stock (note 8)............................... - -
Additional paid-in capital.......................... 29.0 52.8
Accumulated deficit................................. (230.3) (202.5)
Cumulative foreign currency translation adjustment.. (0.4) (0.5)
Intercompany account................................ (1.4) 0.6
------- ------
(9.2) 20.5
------- ------

$506.0 548.1
======= ======

See accompanying notes to consolidated financial statements.

UNITED ARTISTS THEATRE CIRCUIT, INC.
AND SUBSIDIARIES

Consolidated Statements of Operations
(Amounts in Millions)

Years Ended December 31,
------------------------
1997 1996 1995
------ ----- -------

Revenue:
Admissions........................................... $473.9 466.5 457.1
Concession sales..................................... 189.6 185.1 178.2
Other................................................ 21.6 25.9 13.3
------ ----- -----
685.1 677.5 648.6
------ ----- -----

Costs and expenses:
Film rental and advertising expenses................. 262.5 257.2 248.6
Direct concession costs.............................. 30.2 29.3 29.5
Other operating expenses............................. 261.2 259.4 246.2
Sale and leaseback rentals (note 2).................. 13.4 11.6 0.5
Affiliate lease rentals (note 9)..................... 9.6 10.0 14.1
General and administrative (notes 9 and 11).......... 23.7 34.5 34.6
Restructuring charge (note 10)....................... 0.8 1.9 -
Depreciation and amortization (note 12).............. 89.3 80.7 87.0
------ ----- -----
690.7 684.6 660.5
------ ----- -----
Operating loss...................................... (5.6) (7.1) (11.9)

Other income (expense):
Interest, net (note 5):
Interest expense.................................... (36.9) (36.1) (39.0)
Amortization of deferred loan costs................. (2.1) (2.2) (2.1)
Interest income..................................... 1.9 1.4 1.9
------ ----- -----
(37.1) (36.9) (39.2)
Gain (loss) on disposition of assets, net (note 13).. 21.9 1.3 (13.9)
Share of earnings (losses) of affiliates, net........ (1.6) (0.5) 0.7
Minority interests in earnings of
consolidated subsidiaries........................... (1.3) (0.8) (1.2)
Other, net........................................... (2.6) (1.5) (2.0)
------ ----- -----
(20.7) (38.4) (55.6)
------ ----- -----
Loss before income tax expense...................... (26.3) (45.5) (67.5)
Income tax expense (note 14).......................... (1.5) (1.1) (1.4)
------ ----- -----
Net loss............................................ (27.8) (46.6) (68.9)
Dividend on preferred stock (note 7).................. (23.8) (20.9) (18.3)
------ ----- -----
Net loss available to common stockholder............ $(51.6) (67.5) (87.2)
====== ===== =====

See accompanying notes to consolidated financial statements.

UNITED ARTISTS THEATRE CIRCUIT, INC.
AND SUBSIDIARIES

Consolidated Statements of Stockholder's Equity (Deficit)
(Amounts in Millions)

Cumulative
foreign Total
Additional Accumu- currency Inter- stockholder's
Preferred Common paid-in lated translation company equity
stock stock capital deficit adjustment account (deficit)
--------- ------ ---------- ------- ----------- ------- -------------

Balance at January 1, 1995................... $130.9 - 92.0 (87.0) - 2.5 138.4
Accretion of dividends on preferred stock.. 18.3 - (18.3) - - - -
Net decrease in intercompany account....... - - - - - (2.3) (2.3)
Foreign currency translation adjustment.... - - - - (0.1) - (0.1)
Net loss................................... - - - (68.9) - - (68.9)
--------- ------ ---------- ------- ----------- ------- -------------

Balance at December 31, 1995................. 149.2 - 73.7 (155.9) (0.1) 0.2 67.1
Accretion of dividends on preferred stock.. 20.9 - (20.9) - - - -
Net increase in intercompany account....... - - - - - 0.4 0.4
Foreign currency translation adjustment.... - - - - (0.4) - (0.4)
Net loss................................... - - - (46.6) - - (46.6)
--------- ------ ---------- ------- ----------- ------- -------------

Balance at December 31, 1996................. 170.1 - 52.8 (202.5) (0.5) 0.6 20.5
Accretion of dividends on preferred stock.. 23.8 - (23.8) - - - -
Net decrease in intercompany account....... - - - - - (2.0) (2.0)
Foreign currency translation adjustment.... - - - - 0.1 - 0.1
Net loss................................... - - - (27.8) - - (27.8)

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

Balance at December 31, 1997................. $193.9 - 29.0 (230.3) (0.4) (1.4) (9.2)

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

See accompanying notes to consolidated financial statements.

UNITED ARTISTS THEATRE CIRCUIT, INC.
AND SUBSIDIARIES

Consolidated Statements of Cash Flow
(Amounts in Millions)

Years Ended December 31,
--------------------------
1997 1996 1995
-------- ------- -------

Net cash provided by operating activities................................. $ 48.7 28.4 42.0
------- ------ ------

Cash flow from investing activities:
Capital expenditures............................................. (58.4) (67.3) (84.2)
(Increase) decrease in construction in progress, net............. (7.4) 1.5 (5.1)
Increase in receivable from sale and leaseback escrow............ (12.8) (19.5) -
Proceeds from sale and leaseback transaction and escrow.......... 23.2 22.9 40.4
Cash paid for minority interest holding.......................... - - (10.3)
Proceeds from disposition of assets, net......................... 59.5 20.5 7.7
Investments in and receivables from theatre joint ventures, net.. (18.3) (14.3) (2.3)
Other, net....................................................... (0.5) (2.5) (0.5)
------- ------ ------
Net cash used in investing activities........................... (14.7) (58.7) (54.3)
------- ------ ------

Cash flow from financing activities:
Debt borrowings.................................................. 150.9 129.8 187.5
Debt repayments.................................................. (179.2) (126.3) (127.9)
Increase (decrease) in intercompany account...................... (2.0) 0.4 (2.3)
Increase (decrease) in cash overdraft............................ (2.8) 6.2 (14.1)
(Increase) decrease in related party receivables................. 0.4 (2.8) (6.7)
Other, net....................................................... (0.3) 0.2 (4.5)
------- ------ ------
Net cash provided by (used in) financing activities............. (33.0) 7.5 32.0
------- ------ ------

Net increase (decrease) in cash and cash equivalents............ 1.0 (22.8) 19.7
Cash and cash equivalents:
Beginning of period.............................................. 9.6 32.4 12.7
------- ------ ------
End of period.................................................... $ 10.6 9.6 32.4
======= ====== ======

Reconciliation of net loss to net cash provided by
operating activities:
Net loss......................................................... $ (27.8) (46.6) (68.9)
Effect of leases with escalating minimum annual
rentals.......................................................... 3.7 3.1 2.0
Depreciation and amortization.................................... 89.3 80.7 87.0
(Gain) loss on disposition of assets, net........................ (21.9) (1.3) 13.9
Share of (earnings) losses of affiliates, net.................... 1.6 0.5 (0.7)
Minority interests in earnings of
consolidated subsidiaries....................................... 1.3 0.8 1.2
(Increase) decrease in receivables, prepaid expenses
and other assets, net........................................... 0.9 0.6 (3.6)
Increase (decrease) in accounts payable, accrued
liabilities and other liabilities, net.......................... 1.6 (9.4) 11.1
------- ------ ------

Net cash provided by operating activities....................... $ 48.7 28.4 42.0
======= ====== ======

See accompanying notes to consolidated financial statements.

UNITED ARTISTS THEATRE CIRCUIT, INC.
AND SUBSIDIARIES

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

(1) ORGANIZATION

On May 12, 1992, United Artists Theatre Circuit, Inc. and substantially
all of its then existing subsidiaries (the "Company") were acquired (the
"Acquisition") by OSCAR I Corporation ("OSCAR I") from an indirect
subsidiary of Tele-Communications, Inc. ("TCI"). OSCAR I is owned by an
investment fund managed by affiliates of Merrill Lynch Capital Partners,
Inc., ("MLCP") and certain institutional investors (collectively the "Non-
Management Investors"), and certain members of the Company's management.

In addition to owning all of the outstanding capital stock of the
Company, OSCAR I also owns all of the outstanding capital stock of United
Artists Realty Company ("UAR"). UAR and its subsidiary United Artists
Properties I Corp. ("Prop I") are the owners and lessors of certain
operating theatre properties leased to and operated by the Company. Prior
to December 13, 1995, UAR's other subsidiary, United Artists Properties II
Corp. ("Prop II"), was also the owner and lessor of certain theatre
properties leased to and operated by the Company.

(2) SALE AND LEASEBACK TRANSACTIONS

On December 13, 1995, the Company entered into a sale and leaseback
transaction (the "1995 Sale and Leaseback") whereby the buildings and land
underlying ten of its operating theatres and four theatres under
development were sold to, and leased back from, the 1995-A United Artists
Pass Through Trust (the "Pass Through Trust"), an unaffiliated third party,
for approximately $47.1 million. A portion of the sale proceeds were used
to pay certain transaction expenses and repay the outstanding revolving
bank debt of the Company and the remainder was held in short-term cash
investments at December 31, 1995. The proceeds related to three of the
theatres under development (approximately $14.2 million) were initially
deposited into an escrow account and were paid to the Company during 1996
after construction of the theatres was completed. The proceeds related to
one of the new theatres and a four-screen addition to an existing theatre
under development (approximately $7.8 million) were deposited into the same
escrow account and were paid to the Company in 1997 when construction of
the new theatre and the screen addition was completed. The 1995 Sale and
Leaseback requires the Company to lease the underlying theatres for a
period of 21 years and one month, with the option to extend for up to an
additional 10 years. An agreement with the Pass Through Trust requires the
maintenance of certain financial covenants by the Company.

On November 8, 1996, the Company entered into a sale and leaseback
transaction whereby the buildings and land underlying three of its
operating theatres and two theatres under development were sold to, and
leased back from, an unaffiliated third party for approximately $21.5
million. The sales proceeds relating to the three operating theatres
(approximately $9.2 million) were used to pay certain transaction expenses
and repay outstanding bank debt. The sales proceeds related to the two
theatres under development (approximately $12.3 million) were deposited
into an escrow account and are to be paid under the terms of the sale and
leaseback to fund certain of the construction costs associated with the two
theatres. During 1997, the Company opened one of the theatres under
development and received approximately $10.8 million of proceeds from the
escrow account. The lease has a term of 20 years and nine months with
options to extend for an additional 10 years.

UNITED ARTISTS THEATRE CIRCUIT, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(2) SALE AND LEASEBACK TRANSACTIONS, CONTINUED

On December 31, 1997, the Company entered into a sale and leaseback
transaction whereby two theatres currently under development were sold to,
and leased back from, an unaffiliated third party for approximately $18.1
million. At December 31, 1997, approximately $13.5 million of the sales
proceeds were deposited into an escrow account and are to be paid under the
terms of the sale and leaseback to fund certain of the construction costs
associated with the two theatres. The lease has a term of 22 years with
options to extend for an additional 10 years.

(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Principles of Consolidation
---------------------------

The consolidated financial statements include the accounts of the
Company and its majority owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated in
consolidation.

(b) Nature of Operations
--------------------
The Company is principally engaged in the operation of motion
picture theatres.

The Company considers investments with initial maturities of three
months or less to be cash equivalents. Transactions effected through
intercompany accounts are considered to be constructive cash receipts
and payments.

(d) Investments
-----------

Investments in which the Company's ownership is 20% to 50% are
accounted for using the equity method. Under this method, the
investment, originally recorded at cost, is adjusted to recognize
dividends received and the Company's share of net earnings or losses
of the investee as they occur. Investments in which the Company's
ownership is less than 20% are accounted for using the cost method.
Under this method, the investments are recorded at cost and any
dividends received are recorded as income.

(e) Property and Equipment
----------------------

Property and equipment are stated at cost, including acquisition
costs allocated to tangible assets acquired. Construction costs,
including applicable direct overhead, are capitalized. Repairs and
maintenance are charged to operations.

Depreciation is calculated using the straight-line method over the
estimated useful lives of the assets, which range from 3 to 40 years.
Leasehold improvements are amortized over the terms of the leases,
including certain renewal periods or, in the case of certain
improvements, the estimated useful lives of the assets, if shorter.
Costs associated with new theatre construction are depreciated once
such theatres are placed in service.

(f) Intangible Assets
-----------------

Intangible assets consist of theatre lease acquisition costs and
non-compete agreements. Amortization of theatre lease acquisition
costs and non-compete agreements is calculated on a straight-line
basis over the terms of the underlying leases including certain
renewal periods (weighted average life of approximately 17 years) and
non-compete agreements (primarily 5 years). During 1997,
approximately $100 million of non-compete agreements relating to the
Acquisition were fully amortized. Intangible assets and related
accumulated amortization are summarized as follows (amounts in
millions):

UNITED ARTISTS THEATRE CIRCUIT, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED

December 31,
----------------
1997 1996
------- -------

Theatre lease acquisition costs.. $156.9 169.7
Non-compete agreements........... 3.0 103.0
------ ------
159.9 272.7
Accumulated amortization......... (58.4) (145.2)
------ ------
$101.5 127.5
====== ======

(g) Other Assets
------------

Other assets primarily consist of deferred loan and acquisition
costs. Amortization of the deferred loan costs is calculated on a
straight-line basis over the terms of the underlying loan agreements
(average life of approximately seven years) and is included as a
component of interest expense. Amortization of the deferred
acquisition costs is calculated on a straight line basis over five
years. During 1997, approximately $18.4 million of deferred
acquisition costs relating to the Acquisition and approximately $7.2
million of other assets were fully amortized. Other assets and
related accumulated amortization are summarized as follows (amounts in
millions):

December 31,
---------------
1997 1996
------- ------

Deferred loan costs......... $ 14.9 14.9
Deferred acquisition costs.. - 18.4
Other....................... 2.2 8.4
------ -----
17.1 41.7
Accumulated amortization.... (10.5) (29.7)
------ -----
$ 6.6 12.0
====== =====

(h) Operating Costs and Expenses
----------------------------

Film rental and advertising expenses include film rental and co-op
and directory advertising costs. Film advertising costs are expensed
as incurred. Direct concession costs include direct concession
product costs and concession promotional expenses. Concession
promotional expenses are expensed as incurred. Other operating
expenses include joint facility costs such as employee costs, theatre
rental and utilities, which are common to both ticket sales and
concession operations. As such, other operating expenses are reported
as a combined amount as the allocation of such costs to exhibition and
concession activities would be arbitrary and not meaningful. Rental
expense for operating leases which provide for escalating minimum
annual rentals during the term of the lease are accounted for on a
straight-line basis over the terms of the underlying leases.

(i) Estimates
---------

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

UNITED ARTISTS THEATRE CIRCUIT, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED

(j) Reclassification
----------------
Certain prior year amounts have been reclassified for
comparability with the 1997 presentation.

(4) SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash payments for interest for the years ended December 31, 1997, 1996
and 1995, were $36.3 million, $37.3 million and $35.0 million,
respectively.

Cash payments by certain less than 80% owned entities for income taxes
for the years ended December 31, 1997, 1996 and 1995, were $1.4 million,
$1.2 million and $0.7 million, respectively.

The Company accrued $23.8 million, $20.9 million and $18.3 million of
dividends during the years ended December 31, 1997, 1996 and 1995,
respectively, on its preferred stock (see note 7).

During 1997, 1996 and 1995, the Company incurred $1.1 million, $1.4
million and $2.4 million, respectively, of capital lease obligations
relating to new equipment.

During 1995, Prop II transferred equipment with a net historical basis
of $6.1 million to the Company.

(5) DEBT

Debt is summarized as follows (amounts in millions):

December 31,
-------------
1997 1996
------ -----

Bank Credit Facility (a).. $226.5 255.6
Senior Secured Notes (b).. 125.0 125.0
Other (c)................. 10.7 8.4
------ -----
$362.2 389.0
====== =====

(a) The Company's bank credit facility (the "Bank Credit Facility")
provides for term loans aggregating $203.5 million (the "Term Loans"),
a reducing revolving loan with commitments aggregating $78.8 million
(the "Revolving Facility") and standby letters of credit aggregating
$12.5 million (the "Standby Letters of Credit"). Principal on the
Term Loans is payable in escalating semi-annual installments through
March 31, 2002. The aggregate commitments available for borrowing
under the Revolving Facility decline $8.75 million at December 31,
1998, $13.125 million at December 31, 1999 and 2000 and $21.875
million at December 31, 2001 and March 31, 2002. Borrowings under the
Bank Credit Facility provide for interest to be accrued at varying
rates depending on the ratio of indebtedness to annualized operating
cash flow, as defined. Interest is payable at varying dates
depending on the type of rate selected by the Company, but no less
frequently than once each quarter. The Bank Credit Facility contains
certain provisions that require the maintenance of certain financial
ratios and place limitations on additional indebtedness, disposition
of assets, capital expenditures and payment of dividends. The Bank
Credit Facility is secured by the stock of the Company and
substantially all of the Company's subsidiaries, and is guaranteed by
OSCAR I and substantially all of the Company's subsidiaries. During
1997, the Company repaid $10.8 million on the Term Loans in
conjunction with certain asset dispositions. This repayment will be
applied pro rata against the remaining semi-annual Term Loan principal
installments.

UNITED ARTISTS THEATRE CIRCUIT, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(5) DEBT, CONTINUED

(b) The senior secured notes (the "Senior Secured Notes") are due May
1, 2002 and require repayments prior to maturity of $31.25 million on
May 1, 2000 and on May 1, 2001. The Senior Secured Notes accrue
interest at 11 1/2% per annum, which is payable semi-annually. The
Senior Secured Notes place limitations on, among other things,
additional indebtedness, disposition of assets and payment of
dividends. The Senior Secured Notes are secured on a pari-passu basis
----------
with the Bank Credit Facility by the stock of the Company and
substantially all of the Company's subsidiaries, and are guaranteed on
a pari-passu basis with the Bank Credit Facility by OSCAR I and
----------
substantially all of the Company's subsidiaries. The Senior Secured
Notes are redeemable at the option of the Company. The redemption
price of the Senior Secured Notes at December 31, 1997 was 104.313% of
the outstanding principal balance.

(c) Other debt at December 31, 1997, consists of various term loans,
mortgage notes, capital leases and other borrowings. This other debt
carries interest rates ranging from 7% to 12%. Principal and interest
are payable at various dates through June 2007.

At December 31, 1997, the Company was party to interest rate cap
agreements on $100.0 million of floating rate debt which provide for a
LIBOR interest rate cap of 7 1/2% and expire at various dates through July
1999. The Company is subject to credit risk exposure from non-performance
of the counterparties to the interest rate cap agreements. As the Company
has historically received payments relating to its interest rate cap
agreements, it does not anticipate such non-performance in the future. The
Company amortizes the cost of its interest rate cap agreements to interest
expense over the life of the underlying agreement. Amounts received from
the counterparties to the interest rate cap agreements are recorded as a
reduction of interest expense.

At December 31, 1997, the Company had approximately $55.8 million of
unused revolving loan commitments pursuant to the Bank Credit Facility,
$11.1 million of which has been used for the issuance of letters of credit.
The Company pays commitment fees of 3/8% per annum on the average unused
revolver commitments.

Annual maturities of debt for each of the next five years and
thereafter are summarized as follows (amounts in millions):

1998........ $ 32.3
1999........ 48.4
2000........ 83.8
2001........ 83.7
2002........ 110.2
Thereafter.. 3.8
------
$362.2
======

(6) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

Cash and Cash Equivalents
-------------------------
The carrying amount of cash and cash equivalents approximates fair
value because of its short maturity.

UNITED ARTISTS THEATRE CIRCUIT, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(6) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS, CONTINUED

Financial Instruments
---------------------
The carrying amount and estimated fair value of the Company's financial
instruments at December 31, 1997 are summarized as follows (amounts in
millions):

Carrying Estimated
Amount Fair Value
-------- ----------

Bank Credit Facility and Other Debt.. $237.2 237.2
====== =====
Senior Secured Notes................. $125.0 130.6
====== =====
Interest Rate Cap Agreements......... $ 0.1 0.1
====== =====

Bank Credit Facility and Other Debt: The carrying amount of the
Company's borrowings under the Bank Credit Facility and other debt
approximates fair value because the interest rates on the majority of this
debt floats with market interest rates.

Senior Secured Notes: The fair value of the Company's Senior Secured
Notes is estimated based upon quoted market prices at December 31, 1997.

Interest Rate Cap Agreements: The fair value of the Company's interest
rate cap agreements is estimated based upon dealer quotes for similar
agreements at December 31, 1997.

(7) PREFERRED STOCK

The Company's preferred stock is redeemable at any time at the option
of the Company at its stated liquidation value plus accrued and unpaid
dividends. Dividends accrue at a rate of 8% through December 31, 1995, 9%
through December 31, 1996 and 14% thereafter, and are payable in cash or in
kind through December 31, 1996. Cash dividends are required for periods
subsequent to December 31, 1996, provided that no provisions exist in any
senior debt facility, which restricts such cash payments. Currently, such
restrictions exist. Due to the perpetual nature of the preferred stock and
the escalating terms of the required dividend rates, for financial
reporting purposes, dividends have been accrued at a 14% per annum rate for
all periods since issuance. At December 31, 1997, the actual redemption
value in accordance with the terms of the preferred stock was approximately
$152.1 million, or approximately $41.8 million less than the carrying
amount at December 31, 1997.

(8) COMMON STOCK

The Company is authorized to issue 1,000 shares of its $1.00 par value
common stock. At December 31, 1997 and 1996, the Company had 100 shares of
common stock outstanding, all of which were held by OSCAR I.

At December 31, 1997, OSCAR I had three stock-based compensation plans,
which are described more fully in OSCAR I's financial statement footnotes,
a copy of which is attached hereto. The Company applies the provisions of
Accounting Principles Board Opinion No. 25 "Accounting for Stock Issued to
Employees," and related Interpretations in accounting for OSCAR I's stock
option plans. No compensation cost has been recognized by the Company for
any of OSCAR I's stock option plans. The Company's compensation expense
would not have been materially different had the Company recorded
compensation expense for these three stock option plans in accordance with
SFAS No. 123, "Accounting for Stock Based Compensation."

UNITED ARTISTS THEATRE CIRCUIT, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(9) RELATED PARTY TRANSACTIONS

The Company leases certain of its theatres from UAR, Prop I and Prop II
(prior to December 13, 1995) in accordance with three master leases. The
master leases provide for basic monthly rentals and may require additional
rentals, based on the revenue of the underlying theatre. The lease
arrangements with Prop I and Prop II were entered into in conjunction with
the placement of mortgage debt financing in 1988 and 1989, respectively.
In conjunction with the Acquisition, the Company issued $25.0 million of
Standby Letters of Credit as part of its Bank Credit Facility. In
conjunction with the 1995 Sale and Leaseback, the Prop II mortgage debt was
prepaid, the Prop II master lease was terminated and $12.5 million in
Standby Letters of Credit issued by the Company were canceled.

In order to fund the cost of additions and/or renovations to the
theatres leased by the Company from UAR or Prop I, the Company has
periodically made advances to UAR. Interest on these advances accrues at
the prime rate and amounted to $1.4 million, $1.1 million and $1.4 million
for the years ended December 31, 1997, 1996 and 1995, respectively.

During 1997, the Company exchanged two fee-owned theatre properties
with Prop I in return for a fee-owned property and a $2.7 million note.
During 1996, the Company exchanged a fee-owned theatre property with Prop I
in return for two fee-owned theatre properties and a $1.5 million note.
The notes bear interest at the prime rate plus 1 1/2% and are due upon
demand.

In conjunction with the Acquisition, the Company entered into a
management agreement with UAR. Such management agreement provides for a fee
to be paid to the Company in return for certain accounting and management
services. These fees are recorded as a reduction of general and
administrative expenses in the accompanying consolidated financial
statements and approximated $0.6 million, $0.6 million and $0.9 million for
the years ended December 31, 1997, 1996 and 1995, respectively.

(10) RESTRUCTURING CHARGE

At the end of 1996, the Company initiated a corporate restructuring
plan intended to provide a higher level of focus on the Company's domestic
theatrical business at a lower annual cost. This corporate restructuring
was substantially completed in January 1997. In conjunction with this
corporate restructuring plan, the Company recorded $0.8 million and $1.9
million of restructuring charges in 1997 and 1996, respectively, for
severance and other related expenses.

(11) EMPLOYEE BENEFIT PLANS

The UATC 401(k) Savings Plan (the "Savings Plan") provides that
employees may contribute up to 10% of their compensation, subject to IRS
limitations, to the Savings Plan. Employee contributions are invested in
various investment funds based upon elections made by the employee. Prior
to January 1, 1997, the Company matched 100% of each employee's
contributions up to 10% of an employee's compensation. As part of the
corporate restructuring plan (see note 10), effective January 1, 1997, the
Savings Plan was amended to provide for a Company match of 100% of each
employee's contribution up to 3% of their compensation. Employees vest in
the Company's matching contributions 20% per year for every year of
service, as defined.

UNITED ARTISTS THEATRE CIRCUIT, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(11) EMPLOYEE BENEFIT PLANS, CONTINUED

Effective January 1, 1993, the Company established the UATC
Supplemental 401(k) Savings Plan (the "Supplemental Plan") for certain
employees who are highly compensated as defined by the IRS and whose
elective contributions to the Savings Plan exceed the IRS limitations.
Through December 31, 1996, such employees were allowed to contribute to the
Supplemental Plan provided that the aggregate contributions to the Savings
Plan and Supplemental Plan did not exceed 10% of their compensation. As
part of the corporate restructuring plan (see note 10), effective January
1, 1997, the Company suspended the Supplemental Plan. The Company matched
100% of the employee's contributions through the date of suspension of the
Supplemental Plan. Employees vest ratably in the Company's matching
contributions over 5 years from the date of participation in the
Supplemental Plan.

Contributions to the various employee benefit plans for the years ended
December 31, 1997, 1996 and 1995 were $0.6 million, $2.3 million and $2.1
million, respectively.

(12) PROVISION FOR IMPAIRMENT

The Company adopted SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of," during
1995. Upon adoption of SFAS No. 121 in 1995, a non-cash charge of $21.0
million was recorded by the Company. During 1997 and 1996, the Company
recorded non-cash charges for the impairment of its long-lived assets of
$31.4 million and $8.7 million, respectively. These non-cash charges
relate to the difference between the historical book value of the
individual theatres (in some cases groups of theatres) and the discounted
cash flow expected to be received from the operation or future sale of the
individual theatres (or groups of theatres).

(13) GAIN ON DISPOSITION OF ASSETS

During April 1997, the Company sold its 50% interest in Hong Kong theatre
company to its partner for approximately $17.5 million and, during
September 1997, the Company sold its theatre investments in Mexico and the
majority of its theatre assets in Argentina for approximately $25.0
million. During the year ended December 31, 1997, the Company sold various
other non-strategic or underperforming theatres for net cash proceeds of
approximately $17.0 million. Additionally, the Company has entered into an
agreement to sell a portion of its theatre investments in Singapore and
Thailand for approximately $8.1 million.

(14) INCOME TAXES

The Company and each of its 80% or more owned subsidiaries are included
in OSCAR I's consolidated Federal income tax return. Pursuant to a tax
sharing agreement with OSCAR I, the Company and each of its 80% or more
owned consolidated subsidiaries are allocated a portion of OSCAR I's
current Federal income tax expense (benefit). Such allocations are
determined as if the Company and each of its 80% or more owned consolidated
subsidiaries were separate tax paying entities within the consolidated
group. For the years ended December 31, 1997, 1996 and 1995, the Company
and each of its 80% or more owned consolidated subsidiaries were allocated
no current Federal income tax expense (benefit) pursuant to such tax
sharing agreement as a result of the group's overall net loss position.

UNITED ARTISTS THEATRE CIRCUIT, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(14) INCOME TAXES, CONTINUED

Consolidated subsidiaries in which the Company owns less than 80% file
separate Federal income tax returns. The current and deferred Federal and
state income taxes of such subsidiaries are calculated on a separate return
basis and are included in the accompanying consolidated financial
statements of the Company.

The current state income tax expense of the Company and Federal income
tax expense of the Company's less than 80%-owned consolidated subsidiaries
and deferred state and Federal income tax expense are as follows (amounts
in millions):

Years Ended December 31,
------------------------
1997 1996 1995
------- ------- ------

Current income taxes:
State expense.......... $ 0.2 0.1 0.4
Federal expense........ 1.3 1.0 1.0
----- ---- ------
1.5 1.1 1.4
Deferred income taxes:
State expense.......... - - -
Federal expense........ - - -
----- ---- ------
$ 1.5 1.1 1.4
===== ==== ======

Income tax expense differed from the amount computed by applying the
U.S. Federal income tax rate (35% for all periods) to loss before income
tax expense as a result of the following (amounts in millions):

Years Ended December 31,
-------------------------
1997 1996 1995
------- ------- ---------

Expected tax benefit........................... $(9.2) (15.9) (23.6)
Change in valuation allowance.................. 12.9 13.3 24.8
State tax, net of Federal benefit.............. 0.1 - 0.3
Adjustment of net operating loss carryforward.. (2.4) 0.7 -
Other.......................................... 0.1 3.0 (0.1)
----- ----- -----
$ 1.5 1.1 1.4
===== ===== =====

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at December 31, 1997
and 1996 are as follows (amounts in millions):

1997 1996
----- -----

Deferred tax assets:
Net operating loss carryforwards.. $75.0 65.6
Intangible and other assets....... 3.7 3.9
Accrued liabilities............... 3.6 2.8
Other............................. 1.2 1.1
----- -----
83.5 73.4
Less: valuation allowance........ (78.3) (65.4)
----- -----
Net deferred tax assets.......... 5.2 8.0
----- -----
Deferred tax liabilities:
Property and equipment............ 3.7 6.7
Other............................. 1.5 1.3
----- -----
Net deferred tax liabilities..... 5.2 8.0
----- -----
Net................................ $ - -
===== =====

UNITED ARTISTS THEATRE CIRCUIT, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(14) INCOME TAXES, CONTINUED

At December 31, 1997, the Company had a net operating loss carryforward of
approximately $200.0 million. The income tax returns of OSCAR I are
currently being audited by the Internal Revenue Service. The outcome of
this audit may reduce the amount of OSCAR I's net operating loss
carryforward and/or change the basis (and thus future depreciation) related
to certain assets. Management believes that the result of the audit will
not have a material adverse effect on the financial condition or results of
operations of the Company.

(15) COMMITMENTS AND CONTINGENCIES

As discussed in note 9, in conjunction with the Acquisition, at
December 31, 1997 the Company issued $12.5 million of Standby Letters of
Credit related to certain indebtedness of Prop I. Should Prop I default on
such indebtedness, the Company may be liable for up to $12.5 million under
the Standby Letters of Credit.

The Company conducts a significant portion of its theatre and corporate
operations in leased premises. These leases have noncancelable terms
expiring at various dates after December 31, 1997. Many leases have
renewal options. Most of the leases provide for contingent rentals based
on the revenue results of the underlying theatre and require the payment of
taxes, insurance, and other costs applicable to the property. Also,
certain leases contain escalating minimum rental provisions that have been
accounted for on a straight-line basis over the initial term of the leases.

Rent expense for theatre and corporate operations is summarized as
follows (amounts in millions):

Years Ended December 31,
------------------------
1997 1996 1995
----- ---- ----

Minimum rental.................... $86.6 82.5 69.6
Contingent rental................. 3.8 3.5 3.5
Effect of leases with escalating
minimum annual rentals............ 3.7 3.1 2.0
Rent tax.......................... 0.5 0.6 0.7
----- ---- ----
$94.6 89.7 75.8
===== ==== ====

Approximately $13.4 million, $11.6 million and $0.5 million of the
minimum rentals reflected in the preceding table for the years ended
December 31, 1997, 1996 and 1995, respectively, were incurred pursuant to
the sale and leaseback transactions (see note 2).

Approximately $9.5 million, $9.9 million and $13.8 million of the
minimum rentals reflected in the preceding table for the years ended
December 31, 1997, 1996 and 1995, respectively, were incurred pursuant to
operating leases between the Company and UAR, Prop I and Prop II.
Additionally, $0.1 million, $0.1 million and $0.3 million of the contingent
rentals reflected in the preceding table for the years ended December 31,
1997, 1996 and 1995, respectively, were incurred pursuant to such leases.

UNITED ARTISTS THEATRE CIRCUIT, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(15) COMMITMENTS AND CONTINGENCIES, CONTINUED

Future minimum lease payments under noncancelable operating leases for
each of the next five years and thereafter are summarized as follows
(amounts in millions):

Third Party Affiliate
Leases Leases
----------- ---------

1998........ $ 79.3 8.4
1999........ 78.5 8.4
2000........ 75.2 8.4
2001........ 73.1 8.4
2002........ 70.4 8.4
Thereafter.. 689.0 7.0

Included in the future minimum lease payments table above are lease
payments relating to theatres which the Company intends to sell or close.
To the extent the Company is successful in disposing of these theatres, the
future minimum lease payments will be decreased.

It is expected that in the normal course of business, desirable leases
that expire will be renewed or replaced by other leases.

At December 31, 1997, the Company had entered into theatre construction
and equipment commitments aggregating approximately $100 million for ten
new theatres and screen additions or renovations to 12 existing theatres
which the Company intends to open during the next two years. Such amount
relates only to projects in which the Company had executed a definitive
lease agreement and all significant lease contingencies have been
satisfied. Of the committed amount, approximately $15.0 million will be
reimbursed to the Company from proceeds of the sale and leaseback
transactions currently held in escrow (see note 2). The lease agreements
have terms of between 15 and 20 years and, upon the opening of the
theatres, require future minimum lease payments over the terms of the
leases averaging $13.8 million per annum.

The Company is involved in various pending and threatened legal proceedings
involving allegations concerning contract breaches, torts, employment
matters, environmental issues, anti-trust violations, local tax disputes
and miscellaneous other matters. In addition, there are various claims
against the Company relating to certain of the leases held by the Company.
Although it is not possible to predict the outcome of these proceedings,
the Company believes that such legal proceedings will not have a material
adverse effect on the Company's financial position, liquidity or results of
operations.

The Americans with Disabilities Act of 1990 (the "ADA"), and certain
state statutes among other things, require that places of public
accommodation, including theatres (both existing and newly constructed) be
accessible to and that assistive listening devices be available for use by
certain patrons with disabilities. With respect to access to theatres, the
ADA may require that certain modifications be made to existing theatres to
make such theatres accessible to certain theatre patrons and employees who
are disabled. The ADA requires that theatres be constructed in such a
manner that persons with disabilities have full use of the theatre and its
facilities and reasonable access to work stations. The ADA provides for a
private right of action and reimbursement of plaintiff's attorneys' fees
and expenses under certain circumstances. The Company has established a
program to review and evaluate the Company's theatres and to make any
changes that may be required by the ADA. In 1995, the Company settled the
lawsuit styled Connie Arnold et al. vs. UATC, filed in 1991. This lawsuit
involved allegations that certain of the Company's theatres lacked
accessibility to persons with mobility disabilities in violation of the
ADA. In the settlement agreement, the Company, the plaintiffs and the
Department of Justice established standards of modifications that
must be made to the

UNITED ARTISTS THEATRE CIRCUIT, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(15) COMMITMENTS AND CONTINGENCIES, CONTINUED

Company's theatres throughout the United States to make them more
accessible to persons with disabilities. The Company believes that the
cost of complying with the ADA and the settlement agreement in the Connie
Arnold case will not have a material adverse effect on the Company's
financial position, liquidity or results of operations.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------

TO OSCAR I CORPORATION:

We have audited the accompanying consolidated balance sheets of OSCAR I
Corporation and subsidiaries (the "Company") as of December 31, 1997 and 1996,
and the related consolidated statements of operations, stockholders' equity
(deficit) and cash flow for the years then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of OSCAR I Corporation
and subsidiaries as of December 31, 1997 and 1996 and the results of their
operations and their cash flow for the years then ended in conformity with
generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Denver, Colorado
March 23, 1998

INDEPENDENT AUDITORS' REPORT
----------------------------

THE BOARD OF DIRECTORS AND STOCKHOLDERS
OSCAR I CORPORATION:

We have audited the accompanying consolidated statements of operations,
stockholders' equity and cash flow of OSCAR I Corporation and subsidiaries (the
"Company") for the year ended December 31, 1995. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the results of operations and cash flow of
OSCAR I Corporation and subsidiaries for the year ended December 31, 1995, in
conformity with generally accepted accounting principles.

As discussed in note 10 to the consolidated financial statements, the Company
adopted the provisions of Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of," in 1995.

KPMG PEAT MARWICK LLP

Denver, Colorado
March 27, 1996

OSCAR I CORPORATION
AND SUBSIDIARIES

Consolidated Balance Sheets
(Amounts in Millions)

December 31,
-----------------
1997 1996
-------- -------

Assets
- ------
Cash and cash equivalents..................................... $ 10.8 10.1
Receivables, net:
Notes................................................ 1.3 1.7
Other................................................ 13.5 30.3
------- ------
14.8 32.0
------- ------

Prepaid expenses and concession inventory..................... 18.4 15.4
Investments and related receivables........................... 15.4 30.2
Property and equipment, at cost (note 10):
Land................................................. 54.7 62.2
Theatre buildings, equipment and other............... 499.0 453.2
------- ------
553.7 515.4
Less accumulated depreciation and amortization....... (158.4) (130.4)
------- ------
395.3 385.0
------- ------
Intangible assets, net (notes 3 and 10)....................... 101.5 127.5
Other assets, net (note 3).................................... 6.8 12.5
------- ------

$ 563.0 612.7
======= ======

Liabilities and Stockholders' Equity (Deficit)
- ----------------------------------------------
Accounts payable:
Film rentals......................................... $ 29.8 28.0
Other................................................ 57.3 51.9
------- ------
87.1 79.9
------- ------
Accrued liabilities:
Salaries and wages................................... 7.9 9.4
Interest............................................. 5.6 5.7
Other................................................ 13.2 13.0
------- ------
26.7 28.1
------- ------

Other liabilities (note 2).................................... 48.3 36.2
Debt (note 5) 414.0 453.1
------- ------
Total liabilities.................................... 576.1 597.3

Minority interests in equity of consolidated subsidiaries..... 7.2 7.0

Stockholders' Equity (Deficit) (note 7):
Preferred stock...................................... 193.9 170.1
Common stock:
Class A............................................ 0.1 0.1
Class B............................................ - -
Class C............................................ - -
Additional paid-in capital........................... 16.4 40.2
Accumulated deficit.................................. (228.5) (201.5)
Cumulative foreign currency translation adjustment... (0.4) (0.5)
Treasury stock....................................... (1.8) -
------- ------
(20.3) 8.4
------- ------

$563.0 612.7
======= ======
See accompanying notes to consolidated financial statements.

OSCAR I CORPORATION
AND SUBSIDIARIES

Consolidated Statements of Operations
(Amounts in Millions)

Years Ended December 31,
------------------------
1997 1996 1995
------ ----- -----

Revenue:
Admissions........................................... $473.9 466.5 457.1
Concession sales..................................... 189.6 185.1 178.2
Other................................................ 22.8 27.5 14.5
------ ----- -----
686.3 679.1 649.8
------ ----- -----

Costs and expenses:
Film rental and advertising expenses................. 262.5 257.2 248.6
Direct concession costs.............................. 30.2 29.3 29.5
Other operating expenses............................. 261.5 259.5 246.3
Sale and leaseback rentals (note 2).................. 12.8 11.0 0.5
General and administrative (note 9).................. 24.3 35.1 35.5
Restructuring charge (note 8)........................ 0.8 1.9 -
Depreciation and amortization (note 10).............. 96.7 84.4 90.8
------ ----- -----
688.8 678.4 651.2
------ ----- -----
Operating income (loss)............................. (2.5) 0.7 (1.4)

Other income (expense):
Interest, net (note 5):
Interest expense.................................... (43.9) (43.5) (51.9)
Amortization of deferred loan costs................. (2.2) (2.2) (1.9)
Interest income..................................... 0.5 0.3 0.5
------ ----- -----
(45.6) (45.4) (53.3)
Gain (loss) on disposition of assets, net (note 11).. 28.0 2.7 (5.7)
Share of earnings (losses) of affiliates, net........ (1.6) (0.5) 0.7
Minority interests in earnings of
consolidated subsidiaries........................... (1.3) (0.8) (1.2)
Other, net........................................... (2.5) (1.4) (2.1)
------ ----- -----
(23.0) (45.4) (61.6)
------ ----- -----
Loss before income tax expense...................... (25.5) (44.7) (63.0)
Income tax expense (note 12).......................... (1.5) (1.1) (1.8)
------ ----- -----
Net loss............................................ (27.0) (45.8) (64.8)
Dividend on preferred stock (note 7).................. (23.8) (20.9) (18.3)
------ ----- -----
Net loss available to common stockholders........... $(50.8) (66.7) (83.1)
====== ===== =====

See accompanying notes to consolidated financial statements.

OSCAR I CORPORATION
AND SUBSIDIARIES

Consolidated Statements of Stockholders' Equity (Deficit)
(Amounts in Millions)

Cumulative Total
Common Common Common foreign stock-
stock stock stock Additional currency holder's
Preferred Class Class Class paid-in Accumulated translation Treasury equity
stock A B C capital deficit adjustment stock (deficit)
--------- ------ ------ ------- ----------- ------------ ------------ --------- -----------

Balance at January 1, 1995. $130.9 0.1 - - 79.4 (90.9) - - 119.5
Accretion of dividends
on preferred stock...... 18.3 - - - (18.3) - - - -
Foreign currency
translation adjustment.. - - - - - - (0.1) - (0.1)

Net loss................. - - - - - (64.8) - - (64.8)

--------- ------ ------ ------- ----------- ------------ ------------ --------- -----------
Balance at December 31,
1995...................... 149.2 0.1 - - 61.1 (155.7) (0.1) - 54.6
Accretion of dividends
on preferred stock...... 20.9 - - - (20.9) - - - -
Foreign currency
translation adjustment.. - - - - - - (0.4) - (0.4)

Net loss................. - - - - - (45.8) - - (45.8)

------ ------ ------ ---------- ----- ------ ---- -------- -----
Balance at December 31,
1996...................... 170.1 0.1 - - 40.2 (201.5) (0.5) - 8.4
Accretion of dividends
on preferred stock...... 23.8 - - - (23.8) - - - -
Foreign currency
translation adjustment.. - - - - - - 0.1 - 0.1
Purchase of treasury
stock................... - - - - - - - (1.8) (1.8)

Net loss................. - - - - - (27.0) - - (27.0)

--------- ------ ------ ------- ----------- ------------ ------------ --------- -----------
Balance at December 31,
1997...................... $193.9 0.1 - - 16.4 (228.5) (0.4) (1.8) (20.3)

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

See accompanying notes to consolidated financial statements.

OSCAR I CORPORATION
AND SUBSIDIARIES

Consolidated Statements of Cash Flow
(Amounts in Millions)

Years Ended December 31,
-------------------------
1997 1996 1995
------- ------ ------

Net cash provided by operating activities................................. $ 51.0 30.8 40.7
------- ------ ------

Cash flow from investing activities:
Capital expenditures............................................. (60.0) (68.6) (91.4)
(Increase) decrease in construction in progress, net............. (7.4) 1.5 (5.1)
Increase in receivable from sale and leaseback escrow............ (12.8) (19.5) -
Proceeds from sale and leaseback transaction and escrow.......... 23.2 22.9 90.9
Cash paid for minority interest holding.......................... - - (10.3)
Proceeds from disposition of assets, net......................... 70.0 23.5 16.6
Investments in and receivables from theatre joint ventures, net.. (18.3) (14.3) (2.3)
Other, net....................................................... 0.7 (2.2) -
------- ------ ------
Net cash used in investing activities........................... (4.6) (56.7) (1.6)
------- ------ ------

Cash flow from financing activities:
Debt borrowings.................................................. 150.9 129.8 187.5
Debt repayments.................................................. (191.5) (132.7) (188.9)
Increase (decrease) in cash overdraft............................ (2.8) 6.2 (14.1)
Other, net....................................................... (2.3) 0.2 (3.9)
------- ------ ------
Net cash provided by (used in) financing activities............. (45.7) 3.5 (19.4)
------- ------ ------

Net increase (decrease) in cash and cash equivalents............ 0.7 (22.4) 19.7
Cash and cash equivalents:
Beginning of period.............................................. 10.1 32.5 12.8
------- ------ ------
End of period.................................................... $ 10.8 10.1 32.5
======= ====== ======

Reconciliation of net loss to net cash provided by
operating activities:
Net loss......................................................... $ (27.0) (45.8) (64.8)
Effect of leases with escalating minimum annual
rentals.......................................................... 3.7 3.1 2.0
Depreciation and amortization.................................... 96.7 84.4 90.8
(Gain) loss on disposition of assets, net........................ (28.0) (2.7) 5.7
Share of (earnings) losses of affiliates, net.................... 1.6 0.5 (0.7)
Minority interests in earnings of
consolidated subsidiaries....................................... 1.3 0.8 1.2
(Increase) decrease in receivables, prepaid expenses
and other assets, net........................................... 1.3 0.9 (3.7)
Increase (decrease) in accounts payable, accrued
liabilities and other liabilities, net.......................... 1.4 (10.4) 10.2
------- ------ ------

Net cash provided by operating activities....................... $ 51.0 30.8 40.7
======= ====== ======

See accompanying notes to consolidated financial statements.

OSCAR I CORPORATION
AND SUBSIDIARIES

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

(1) ORGANIZATION

OSCAR I Corporation ("OSCAR I"), a Delaware corporation, was formed in
February 1992 for the purpose of purchasing United Artists Theatre Circuit,
Inc. ("UATC") from an affiliate of Tele-Communications, Inc. ("TCI"). OSCAR
I is owned by an investment fund managed by affiliates of Merrill Lynch
Capital Partners, Inc. ("MLCP") and certain institutional investors
(collectively, the "Non-Management Investors"), and certain members of
UATC's management. On May 12, 1992, OSCAR I purchased all of the outstanding
common stock of UATC from an affiliate of TCI (the "Acquisition").

Simultaneously with the Acquisition, the Non-Management Investors
formed OSCAR II Corporation, ("OSCAR II"), a Delaware corporation, and
acquired from an affiliate of TCI all of the outstanding capital stock of
United Artists Realty Company ("UAR") and its subsidiaries, United Artists
Properties I Corp. ("Prop I") and United Artists Properties II Corp. ("Prop
II"). UAR, Prop I and Prop II were the owners and lessors of certain
operating theatre properties leased to and operated by UATC and its
subsidiaries. On February 28, 1995, OSCAR II was merged into OSCAR I
effected by a one-for-one share exchange.

(2) SALE AND LEASEBACK TRANSACTIONS

On December 13, 1995, OSCAR I entered into a sale and leaseback transaction
(the "1995 Sale and Leaseback") whereby the buildings and land underlying 27
of its operating theatres and four theatres currently under development were
sold to, and leased back from, the 1995-A United Artists Pass Through Trust
(the "Pass Through Trust"), an unaffiliated third party, for approximately
$97.6 million. A portion of the sale proceeds were used to pay certain
transaction expenses, repay certain existing indebtedness and the remainder
was held in short-term cash investments. The proceeds related to three of
the theatres under development (approximately $14.2 million) were initially
deposited into an escrow account and were funded during 1996 after
construction of the theatres was completed. The proceeds related to one of
the new theatres and a four screen addition to an existing theatre under
development (approximately $7.8 million) were deposited into the same escrow
account and were paid to the Company in 1997 when construction of the new
theatre and the screen addition was completed.

The net book value of the land and buildings included in the 1995 Sale and
Leaseback was approximately $85.5 million, and OSCAR I realized a net gain
of approximately $12.1 million as a result of the Sale and Leaseback. For
financial statement purposes, this gain has been deferred and will be
recognized over the term of the lease as a reduction of rent expense. The
1995 Sale and Leaseback requires UATC to lease the underlying theatres for a
period of 21 years and one month, with the option to extend for up to an
additional 10 years. An agreement with the Pass Through Trust requires the
maintenance of certain financial covenants by UATC.

On November 8, 1996, OSCAR I entered into a sale and leaseback transaction
whereby the buildings and land underlying three of its operating theatres
and two theatres currently under development were sold to, and leased back
from, an unaffiliated third party for approximately $21.5 million. The sales
proceeds relating to the three operating theatres (approximately $9.2
million) were used to pay certain transaction expenses and repay outstanding
bank debt of UATC. The sales proceeds related to the two theatres under
development (approximately $12.3 million) were deposited into an escrow
account and are to be paid under the terms of the sale and leaseback to fund
certain of the construction costs associated with the two theatres. During
1997, OSCAR I opened one of the theatres under development and received
approximately $10.8 million of proceeds from the escrow account. The lease
has a term of 20 years and nine months with options to extend for an
additional 10 years.

OSCAR I CORPORATION
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(2) SALE AND LEASEBACK TRANSACTIONS, CONTINUED

On December 31, 1997, OSCAR I entered into a sale and leaseback
transaction whereby two theatres currently under development were sold to,
and leased back from, an unaffiliated third party for approximately $18.1
million. At December 31, 1997, approximately $13.5 million of the sales
proceeds were deposited into an escrow account and are to be paid under the
terms of the sale and leaseback to fund certain of the construction costs
associated with the two theatres. The lease has a term of 22 years with
options to extend for an additional 10 years.

(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Principles of Consolidation
---------------------------

The consolidated financial statements include the accounts of
OSCAR I and its majority owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated in
consolidation.

(b) Nature of Operations
--------------------
OSCAR I, through its subsidiaries, is principally engaged in the
operation and ownership of motion picture theatres.

(c) Cash and Cash Equivalents
-------------------------
OSCAR I considers investments with initial maturities of three
months or less to be cash equivalents.

(d) Investments
-----------

Investments in which OSCAR I's ownership is 20% to 50% are
accounted for using the equity method. Under this method, the
investment, originally recorded at cost, is adjusted to recognize
dividends received and OSCAR I's share of net earnings or losses of
the investee as they occur. Investments in which OSCAR I's ownership
is less than 20% are accounted for using the cost method. Under this
method, the investments are recorded at cost and any dividends
received are recorded as income.

(e) Property and Equipment
----------------------

Depreciation is calculated using the straight-line method over the
estimated useful lives of the assets that range from 3 to 40 years.
Leasehold improvements are amortized over the terms of the leases,
including certain renewal periods or, in the case of certain
improvements, the estimated useful lives of the assets, if shorter.
Costs associated with new theatre construction are depreciated once
such theatres are placed in service.

(f) Intangible Assets
-----------------

OSCAR I CORPORATION
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED

December 31,
----------------
1997 1996
------- -------

(g) Other Assets
------------

December 31,
---------------
1997 1996
------- ------

Deferred loan costs......... $ 16.2 16.2
Deferred acquisition costs.. - 18.4
Other....................... 2.2 8.6
------ -----
18.4 43.2
Accumulated amortization.... (11.6) (30.7)
------ -----
$ 6.8 12.5
====== =====

(h) Operating Costs and Expenses
----------------------------

Film rental and advertising expenses include film rental and co-op
and directory advertising costs. Film advertising costs are expensed
as incurred. Direct concession costs include direct concession
product costs and concession promotional expenses. Concession
promotional expenses are expensed as incurred. Other operating
expenses include joint facility costs such as employee costs, theatre
rental and utilities that are common to both ticket sales and
concession operations. As such, other operating expenses are reported
as a combined amount as the allocation of such costs to exhibition and
concession activities would be arbitrary and not meaningful. Rental
expense for operating leases which provide for escalating minimum
annual rentals during the term of the lease are accounted for on a
straight-line basis over the terms of the underlying leases.

(i) Estimates
---------

(j) Reclassification
----------------
Certain prior year amounts have been reclassified for
comparability with the 1997 presentation.

OSCAR I CORPORATION
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(4) SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash payments for interest for the years ended December 31, 1997, 1996
and 1995, were $42.8 million, $44.6 million and $47.3 million,
respectively.

Cash payments by certain less than 80% owned entities for income taxes
for the years ended December 31, 1997, 1996 and 1995, were $1.4 million,
$1.4 million and $0.7 million, respectively.

OSCAR I accrued $23.8 million, $20.9 million and $18.3 million of
dividends during the years ended December 31, 1997, 1996 and 1995,
respectively, on its preferred stock (see note 7).

During 1997, 1996 and 1995, OSCAR I incurred $1.1 million, $1.4 million
and $2.4 million, respectively, of capital lease obligations relating to
new equipment.

(5) DEBT

Debt is summarized as follows (amounts in millions):

December 31,
-------------
1997 1996
------ -----

UATC Bank Credit Facility (a).. $226.5 255.6
UATC Senior Secured Notes (b).. 125.0 125.0
UATC Other (c)................. 10.7 8.4
UAR Promissory Notes (d)....... 5.6 10.0
Prop I Mortgage Notes (e)...... 46.2 54.1
------ -----
$414.0 453.1
====== =====

(a) UATC's bank credit facility (the "Bank Credit Facility") currently
provides for term loans aggregating $203.5 million (the "Term Loans),
a reducing revolving loan with commitments aggregating $78.8 million
(the "Revolving Facility") and standby letters of credit aggregating
$12.5 million (the "Standby Letters of Credit"). Principal on the
Term Loans is payable in escalating semi-annual installments through
March 31, 2002. The aggregate commitments available for borrowing
under the Revolving Facility decline $8.75 million at December 31,
1998, $13.125 million at December 31, 1999 and 2000 and $21.875
million at December 31, 2001 and March 31, 2002. Borrowings under the
Bank Credit Facility provide for interest to be accrued at varying
rates depending on the ratio of indebtedness to annualized operating
cash flow, as defined. Interest is payable at varying dates depending
on the type of rate selected by UATC, but no less frequently than once
each quarter. The Bank Credit Facility contains certain provisions
that require the maintenance of certain financial ratios and place
limitations on additional indebtedness, disposition of assets, capital
expenditures and payment of dividends. The Bank Credit Facility is
secured by the stock of UATC and substantially all of UATC's
subsidiaries and is guaranteed by OSCAR I and substantially all of
UATC's subsidiaries. During 1997, UATC repaid $10.8 million on the
Term Loans in conjunction with certain asset dispositions. This
repayment will be applied pro rata against the remaining semi-annual
Term Loan principal installments.

OSCAR I CORPORATION
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(5) DEBT, CONTINUED

(b) The senior secured notes (the "Senior Secured Notes") are due May
1, 2002 and require repayments prior to maturity of $31.25 million
on May 1, 2000 and on May 1, 2001. The Senior Secured Notes
accrue interest at 11 1/2% per annum, which is payable semi-
annually. The Senior Secured Notes place limitations on, among
other things, additional indebtedness, disposition of assets and
payment of dividends. The Senior Secured Notes are secured on a
pari-passu basis with the Bank Credit Facility by the stock of
----------
UATC and substantially all of UATC's subsidiaries, and are
guaranteed on a pari-passu basis with the Bank Credit Facility by
----------
OSCAR I and substantially all of UATC's subsidiaries. The Senior
Secured Notes are redeemable at the option of UATC. The
redemption price of the Senior Secured Notes at December 31, 1997
was 104.313% of the outstanding principal balance.

(c) UATC's other debt at December 31, 1997 consists of various term
loans, mortgage notes, capital leases and other borrowings. This
other debt carries interest rates ranging from 7% to 12%. Principal
and interest are payable at various dates through June 2007.

(d) In conjunction with the acquisitions of certain theatres prior to
the Acquisition, UAR issued non-interest bearing promissory notes to
the sellers. Principal on the promissory notes is due quarterly
through October 1999. For financial statement purposes, the
promissory notes were discounted at UAR's effective borrowing rate on
the date the promissory notes were executed. The undiscounted amount
payable under the promissory notes at December 31, 1997 was
approximately $6.2 million.

(e) The Prop I first mortgage notes (the "Prop I Notes") bear interest
at 11.15% per annum. Principal and interest are payable in monthly
installments, with a lump sum payment of principal and accrued, but
unpaid, interest due on November 1, 1998. The Prop I Notes are
secured by a first mortgage on Prop I's theatre properties, an
assignment of the lease agreement with UATC, and $12.5 million of bank
Standby Letters of Credit provided by UATC. The Indenture of Mortgage,
among its other provisions, contains limitations on the sale and/or
substitution of properties and a limitation on any additional debt
incurred by Prop I other than intercompany advances.

At December 31, 1997, UATC was party to interest rate cap agreements on
$100.0 million of floating rate debt which provide for a LIBOR interest
rate cap of 7 1/2% and expire at various dates through July 1999. UATC is
subject to credit risk exposure from non-performance of the counterparties
to the interest rate cap agreements. As UATC has historically received
payments relating to such interest rate cap agreements, it does not
anticipate such non-performance in the future. UATC amortizes the cost of
its interest rate cap agreements to interest expense over the life of the
underlying agreement. Amounts received from the counterparties to the
interest rate cap agreements are recorded as a reduction of interest
expense.

At December 31, 1997, UATC had approximately $55.8 million of unused
revolving loan commitments pursuant to the Bank Credit Facility, $11.1
million of which has been used for the issuance of letters of credit.
Commitment fees of 3/8% per annum are paid on the average unused revolver
commitments.

Annual maturities of debt for each of the next five years and
thereafter are as follows (amounts in millions):

1998............ $ 81.7
1999............ 50.8
2000............ 83.8
2001............ 83.7
2002............ 110.2
Thereafter...... 3.8
------
$414.0
======

OSCAR I CORPORATION
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(6) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

Cash and Cash Equivalents
-------------------------
The carrying amount of cash and cash equivalents approximates fair
value because of its short maturity.

Financial Instruments
---------------------
The carrying amount and estimated fair value of OSCAR I's financial
instruments at December 31, 1997 are summarized as follows (amounts in
millions):

Carrying Estimated
Amount Fair Value
-------- ----------

UATC Bank Credit Facility and Other Debt.. $237.2 237.2
====== =====
UATC Senior Secured Notes................. $125.0 130.6
====== =====
UAR Promissory Notes...................... $ 5.6 5.6
====== =====
Prop I Mortgage Notes..................... $ 46.2 47.1
====== =====
Interest Rate Cap Agreements.............. $ 0.1 0.1
====== =====

UATC Bank Credit Facility and Other Debt: The carrying amount of
UATC's borrowings under the Bank Credit Facility and other debt
approximates fair value because the interest rates on the majority of this
debt floats with market interest rates.

UATC Senior Secured Notes: The fair value of the Senior Secured Notes
is estimated based upon quoted market prices at December 31, 1997.

UAR Promissory Notes: The fair value of the UAR Promissory Notes is
estimated based upon dealer quotes for similar agreements at December 31,
1997.

Prop I Mortgage Notes: The fair value of the Prop I Mortgage Notes is
estimated based upon dealer quotes for similar agreements at December 31,
1997.

Interest Rate Cap Agreements: The fair value of the interest rate cap
agreements is estimated based upon dealer quotes for similar agreements at
December 31, 1997.

(7) STOCKHOLDERS' EQUITY

Preferred Stock
---------------

The OSCAR I preferred stock is redeemable any time at the option of OSCAR I
at its stated liquidation value plus accrued and unpaid dividends.
Dividends accrue at a rate of 8% through December 31, 1995, 9% through
December 31, 1996 and 14% thereafter, and are payable in cash or in kind
through December 31, 1996. Dividends subsequent to December 31, 1996 are
required to be paid in cash unless any senior debt facility of OSCAR I or
UATC restricts such cash payment. Currently, such restrictions exist. The
preferred stock contains certain restrictions on, among other things, the
incurrence of additional indebtedness by OSCAR I or its subsidiaries. Due
to the perpetual nature of the preferred stock and the escalating terms of
the required dividend rates, for financial reporting purposes dividends
have been accrued at a 14% per annum rate for all periods since issuance.
At December 31, 1997, the actual redemption value in accordance with the
terms of the preferred stock was approximately $152.1 million, or
approximately $41.8 million less than the carrying amount at December 31,
1997.

OSCAR I is authorized to issue 5,000,000 shares of preferred stock.

OSCAR I CORPORATION
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(7) STOCKHOLDERS' EQUITY, CONTINUED

Common Stock
------------

At December 31, 1997, OSCAR I had outstanding 11,551,383 shares of Class A
common stock, $0.01 par value per share, 48,425 shares of Class B common
stock, $0.01 par value per share and has granted 15,462 shares of Class C
common stock, $0.01 par value to certain members of management. The Class A
and Class B shares are identical except that the Class B shares do not have
any voting rights. The Class C shares vest over a four-year period and are
identical to the Class B common stock except for a $9.50 per share
liquidation preference in favor of the holders of the Class A and Class B
common stock. As of December 31, 1997, 13,001 shares of the Class C common
stock had vested.

OSCAR I is authorized to issue 23,200,000 shares of Class A common stock,
1,818,000 shares of Class B common stock and 57,000 shares of Class C
common stock.

Stock Options
-------------

In connection with the Acquisition, the OSCAR I Management Stock Plan was
established. The OSCAR I Management Stock Plan established three types of
options, those being: the Incentive Options (the "Incentive Plan"),
Performance Options (the "Performance Plan"), and Premium Options (the
"Premium Plan" and collectively, the "Option Plans"). The options covered
under the Incentive Plan vest in equal amounts each year through the fifth
anniversary of the date of grant, while options covered under the
Performance and Premium Plans vest based on certain calculations of UATC's
value or the investment returns received by the Class A common
stockholders. Each option granted under either the Incentive or Performance
Plans may be exercised for one Class B share at an exercise price equal to
the estimated market value of the Class B share at the date of grant
provided that such options have been vested under the terms of the
respective plan. Each option granted under the Premium Plan may be
exercised for one Class B share at an exercise price, which increases from
$30 to $233, provided that such options have vested under the terms of the
Premium Plan. All options granted expire 10 years after the date of grant.

OSCAR I applies the provisions of Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees," and related
Interpretations in accounting for its Option Plans. No compensation cost
has been recognized by OSCAR I for any of the Option Plans. OSCAR I's
compensation expense would not have been materially different had OSCAR I
recorded compensation expense for its Option Plans in accordance with SFAS
No. 123, "Accounting for Stock Based Compensation," and accordingly, the
pro forma net loss disclosure as if SFAS No. 123 had been applied are not
presented.

A summary of OSCAR I's Incentive Plan as of December 31, 1997, 1996 and
1995, and changes during those years is presented below:

1997 1996 1995
------------------------------- ----------------------------- -------------------------
Weighted Avg. Weighted Avg. Weighted Avg.
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
-------------- ------------- -------------- ----------- -------- -------------

Outstanding at January 1 544,320 $10.06 594,720 $10.05 593,970 $10.04
Granted - - 6,600 $10.79 3,000 $10.79
Exercised - - - - - -
Forfeited (413,487) $10.04 (57,000) $10.00 (2,250) $10.00
-------- ------- -------
Outstanding at December 31 130,833 $10.12 544,320 $10.06 594,720 $10.05
======== ======= =======

OSCAR I CORPORATION
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(7) STOCKHOLDERS' EQUITY, CONTINUED

The following table summarizes information about the Incentive Plan at
December 31, 1997:

Options Outstanding Options Exercisable
-------------------------------- -------------------
Weighted Avg.
Number Remaining Number
Exercise Price Outstanding Contractual Life Exercisable
- ----------------- ----------- ------------------- -------------------

$10.00 111,233 4.5 111,233
$10.79 19,600 6.8 9,470
------- -------
130,833 5.0 120,703
======= =======

A summary of OSCAR I's Performance Plan as of December 31, 1997, 1996
and 1995, and changes during those years is presented below:

1997 1996 1995
----------------------- ------------------------- -----------------------
Weighted Avg. Weighted Avg. Weighted Avg.
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------- ------------- ------- ------------- ------- -------------

Outstanding at January 1 528,975 $10.05 573,450 $10.04 572,825 $10.04
Granted 197,250 $12.00 5,900 $10.79 2,500 $10.79
Exercised - - - - - -
Forfeited (414,350) $10.04 (50,375) $10.00 (1,875) $10.00
-------- ------- ------- ------ ------- ------
Outstanding at December 31 311,875 $11.31 528,975 $10.05 573,450 $10.04
======== ======= ======= ====== ======= ======

The following table summarizes information about the Performance Plan at
December 31, 1997:

Options Outstanding Options Exercisable
------------------------------------- -------------------
Weighted Avg.
Number Remaining Number
Exercise Price Outstanding Contractual Life Exercisable
-------------- ----------- ---------------- -----------

$10.00 103,500 4.5 0
$10.79 11,125 6.8 0
$12.00 197,250 9.3 0
------- ------
311,875 7.6 0
======= ======

A summary of OSCAR I's Premium Plan as of December 31, 1997, 1996 and
1995, and changes during those years is presented below:

1997 1996 1995
------------------------------ ----------------------------- -------------------------
Weighted Avg. Weighted Avg. Weighted Avg.
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
-------------- ------------- -------------- -------- -------- -------------

Outstanding at January 1 265,403 $66.00 287,791 $48.25 287,479 $35.25
Granted - - 2,800 $48.25 1,250 $35.25
Exercised - - - - - -
Forfeited (208,972) $66.00 (25,188) $48.25 (938) $35.25
-------- ------- -------
Outstanding at December 31 56,431 $66.00 265,403 $48.25 287,791 $35.25
======== ======= =======

Options Exercisable at
December 31 0 0 0
======== ======= ========

OSCAR I CORPORATION
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(7) STOCKHOLDERS' EQUITY, CONTINUED

As of December 31, 1997, the 56,431 Premium Plan options had an
exercise price of $66.00 and a weighted average remaining contractual life
of 5.0 years.

(8) RESTRUCTURING CHARGE

At the end of 1996, OSCAR I initiated a corporate restructuring plan
intended to provide a higher level of focus on OSCAR I's domestic
theatrical business at a lower annual cost. This corporate restructuring
was substantially completed in January 1997. In conjunction with this
corporate restructuring plan, OSCAR I recorded $0.8 million and $1.9
million restructuring charges in 1997 and 1996, respectively, for severance
and other related expenses.

(9) EMPLOYEE BENEFIT PLANS

The UATC 401(k) Savings Plan (the "Savings Plan") provides that
employees may contribute up to 10% of their compensation, subject to IRS
limitations, to the Savings Plan. Employee contributions are invested in
various investment funds based upon elections made by the employee. Prior
to January 1, 1997, OSCAR I matched 100% of each employee's contributions
up to 10% of an employee's compensation. As part of the corporate
restructuring plan (see note 8), effective January 1, 1997, the Savings
Plan was amended to provide for an OSCAR I match of 100% of each employee's
contribution up to 3% of their compensation. Employees vest in OSCAR I's
matching contributions 20% per year for every year of service, as defined.

Effective January 1, 1993, OSCAR I established the UATC Supplemental
401(k) Savings Plan (the "Supplemental Plan") for certain employees who are
highly compensated as defined by the IRS and whose elective contributions
to the Savings Plan exceed the IRS limitations. Through December 31, 1996,
such employees were allowed to contribute to the Supplemental Plan provided
that the aggregate contributions to the Savings Plan and Supplemental Plan
did not exceed 10% of their compensation. As part of the corporate
restructuring plan (see note 8), effective January 1, 1997, OSCAR I
suspended the Supplemental Plan. OSCAR I matched 100% of the employee's
contributions through the date of suspension of the Supplemental Plan.
Employees vest ratably in OSCAR I's matching contributions over 5 years
from the date of participation in the Supplemental Plan.

Contributions to the various employee benefit plans for the years ended
December 31, 1997, 1996 and 1995, were $0.6 million, $2.3 million and $2.1
million, respectively.

(10) PROVISION FOR IMPAIRMENT

OSCAR I adopted SFAS No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed Of," during 1995.
Upon adoption of SFAS No. 121 in 1995, a non-cash charge of $21.0 million
was recorded by OSCAR I. During 1997 and 1996, OSCAR I recorded non-cash
charges for the impairment of its long-lived assets of $36.0 million and
$9.5 million, respectively. These non-cash charges relate to the difference
between the historical book value of the individual theatres (in some cases
groups of theatres) and the discounted cash flow expected to be received
from the operation or future sale of the individual theatres (or groups of
theatres).

(11) GAIN ON DISPOSITION OF ASSETS

During April 1997, OSCAR I sold its 50% interest in Hong Kong theatre
company to its partner for approximately $17.5 million and, during
September 1997, OSCAR I sold its theatre investments in Mexico and the
majority of its theatre assets in Argentina for approximately $25.0
million. During the year ended December 31, 1997, OSCAR I sold various
other non-strategic or underperforming theatres for net cash proceeds of
approximately $27.5 million. Additionally, OSCAR I has entered into an
agreement to sell a portion of its theatre investments in Singapore and
Thailand for approximately $8.1 million.

OSCAR I CORPORATION
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(12) INCOME TAXES

Consolidated subsidiaries in which OSCAR I owns less than 80% file
separate Federal income tax returns. The current and deferred Federal and
state income taxes of such subsidiaries are calculated on a separate return
basis and are included in the accompanying consolidated financial
statements of OSCAR I.

The current state income tax expense of OSCAR I and Federal income tax
expense of OSCAR I's less than 80%-owned consolidated subsidiaries and
deferred state and Federal income tax expense are as follows (amounts in
millions):

Years Ended December 31,
------------------------
1997 1996 1995
------- ------- ------

Current income taxes:
State expense.......... $ 0.2 0.1 0.7
Federal expense........ 1.3 1.0 1.1
----- ---- ------
1.5 1.1 1.8

Deferred income taxes:
State expense.......... - - -
Federal expense........ - - -
----- ---- ------
$1.5 1.1 1.8
===== ==== ======

Years Ended December 31,
------------------------
1997 1996 1995
----- ----- -----

Expected tax benefit........................... $(8.9) (15.7) (22.0)
Change in valuation allowance.................. 11.1 16.1 22.3
State tax, net of Federal benefit.............. 0.1 - 0.5
Adjustment of net operating loss carryforward.. 0.1 2.9 -
Other.......................................... (0.9) (2.2) 1.0
----- ----- ----
$ 1.5 1.1 1.8
===== ===== =====

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at December 31, 1997
and 1996 are as follows (amounts in millions):

1997 1996
------- -----

Deferred tax assets:
Net operating loss carryforwards..... $ 75.1 68.0
Intangible and other assets.......... 3.7 3.9
Accrued liabilities.................. 3.6 2.8
Deferred gain on Sale and Leaseback.. 3.5 4.6
Other................................ 1.2 1.1
------- -----
87.1 80.4
Less: valuation allowance........... (80.5) (69.4)
------- -----
Net deferred tax assets............. 6.6 11.0
------- -----
Deferred tax liabilities:
Property and equipment............... 3.5 8.1
Deferred intercompany gains.......... 1.6 1.6
Other................................ 1.5 1.3
------- -----
Net deferred tax liabilities........ 6.6 11.0
------- -----
Net................................... $ - -
======= =====

OSCAR I CORPORATION
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(12) INCOME TAXES, CONTINUED

At December 31, 1997, OSCAR I had a net operating loss carryforward of
approximately $200 million. The income tax returns of OSCAR I are currently
being audited by the Internal Revenue Service. The outcome of this audit
may reduce the amount of OSCAR I's net operating loss carryforward and/or
change the basis (and thus future depreciation) related to certain assets.
Management believes that the result of the audit will not have a material
adverse effect on the financial condition or results of operations of OSCAR
I.

(13) COMMITMENTS AND CONTINGENCIES

OSCAR I conducts a significant portion of its theatre and corporate
operations in leased premises. These leases have noncancelable terms
expiring at various dates after December 31, 1997. Many leases have
renewal options. Most of the leases provide for contingent rentals based
on the revenue results of the underlying theatre and require the payment of
taxes, insurance, and other costs applicable to the property. Also,
certain leases contain escalating minimum rental provisions that have been
accounted for on a straight-line basis over the initial term of the leases.

Rent expense for theatre and corporate operations is summarized as
follows (amounts in millions):

Years Ended December 31,
------------------------
1997 1996 1995
----- ----- -----

Minimum rental.................... $76.5 72.0 55.8
Contingent rental................. 3.7 3.4 3.2
Effect of leases with escalating
minimum annual rentals............ 3.7 3.1 2.0
Rent tax.......................... 0.5 0.6 0.7
----- ---- ----
$84.4 79.1 61.7
===== ==== ====

Approximately $12.8 million, $11.0 million and $0.5 million of the
minimum rentals reflected in the preceding table for the years ended
December 31, 1997, 1996 and 1995, respectively, were incurred pursuant to
the sale and leaseback transactions (see note 2).

Future minimum lease payments under noncancelable operating leases for
each of the next five years and thereafter are summarized as follows
(amounts in millions):

1998........ $ 79.3
1999........ 78.5
2000........ 75.2
2001........ 73.1
2002........ 70.4
Thereafter.. 689.0

Included in the future minimum lease payments table above are lease
payments relating to theatres which OSCAR I intends to sell or close. To
the extent OSCAR I is successful in disposing of these theatres, the future
minimum lease payments will be decreased.

It is expected that in the normal course of business, desirable leases
that expire will be renewed or replaced by other leases.

OSCAR I CORPORATION
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(13) COMMITMENTS AND CONTINGENCIES, CONTINUED

At December 31, 1997, OSCAR I had entered into theatre construction and
equipment commitments aggregating approximately $100 million for ten new
theatres and screen additions or renovations to 12 existing theatres which
OSCAR I intends to open during the next two years. Such amount relates only
to projects in which OSCAR I had executed a definitive lease agreement and
all significant lease contingencies have been satisfied. Of the committed
amount, approximately $15.0 million will be reimbursed to OSCAR I from
proceeds of the sale and leaseback transactions currently held in escrow
(see note 2). The lease agreements have terms of between 15 and 20 years
and, upon the opening of the theatres, require future minimum lease
payments over the terms of the leases averaging $13.8 million per annum.

OSCAR I and/or its subsidiaries are involved in various pending and
threatened legal proceedings involving allegations concerning contract
breaches, torts, employment matters, environmental issues, anti-trust
violations, local tax disputes and miscellaneous other matters. In
addition, there are various claims against OSCAR I and/or its subsidiaries
relating to certain of the leases held by OSCAR I and/or its subsidiaries.
Although it is not possible to predict the outcome of these proceedings,
OSCAR I believes that such legal proceedings will not have a material
adverse effect on OSCAR I's financial position, liquidity or results of
operations.

The Americans with Disabilities Act of 1990 (the "ADA"), and certain
state statutes among other things, require that places of public
accommodation, including theatres (both existing and newly constructed) be
accessible to and that assistive listening devices be available for use by
certain patrons with disabilities. With respect to access to theatres, the
ADA may require that certain modifications be made to existing theatres to
make such theatres accessible to certain theatre patrons and employees who
are disabled. The ADA requires that theatres be constructed in such a
manner that persons with disabilities have full use of the theatre and its
facilities and reasonable access to work stations. The ADA provides for a
private right of action and reimbursement of plaintiff's attorneys' fees
and expenses under certain circumstances. OSCAR I has established a
program to review and evaluate OSCAR I's theatres and to make any changes
which may be required by the ADA. In 1995, OSCAR I settled the lawsuit
styled Connie Arnold et al. vs. UATC, filed in 1991. This lawsuit involved
allegations that certain of OSCAR I's theatres lacked accessibility to
persons with mobility disabilities in violation of the ADA. In the
settlement agreement, OSCAR I, the plaintiffs and the Department of Justice
established standards of modifications that must be made to OSCAR I
theatres throughout the United States to make them more accessible to
persons with disabilities. OSCAR I believes that the cost of complying
with the ADA and the settlement agreement in the Connie Arnold case will
not have a material adverse effect on the OSCAR I's financial position,
liquidity or results of operations.

PART III

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

Information regarding members of the Company's and OSCAR I's Board of Directors
as of March 20, 1998 is set forth below. Directors will serve until the next
annual meeting and until his successor is duly elected and qualified.

Business Experience During
Name Age Past Five Years Other Public Directorships
- ---- --- -------------------------- --------------------------

Kurt C. Hall............... 38 Named President and Chief Mr. Hall is a director of
Executive Officer on Showscan Entertainment,
March 6, 1998. Chief Inc.
Operating Officer from
February 24, 1997 to
March 6, 1998 and
Executive Vice
President, Chief
Financial Officer and
Director since May 12,
1992.

John W. Boyle.............. 69 Named Chairman of the Board on March Mr. Boyle is a director of
6, 1998. Director since March 5, Supermarkets General Holdings Corp.
1997. Mr. Boyle was Chief
Financial Officer of Eckerd
Corporation from 1983 to 1995 and
Vice Chairman from 1992 to 1995.

James J. Burke, Jr. ....... 46 Director since May 12, Mr. Burke is a director
1992. Director of of AnnTaylor Stores
Merrill Lynch Capital Corporation, Borg-Warner
Partners, Inc. ("MLCP"), Security Corporation,
since 1985 and Partner Education Management
and Director of Corporation, Pathmark
Stonington Partners, Stores, Inc. and
Inc. ("SP"), since July Supermarkets General
1993 and Partner and Holdings Corp.
Director of Stonington
Partners, Inc. II
("SPII") since 1994.
Prior to July 1994, Mr.
Burke was President and
Chief Executive Officer
of MLCP from 1987 to
1994, a Managing
Director of the
Investment Banking
Division of Merrill
Lynch & Co. ("ML&Co.")
from 1985 to 1994 and a
First Vice President of
Merrill Lynch Pierce
Fenner and Smith, Inc.
from 1988 to 1994.

Albert J. Fitzgibbons, III. 52 Director since May 12, Mr. Fitzgibbons is a
1992. Director of MLCP director of
since 1988 and a Partner Borg-Warner Security
and a Director of SP Corporation,
since July 1993 and a Dictaphone Corporation
Partner and a Director of and Merisel, Inc.
SPII since 1994. Prior
to July 1994, Mr.
Fitzgibbons was a Partner
of MLCP from 1993 to 1994
and an Executive Vice
President of MLCP from
1988 to 1993. Mr.
Fitzgibbons was also a
Managing Director of the
Investment Banking
Division of ML&Co. from
1978 to July 1994.

Robert F. End............. 42 Director since February 17, 1993. Mr. End is a director of Goss Graphic
Director of MLCP since 1993 and a Systems, Inc. and Packard BioScience
Partner and a Director of SP since Company.
July 1993 and a Partner and a
Director of SPII since 1994. Prior
to July 1994, Mr. End was a Partner
of MLCP from 1993 to 1994 and a
Vice President of MLCP from 1989 to
1993. Mr. End was also a Managing
Director of the Investment Banking
Division of ML&Co. from 1993 to
July 1994.

Scott M. Shaw............. 35 Director since February 17, 1993. Mr. Shaw is a director of Dictaphone
Principal of SP since July 1993. Corporation.
Prior to July 1994, Mr. Shaw was a
Vice President of MLCP from January
1994, an Associate of MLCP from
1991 to 1994 and an Analyst of MLCP
from 1986 to 1989. Mr. Shaw was
also a Vice President of the
Investment Banking Division of
ML&Co. from January to July 1994
and an Associate of the Investment
Banking Division of ML&Co. from
1991 to 1994 and an Analyst of the
Investment Banking Division of
ML&Co. from 1986 to 1989.

Information regarding executive officers of the Company who are not directors of
the Company as of March 20, 1998 is set forth below. Executive officers will
hold office for such term as may be prescribed by the Board of Directors and
until such person's successor is chosen and qualified or until such person's
death, resignation, or removal.

Name Age Business Experience During Past Five Years
- ---- --- ------------------------------------------

Dennis R. Daniels. 50 Executive Vice President. Mr. Daniels became Executive Vice President of the Company in 1993. Mr.
Daniel's duties include supervision of the Company's domestic theatre operations. Mr. Daniels was
previously the Vice President in charge of Central U.S. operations. Mr. Daniels has served the Company
for 24 years in various operating capacities.

Gene Hardy....... 47 Executive Vice President and General Counsel. Mr. Hardy was promoted to Executive Vice President of the
Company in charge of legal affairs and general counsel in September 1994. Mr. Hardy was previously the
Senior Vice President and general counsel of the Company.

Michael Pade..... 48 Executive Vice President. Mr. Pade became Executive Vice President of the Company in February 1997 in
charge of film operations. Mr. Pade joined the Company in October 1994 as a Senior Vice President of
film operations. Prior to joining the Company, Mr. Pade worked for Mann Theatres as the Senior Vice
President in charge of domestic film booking.

Jim Ruybal....... 52 Executive Vice President. Mr. Ruybal became Executive Vice President of the Company in 1992. Mr.
Ruybal's duties include supervision of the Company's Satellite Theatre Network.

Bruce M. Taffet.. 50 Executive Vice President. Mr. Taffet was promoted to Executive Vice President in January 1995 and is
responsible for purchasing, marketing and national concession operations of the Company. Prior to
February 1995, Mr. Taffet was the Senior Vice President in charge of national concession operations of
the Company.

Trent J. Carman.. 37 Named Chief Financial Officer on March 6, 1998. Mr. Carman was previously the Senior Vice President and
Treasurer of the Company from September 1997 to March 6, 1998 and was Vice President of Finance from
June 1992 to September 1997.

There are no family relationships between any of the directors and executive
officers named above. During the past five years, none of the directors and
executive officers named above were involved in any legal proceedings that would
be material to an evaluation of his ability or integrity.

Item 11. Executive Compensation
- -------------------------------

(a) Compensation
------------

The following table sets forth all compensation paid to the president and chief
executive officer and the four next most highly paid executive officers of the
Company for the years ended December 31, 1997, 1996 and 1995.

Summary Compensation Table
- --------------------------
Long-Term
Compensation
Awards/
Annual Compensation Securities Other
------------------------------- Underlying Annual All Other
Name and Salary Bonus Stock Options Compensation Compensation
Principal Positions Year ($) (1) ($) (2) # ($) (3) ($) (4)
- --------------------------- ---------- ------- --------- ------------- ------------ ------------

Kurt C. Hall (5) 1997 283,103 -- 80,000 2,877 4,684
President and 1996 220,514 -- -- 920 22,182
Chief Executive Officer 1995 216,300 12,500 -- -- 23,127

Michael Pade 1997 253,846 -- 12,000 6,083 41,079
Executive Vice President 1996 220,080 -- -- 5,426 --
1995 185,000 -- -- -- --

Dennis R. Daniels 1997 205,130 -- 12,000 2,287 4,800
Executive Vice President 1996 195,473 -- -- 2,500 14,723
1995 185,640 4,375 -- -- 15,273

Jim Ruybal 1997 193,481 -- 12,000 1,073 4,800
Executive Vice President 1996 186,300 -- -- -- 18,630
1995 183,998 8,000 -- -- 19,297

Thomas C. Elliot (6) 1997 215,029 -- -- 4,603 4,800
Executive Vice President 1996 204,244 -- 15,300 4,845 20,765
1995 198,000 8,000 -- -- 21,053

Stewart D. Blair (7) 1997 697,745 -- -- 7,000 445,760
Former Chief Executive 1996 681,882 -- -- 10,258 72,085
Officer 1995 642,467 47,250 -- - 68,959

Robert E. Capps, Jr. (8) 1997 272,950 -- -- 908 22,448
Former Executive 1996 254,260 -- -- 2,545 10,498
Vice President 1995 242,022 25,000 -- -- 150,323

(1) Represents annual salary, including compensation deferred by the Named
Executive Officer pursuant to the UATC 401(k) Savings Plan and the UATC
Supplemental 401(k) Savings Plan (prior to January 1, 1997).

(2) The executive officers were entitled to receive bonuses depending on OSCAR
I's achievement of certain performance criteria. Bonus amounts are reflected
in the year paid but relate to the performance of the previous year.

(3) Other annual compensation consists of reimbursement of membership dues.

(4) Consists primarily of matching contributions to employee benefit plans
except for amounts attributable to Mr. Blair which are in connection with
his severance package, Mr. Capps which are primarily related to
reimbursement of moving expense and to Mr. Pade which are related to a loan
which was forgiven.

(5) Mr. Hall was named President and Chief Executive Officer of the Company on
March 6, 1998.

(6) Mr. Elliot resigned from the Company in 1998.

(7) Mr. Blair resigned as Chief Executive Officer of the Company in December
1996. Amounts received by Mr. Blair in 1997 are in connection with his
severance arrangements with the Company.

(8) Mr. Capps resigned from the Company in February 1997. A portion of the
amount received by Mr. Capps in 1997 is in connection with his severance
arrangements with the Company.

(b) Stock Option Grants
-------------------

The following table sets forth all OSCAR I stock options granted during 1997 to
the president and chief executive officer and the four next most highly paid
executive officers of the Company.

Potential Realizable
Number of % of Total Value at Assumed
Securities Options Annual Rates of Stock
Underlying Granted to Exercise Price Appreciation for
Options Employees in Price Per Expiration Option Term
Name Granted 1997 Share Date 5% 10%
- ---------------------- ---------- ------------ ---------- ---------- -------- -----------

Kurt C. Hall 80,000 40.6% $12.00 2007 $603,739 $1,529,993
Michael Pade 12,000 6.1 12.00 2007 90,561 229,499
Dennis R. Daniels 12,000 6.1 12.00 2007 90,561 229,499
Jim Ruybal 12,000 6.1 12.00 2007 90,561 229,499
Thomas C. Elliott -- -- -- -- -- --
Stewart D. Blair -- -- -- -- -- --
Robert E. Capps, Jr. -- -- -- -- -- --

The following table sets forth the stock options held by the president and chief
executive officer and the four next most highly paid executive officers of the
Company as of December 31, 1997.

Number of
Share Underlying Value of
Unexercised Options at In-the-Money Options at
Option at December 31, 1997 December 31, 1997(1)
Name Type Exercisable Unexercisable Exercisable Unexercisable
- ---------------------- ----------- ----------- -------------------- -------------------- -------------

Kurt C. Hall Incentive 30,250 -- $60,500 --
Performance -- 107,500 -- $55,000
Premium -- 13,750 -- --

Michael Pade Incentive 6,200 1,550 7,502 1,876
Performance -- 18,750 -- 8,168
Premium -- 3,375 -- --

Dennis R. Daniels Incentive 10,000 -- 20,000 --
Performance -- 21,125 -- 18,250
Premium -- 6,063 -- --

Jim Ruybal Incentive 13,850 -- 27,700 --
Performance -- 24,500 -- 25,000
Premium -- 6,250 -- --

Thomas C. Elliott Incentive 18,170 5,280 36,340 10,560
Performance -- 20,900 -- 41,800
Premium -- 10,300 -- --

Stewart D. Blair Incentive -- -- -- --
Performance -- -- -- --
Premium -- -- -- --

Robert E. Capps, Jr. Incentive -- -- -- --
Performance -- -- -- --
Premium -- -- -- --

(1) As the Common Stock of OSCAR I is not publicly held, the Company has valued
the unexercised stock options using the value attributable to the stock
options granted closest to, but not after, December 31, 1997 ($12.00).

(d) Long-Term Incentive Awards
--------------------------

No long-term incentive awards were granted to executive officers of the Company
during 1997.

(e) Compensation of Directors
-------------------------

Mr. Boyle received 10,000 performance options ($12.00 strike price) and $20,000
for his services as a director during 1997. No other directors of the Company
and OSCAR I received any compensation for their services as directors or
committee members.

(f) Employee Benefits Plan
----------------------

The Company established the United Artists Theatre Circuit, Inc. 401(k) Savings
Plan (the "Savings Plan") which allows electing employees to contribute up to
10.0% of their compensation, subject to certain IRS limitations. Prior to
January 1, 1997, the Company matched 100.0% of the electing employee's
contributions up to 10.0% of an employee's compensation. As part of the
corporate restructuring plan, effective January 1, 1997, the Savings Plan was
amended to provide for a Company match of 100.0% of each employee's contribution
up to 3.0% of their compensation. Employees vest in the Company's matching
contributions 20.0% per year for every year of service, as defined.

Effective January 1, 1993, the Company established the United Artists Theatre
Circuit, Inc. Supplemental 401(k) Savings Plan (the "Supplemental Plan") for
certain employees who are highly compensated as defined by the IRS and whose
elective contributions to the Savings Plan exceed the IRS limitations. Through
December 31, 1996, such employees were allowed to contribute to the Supplemental
Plan, provided that the aggregate contributions to the Savings Plan and
Supplemental Plan did not exceed 10.0% of their compensation. As part of the
corporate restructuring plan, effective January 1, 1997, the Company suspended
the Supplemental Plan. The Company matched 100.0% of the employee's
contributions through the date of suspension of the Supplemental Plan.
Employees vest ratably in the matching contributions over five years from the
date of participation in the Supplemental Plan.

Matching contributions to the Savings Plan and the Supplemental Plan for the
president and chief executive officer and the four other highest paid executives
have been included in the summary compensation table.

During 1997, the Company's board established a bonus plan for all non-
commissioned corporate employees that is based upon the Company achieving its
operating budgets and other financial and operating goals and the employee
achieving certain specified goals.

(g) Employment Agreements
---------------------

The Company entered into employment agreements (each an "Employment Agreement"
and collectively, the "Employment Agreements") with each of Kurt C. Hall, Edward
C. Cooper, Dennis R. Daniels, Gene Hardy, Robert A. McCormick, Michael L. Pade,
Jim Ruybal and Bruce M. Taffet. The Employment Agreements with Messrs. Daniels,
Hardy, Ruybal and Taffet expire on May 12, 1998. The Employment Agreements with
Messrs. Cooper and McCormick expire on February 20, 1999. The Employment
Agreement with Mr. Hall expires on February 21, 1999. The Employment Agreement
with Mr. Pade expires on September 30, 2000.

Under the Employment Agreements, the employee receives a base salary (as defined
in the Employment Agreements) and certain customary benefits, including health
and disability insurance, participation in employee benefit plans and certain
perquisites. Each Employment Agreement provides that the employee will be
eligible to receive annual bonuses during the term of employment, as determined
by the Board of Directors.

In the event that Mr. Hall or Mr. Pade is terminated without cause, such
individual will be entitled to his base salary for two years and annual bonuses
for two years, in an amount based upon the average of the annual bonuses awarded
to him over the preceding two fiscal years.

In the event that Mr. McCormick or Mr. Cooper is terminated without cause, such
individual will be entitled to his base salary for the remainder of the term of
his employment agreement following his termination but not less than 12 months
and annual bonuses for the remainder of the term of his employment agreement but
not less than 12 months, in an amount based upon the average bonuses paid to him
over the preceding two fiscal years.

In the event that Mr. Daniels, Mr. Ruybal, Mr. Hardy or Mr. Taffet is terminated
without cause, such individual will be entitled to his base salary for the
lesser of two years or the remainder of the term of his employment agreement
following termination, but not less than 12 months and annual bonuses for the
lesser of two years or the remainder of the term of his employment agreement
following termination, but not less than 12 months, in an amount based upon the
average bonuses paid to him over the preceding two fiscal years.

It is expected that the Employment Agreements will be amended and/or extended
prior to their expiration dates. The terms of the Employment Agreements, as
amended or extended, may be different from those currently in place.

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

OSCAR I owns 100% of the issued and outstanding shares of the Company's capital
stock. OSCAR I is a Delaware corporation whose only business interest is its
ownership of the Company and UAR. OSCAR I's principal executive offices are
located at 9110 E. Nichols Avenue, Englewood, Colorado 80112.

OSCAR I has four classes of capital stock outstanding: the OSCAR I Class A
Shares, the OSCAR I Class B Shares, the OSCAR I Class C Shares (collectively the
"OSCAR I Shares") and the OSCAR I Preferred Stock (the "Preferred Stock"). The
OSCAR I Shares are held of record by 33 holders. The following tables set forth
certain information concerning the beneficial ownership of OSCAR I Shares and
Preferred Stock known to OSCAR I to own beneficially in excess of 5% of the
outstanding OSCAR I Shares and the president and chief executive officer and the
four other highest paid executive officers of the Company, for each director and
all executive officers and directors of the Company as a group as of March 20,
1998. Except as otherwise indicated, all of the persons listed below have (i)
sole voting power and investment power with respect to their OSCAR I Shares,
except to the extent that authority is shared by spouses under applicable law
and (ii) record and beneficial ownership with respect to their OSCAR I Shares.

OSCAR I COMMON STOCK
PERCENT-
PERCENTAGE PERCENTAGE PERCENTAGE AGE
BENEFICIAL OF BENEFICIAL OF BENEFICIAL OF OF
NAME AND ADDRESS INTEREST OSCAR I INTEREST OSCAR I INTEREST OSCAR I OSCAR I
BENEFICIAL OWNER CLASS A SHARES CLASS A SHARES CLASS B SHARES CLASS B SHARES CLASS C SHARES CLASS C SHARES SHARES
- --------------------------- -------------- -------------- -------------- -------------- -------------- -------------- --------

MLCP(1)(5)(7).............. 8,409,761 72.8% 0 - 0 - 71.6%
Merrill Lynch & Co,
Inc.(2)(5)................ 2,082,205 18.0% 0 - 0 - 17.7%
Institutional Investors(8). 1,059,417 9.2% 0 - 0 - 9.0%
Kurt C. Hall(3)(6)......... 0 - 41,750 23.3% 0 - 0.4%
Michael Pade(3)(6)......... 0 - 6,775 3.8% 811 6.2% 0.1%
Dennis R. Daniels(3)(6).... 0 - 12,600 7.0% 0 - 0.1%
Jim Ruybal(3)(6)........... 0 - 20,850 11.6% 0 - 0.2%
Thomas C. Elliot(3)(6)..... 0 - 30,370 16.9% 550 4.2% 0.3%
James J. Burke, Jr.(4)(7).. 0 - 0 - 0 - -
Albert J. Fitzgibbons,
III(4)(7)................. 0 - 0 - 0 - -
Robert F. End(4)(7)........ 0 - 0 - 0 - -
Scott Shaw(4).............. 0 - 0 - 0 - -
John W. Boyle(9)........... 0 - 0 - 0 - -
Directors and Executive
Officers as
a group (12 persons)(6).. 0 - 141,995 79.2% 1,361 10.4% 1.2%
- --------------------------------------------------------

(1) OSCAR I Class A Shares beneficially owned by MLCP are held as follows:
5,049,958.2 by Merrill Lynch Capital Appreciation Partnership No. B-XIX,
L.P. ("MLCAP B-XIX"); 46,396.0 by Merrill Lynch Capital Appreciation
Partnership No. B-XX, L.P. ("MLCAP B-XX"); 3,229,723.5 by Roman Nineteen
Offshore Fund N..V. ("Roman Holdings") and 83,683.3 by MLCP Associates L.P.
No. 11. ("MLCP 11"). MLCP is the indirect managing general partner of
MLCAP B-XIX and MLCAP B-XX and the general partner of MLCP 11. Affiliates
of MLCP are the sole stockholders of Roman Holdings. The address of MLCP
and each of the aforementioned record holders is South Tower, World
Financial Center, New York, New York 10080.
(2) OSCAR I Class A Shares beneficially owned by Merrill Lynch & Co., Inc. are
owned of record as follows: 1,932,204.7 by ML IBK Positions, Inc.;
150,000.0 by Merrill Lynch KECALP L.P. 1991. The address for ML IBK
Positions, Inc. is North Tower, World Financial Center, New York, New York
10281. The address of Merrill Lynch KECALP L.P. 1991 is South Tower, World
Financial Center, New York, New York 10080.
(3) The address for each of Messrs. Hall, Pade, Daniels, Ruybal and Elliot is
9110 East Nichols Avenue, Englewood, Colorado 80112.
(4) The address for each of Messrs. Burke, Fitzgibbons, End and Shaw is c/o
Stonington Partners, Inc., 767 Fifth Avenue, New York, New York 10153.
(5) Entities affiliated with Merrill Lynch & Co., Inc. own approximately
10,491,966 of the outstanding OSCAR I Shares, which represents
approximately 89.3% of the outstanding OSCAR I Shares.
(6) Includes vested incentive options and Class C shares that are exercisable
within 60 days.
(7) Each of Messrs. Burke, Fitzgibbons and End are members of the Board of
Directors of MLCP, but each disclaims beneficial ownership of the OSCAR I
Shares.
(8) To the knowledge of the Company, none of the Institutional Investors
beneficially owns 5% or more of the OSCAR I Class A Shares.
(9) The address for Mr. Boyle is 7 North Pine Circle, Belleair, Florida 34616.

OSCAR I PREFERRED STOCK

Number of Shares Percentage of Shares
Shareholder of Preferred Stock (1) of Preferred Stock
----------- -------------------- -------------------
LBI Group
c/o Lehman Brothers 152,154 100%
3 World Trade Center
New York, NY

(1) The Preferred Stock has 23 votes per share and is subject to a voting
agreement under which MLCP has been granted a proxy to vote such shares.

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

The Company leases four theatres from UAR and 32 theatres from Prop I. The
common stock of UAR is owned 100% by OSCAR I.

The lease agreements between the Company and UAR and Prop I provide for annual
base rentals of approximately $2.5 million and $5.9 million, respectively, as
well as taxes, insurance, maintenance and other related charges. In addition,
the leases provide for additional rentals based upon a percentage of the leased
theatres' revenue. The leases between the Company and UAR and Prop I expire on
October 4, 2003 and October 31, 2003, respectively, and provide for options to
extend the leases at the Company's option for up to ten years.

Pursuant to an indenture and mortgage notes entered into by Prop I on October 1,
1988, the 32 theatres leased by the Company from Prop I are mortgaged for the
benefit of the respective holders of the Prop I mortgage notes. In conjunction
with the issuance of the Prop I mortgage notes, UAE issued a $12.0 million
residual value guaranty. In conjunction with the Acquisition, standby letters
of credit of $12.5 million were issued as part of the Company's Bank Credit
Facility in order to release UAE from certain of its obligations under the
guarantees.

In order to fund the cost of additions and/or renovations to the theatres leased
by the Company from UAR or Prop I, the Company has periodically made advances to
UAR. Interest on the advances accrues at the prime rate and amounted to $1.4
million, $1.1 million and $1.4 million for the years ended December 31, 1997,
1996 and 1995, respectively.

During 1997, the Company exchanged two fee-owned theatre properties with Prop I
in return for a fee-owned theatre property and a $2.7 million note. During
1996, the Company exchanged a fee-owned theatre with Prop I in return for two
fee-owned theatre properties and a $1.5 million note. The note bears interest
at the prime rate plus 1 1/2% and is due upon demand.

Pursuant to a management agreement entered into between the Company and UAR on
May 12, 1992, the Company charges UAR a management fee. This management fee
represents the cost of managing and accounting for UAR's properties. For each
of the years ended December 31, 1997, 1996 and 1995, such management fees were
approximately $0.6 million, $0.6 million and $0.9 million, respectively.

Entities affiliated with MLCP own approximately 89.3% of the OSCAR I Shares.
Through a management agreement with MLCP, Stonington Partners, Inc. manages the
portfolio of companies owned by MLCP, including OSCAR I.

PART IV

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

Page Number
-----------

(a) 1. Financial Statements Included in Part II
of this Report:

United Artists Theatre Circuit, Inc. and Subsidiaries

Report of Independent Public Accountants 25
Independent Auditors' Report 26

Consolidated Balance Sheets 27
December 31, 1997 and 1996

Consolidated Statements of Operations 28
Years Ended December 31, 1997, 1996 and 1995

Consolidated Statements of Stockholder's Equity
(Deficit) 29
Years Ended December 31, 1997, 1996 and 1995

Consolidated Statements of Cash Flow 30
Years Ended December 31, 1997, 1996 and 1995

Notes to Consolidated Financial Statements 31

Guarantor - OSCAR I Corporation and Subsidiaries

Report of Independent Public Accountants 43
Independent Auditors' Report 44

Consolidated Balance Sheets 45
December 31, 1997 and 1996

Consolidated Statements of Operations 46
Years Ended December 31, 1997, 1996 and 1995

Consolidated Statements of Stockholders' Equity
(Deficit) 47
Years Ended December 31, 1997, 1996 and 1995

Consolidated Statements of Cash Flow 48
Years Ended December 31, 1997, 1996 and 1995

Notes to Consolidated Financial Statements 49

2. Financial Statements Schedules

All financial statement schedules are omitted as they are not required
or are not applicable, or the required information is included in the
Consolidated Financial Statements or notes thereto.

3. Exhibits

The following exhibits are filed herewith or incorporated by
reference herein (according to the number assigned to them in Item
601 of Regulation S-K) as noted:

Page Number
-----------

3 a) Restated Articles of Incorporation of United Artists Theatre
Circuit, Inc. (1)

b) By-laws of United Artists Theatre Circuit, Inc. (1)

c) Restated Articles of Incorporation of OSCAR I Corporation (1)

d) By-laws of OSCAR I Corporation (1)

e) Certificate of Designation for Series A Cumulative Redeemable
Exchangeable Preferred Stock of OSCAR I Corporation (1)

4 a) Specimen 11-1/2% Senior Secured Note Due 2002, Series B (1)

b) Indenture dated as of May 12, 1992, among United Artists
Theatre Circuit, Inc. as issuer, The Bank of New York, as trustee and OSCAR
I Corporation, as guarantor (1)

c) Registration Rights Agreement, dated as of May 12, 1992, by
and among United Artists Theatre Circuit, Inc. and OSCAR I Corporation (1)

d) Note Purchase Agreement, dated as of May 12, 1992, among
United Artists Theatre Circuit, Inc., OSCAR I Corporation and the
purchasers thereunder (1)

e) Placement Agent Agreement, dated April 10, 1992, between
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated and
OSCAR I Corporation (1)

f) Affiliate Subordination Agreement, dated as of May 12, 1992,
by and among OSCAR I Corporation, United Artists Realty Company and certain
Subordinated Creditors of the Company (1)

g) OSCAR I Guarantee, dated as of May 12, 1992, by OSCAR I
Corporation (1)

h) Subsidiary Guarantee, dated as of May 12, 1992, by the
Subsidiary Guarantors (1)

i) Intercompany Agreement, dated as of May 12, 1992, by and
among United Artists Theatre Circuit, Inc. and each of the wholly-owned
Subsidiaries (1)

j) Security Agreement, dated as of May 12, 1992, by and between
United Artists Theatre Circuit, Inc. and Bankers Trust Company (1)

k) Pledge Agreement, dated as of May 12, 1992, by and between
United Artists Theatre Circuit, Inc. and Bankers Trust Company (1)

l) Pledge Agreement, dated as of May 12, 1992, by and between
OSCAR I Corporation and Bankers Trust Company (1)

Page Number
-----------

m) Intercreditor Agreement, dated as of May 12, 1992 among Bank
of America National Trust and Savings Association, Barclays Bank PLC,
Continental Bank N.A., The First National Bank of Boston, United Artists
Theatre Circuit, Inc., The Bank of New York and Bankers Trust Company (1)

n) Restated Credit Agreement, dated as of May 1, 1995, among United
Artists Theatre Circuit, Inc. and Bank of
America National Trust and Savings Association, Barclays Bank PLC,
and The First National Bank of Boston, as co-
managing agents, the other financial institutions party hereto and
Bank of America National Trust and Savings
Association, as managing agent.(5)

o) Restated OSCAR I Guaranty.(5)

p) Restated Subsidiary Guaranty.(5)

q) Restated OSCAR I Pledge Agreement.(5)

r) Restated Pledge Agreement.(5)

s) Restated UATC Security Agreement.(5)

t) Restated Affiliate Subordination Agreement.(5)

u) Restated Intercreditor and Collateral Agency Agreement.(5)

v) Agreement and Plan of Merger between OSCAR I Corporation and
OSCAR II Corporation dated as of February 28, 1995.(4)

w) Certificate of Merger of OSCAR II Corporation into OSCAR I
Corporation. (4)

x) Agreement of Purchase and Sale dated as of November 30, 1995
by and between United Artists Properties II Corp. and United Artists
Theatre Circuit, Inc. and Theatre Investors, Inc. (7)

y) Trust Indenture and Security Agreement dated as of December
13, 1995, between Wilmington Trust Company, William J. Wade and Fleet
National Bank of Connecticut, and Alan B. Coffey. (7)

z) Pass Through Certificates, Series 1995-A Registration Rights
Agreement, dated as of December 13, 1995 among United Artists Theatre
Circuit, Inc., Morgan Stanley & Co. Incorporated and Merrill Lynch,
Pierce, Fenner & Smith Incorporated. (7)

aa) Participation Agreement, dated as of December 13, 1995, among
United Artists Theatre Circuit, Inc., Wilmington Trust Company,
William J. Wade, Theatre Investors, Inc., Northway Mall Associates,
LLC, Wilmington Trust Company, William J. Wade, Fleet National Bank of
Connecticut, Alan B. Coffey and Fleet National Bank of Connecticut. or (7)

ab) Pass Through Trust Agreement, dated as of December 13, 1995,
between United Artists Theatre Circuit, Inc. and Fleet National Bank
of Connecticut. (7)

Page Number
-----------

ac) Lease Agreement, dated as of December 13, 1995, between
Wilmington Trust Company and William J. Wade and United Artists
Theatre Circuit, Inc. (7)

10 a) Lease Agreement, dated as of October 1, 1988, between United
Artists Properties I Corporation and United Artists Theatre Circuit,
Inc. (1)

b) Management Stock Plan, effective May 12, 1992, by OSCAR I
Corporation. (1)

c) Stockholders' Agreement, dated as of May 12, 1992, by and
among OSCAR I Corporation, Merrill Lynch Capital Appreciation
Partnership No. B-XIX, L.P., Roman Nineteen Offshore Fund B.V., ML IBK
Positions, Inc., MLCP Associates L.P. No. II, Equitable Capital
Private Income and Equity Partnership II, L.P. and Equitable Deal Flow
Fund, L.P. and the holders of Options or Restricted Stock awards under
the Management Stock Option Plan. (1)

d) Stock Subscription Agreement, dated as of May 12, 1992, by
and among OSCAR I Corporation, Merrill Lynch Capital Appreciation
Partnership No. B-XIX, L.P., Roman Nineteen Offshore Fund B.V., ML IBK
Positions, Inc., MLCP Associates L.P. No. II, Equitable Capital
Private Income and Equity Partnership II, L.P. and Equitable Deal Flow
Fund, L.P. (1)

e) Non-Competition Agreement, dated as of May 12, 1992, by and
among Tele-Communications, Inc., United Artists Theatre Circuit, Inc. and
OSCAR I Corporation. (1)

f) Contingent Capital Agreement, dated as of May 12, 1992, by
and between OSCAR I Corporation and OSCAR II Corporation. (1)

g) Securityholders' Agreement, dated as of May 12, 1992, by and
among OSCAR I Corporation, Merrill Lynch Capital Appreciation Partnership
No. B-XIX, L.P., Roman Nineteen Offshore Fund, B.V., ML IBK Positions,
Inc., MLCP Associates L.P. II, and United Artists Theatre Holding Company. (1)

h) Trademark Agreement as of May 12, 1992 by United Artists
Entertainment Company, United Artists Holdings, Inc., United Artists Cable
Holdings, Inc., United Artists Theatre Holding Company, on the one hand and
United Artists Theatre Circuit, Inc., United Artists Realty Company, UAB,
Inc., and UAB II, Inc., on the other hand. (1)

i) United Artists Theatre Circuit 401(k) Savings Plan. (1)

j) United Artists Theatre Circuit Supplemental 401(k) Savings
Plan. (3)

k) Tax Sharing Agreement, dated as of May 12, 1992, between OSCAR I Corporation and
United Artists Theatre Circuit, Inc. (1)

l) Form of Employment Agreement, dated as of May 12, 1992,
between the Company and Kurt C. Hall. (1)

m) Form of Employment Agreement, dated as of May 12, 1992,
between the Company and Thomas C. Elliot. (1)

Page Number
-----------

n) Amendment No. 1, dated as of July 15, 1992, to the
Stockholders' Agreement, dated as of May 12, 1992, by and among OSCAR I
Corporation, Merrill Lynch Capital Appreciation Partnership No. B-XIX,
L.P., Roman Nineteen Offshore Fund B.V., ML IBK Positions, Inc., MLCP
Associates L.P. No. II, Equitable Capital Private Income and Equity
Partnership II, L.P. and Equitable Deal Flow Fund, L.P. and the holders of
Options or Restricted Stock awards under the Management Stock Option Plan. (1)

o) Amendment to the United Artists Theatre Circuit, Inc. 401(K)
savings Plan dated as of January 1, 1997.(8)

p) Form of Employment Agreement, dated as of March 1, 1993,
between the Company and Dennis Daniels.(8)

q) Form of Employment Agreement, dated as of September 19,
1994, between the Company and Gene Hardy.(8)

r) Form of Employment Agreement, dated as of January 24,
1995, between the Company and Bruce Taffet.(8)

21 a) Subsidiaries of United Artists Theatre Circuit, Inc.(8)

b) Subsidiaries of OSCAR I Corporation.(8)

(1) Incorporated herein by reference from Form S-1 dated October 5, 1992.
(2) Incorporated herein by reference from Form 10-K for the year ended December
31, 1992.
(3) Incorporated herein by reference from Form 10-K for the year ended December
31, 1993.
(4) Incorporated herein by reference from Form 10-K for the year ended December
31, 1994.
(5) Incorporated herein by reference from Form S-1 dated July 12, 1995.
(6) Incorporated herein by reference from Form 10-K for the year ended December
31, 1995.
(7) Incorporated herein by reference from Form S-2 dated January 31, 1996.
(8) Incorporated herein by reference to Form 10-K for the year ended December 31,
1996.

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.

UNITED ARTISTS THEATRE CIRCUIT, INC.
(Registrant)

Director, President and Chief Executive /S/ Kurt C. Hall
------------------
Officer Kurt C. Hall
Dated: March 20, 1998

Chief Financial Officer /S/Trent J. Carman
-------------------
Dated. March 20, 1998 Trent J. Carman

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

Chairman of the
Board and Director /S/ John W. Boyle
-----------------
Dated: March 20, 1998 John W. Boyle

Director /S/ James J. Burke, Jr.
-----------------------
Dated: March 20, 1998 James J. Burke, Jr.

Director /S/ Albert J. Fitzgibbons, III
------------------------------
Dated: March 20, 1998 Albert J. Fitzgibbons, III

Director /S/ Robert F. End
-----------------
Dated: March 20, 1998 Robert F. End

Director /S/ Scott M. Shaw
-----------------
Dated: March 20, 1998 Scott M. Shaw