EXHIBIT 13


Selected portions of the Company's 1997 Annual Report to Shareholders
incorporated by reference herein:

Pages 14-21

FINANCIAL REVIEW

To comply with applicable UK and US securities regulations, Telewest
Communications plc prepares financial statements under UK and US generally
accepted accounting principles ("GAAP") both sets of financial statements are
included in this report. Financial statements prepared under UK GAAP can be
found on pages 26 to 56; financial statements prepared under US GAAP can be
found on pages 57 to 77.

In the discussion of the financial results that follows, unless specifically
noted, all references to figures are identical under UK and US GAAP.

SUMMARY OF OPERATIONS YEARS ENDED 31 DECEMBER 1997 AND 1996
The Group's consolidated revenue increased by (pound)96.2 million or 33% from
(pound)290.3 million in 1996 to (pouNd)386.5 million in 1997. The increase was
attributable to the larger customer base created by the Group's continuing
network construction and penetration and price increases in certain segments of
our business.

CABLE TELEVISION REVENUE
Cable television revenue increased by 32% from (pound)121.2 million in 1996 to
(pound)159.9 million in 1997. The iNcrease was primarily attributable to a 28%
increase (from 440,212 to 562,343) in the average number of customers in 1997
over 1996. The increase in the average number of customers is a result of an
increase in the number of homes passed and marketed (from 2,335,953 at 31
December 1996 to 2,760,184 at 31 December 1997).

Average monthly revenue per cable television customer increased 2% from
(pound)22.95 in 1996 to (pound)23.40 in 1997. This was due to the expansion of
pay per view events, a decrease in promotional discounts offered by the Group
and price increases implemented from 1 November 1997.

TELEPHONY REVENUE
Telephony revenue increased by 32% from (pound)159.6 million in 1996 to
(pound)210.5 million in 1997.

Residential telephony revenue increased by 33% from (pound)125.0 million in 1996
to (pound)166.6 million in 1997. Business telephony revenue increased by 27%
from (pound)34.6 million in 1996 to (pound)43.9 million in 1997.

The increase in residential telephony in 1997 over 1996 was primarily due to a
42% increase (from 514,156 to 732,487) in the average number of residential
lines. This resulted from an increase in the number of homes passed and marketed
(from 2,254,734 at 31 December 1996 to 2,725,154 at 31 December 1997) and an
increase in penetration of the total base of homes passed of 2.2 percentage

<PAGE>
points. The revenue increase from the growth in the average number of
residential lines was partially offset by a 5% decrease in the average monthly
revenue per residential line, from (pound)20.26 in 1996 to (pound)19.19 in 1997.










                                       2
<PAGE>
CONSOLIDATED FINANCIAL HIGHLIGHTS
(all amounts in (pound)million)

<TABLE>
<CAPTION>
                                                        UK GAAP                                       US GAAP
                                          --------------------------------------       -----------------------------------------
Year ended 31 December                    1997    1996     1995    1995     1994        1997     1996     1995    1995     1994
                                                        Pro forma                                       Pro forma
REVENUE                            Note
---------------------------------------------------------------------------------------------------------------------------------
<S>                                      <C>     <C>      <C>     <C>      <C>         <C>      <C>      <C>     <C>      <C>
Cable television                          159.9   121.2    64.7    83.7     35.9        159.9    121.2    64.7    83.7     35.9
Telephony - residential                   166.6   125.0    57.6    81.2     23.5        166.6    125.0    57.6    81.2     23.5
Telephony - business                      43.9    34.6     17.4    20.6     8.8         43.9     34.6     17.4    20.6     8.8
Other                                     16.1    9.5      5.1     5.7      3.8         16.1     9.5      5.1     5.7      3.8
---------------------------------------------------------------------------------------------------------------------------------

Total Revenue                             386.5   290.3    144.8   191.2    72.0        386.5    290.3    144.8   191.2    72.0
---------------------------------------------------------------------------------------------------------------------------------

OPERATING COSTS AND
EXPENSES
Programming                               (93.4)  (69.9)   (32.2)  (42.9)   (15.5)      (93.4)   (69.9)   (32.2)  (42.9)   (15.5)
Telephony                                 (50.1)  (52.7)   (29.5)  (38.7)   (14.7)      (50.1)   (52.7)   (29.5)  (38.7)   (14.7)
Selling, general and administrative      (193.3)  (167.3)  (105.4) (137.8)   (60.4)     (193.3)  (167.3)  (105.4) (137.8)   (60.4)
Depreciation                              (177.3) (129.7)  (61.5)  (82.3)   (30.3)      (177.3)  (129.7)  (60.0)  (80.8)   (30.3)
Amortisation of goodwill           (1)    -       -        -       -        -           (26.4)   (26.1)   (7.9)   (25.3)   (1.8)
---------------------------------------------------------------------------------------------------------------------------------

                                          (514.3) (419.6)  (228.6) (301.7)  (120.9)     (540.7)  (445.7)  (235.0) (325.5)  (122.7)
---------------------------------------------------------------------------------------------------------------------------------

Operating loss                            (127.8) (129.3)  (83.8)  (110.5)  (48.9)      (154.2)  (155.4)  (90.2)  (134.3)  (50.7)

OTHER INCOME (EXPENSE)
Share of loss of affiliates               (21.3)  (15.2)   (12.1)  (12.1)   (8.5)       (21.7)   (16.0)   (12.8)  (12.8)   (805)
Financial expenses, net            (2)    (160.8) (105.4)  (18.8)  (25.3)   (7.8)       (156.2)  (90.8)   (34.6)  (41.1)   (6.2)
Other                                     (0.8)   (1.0)    (0.7)   (0.7)    -           (0.4)    (0.2)    0.1     0.1      -
---------------------------------------------------------------------------------------------------------------------------------

Net loss before extraordinary item        (310.7) (250.9)  (115.4) (148.6)  (65.2)      (332.5)  (262.4)  (137.5) (188.1)  (65.4)
---------------------------------------------------------------------------------------------------------------------------------

Extraordinary item                 (3)    -       -        -       -        -           -        -        -       -        7.3

Net loss                                  (310.7) (250.9)  (115.4) (148.6)  (65.2)      (332.5)  (262.4)  (137.5) (188.1)  (58.1)
---------------------------------------------------------------------------------------------------------------------------------

</TABLE>

Note 1    Under UK GAAP goodwill related to acquisitions is written off to
          reserves at time of purchase. Under US GAAP goodwill is generally
          amortised over 20 years.

Note 2    The accounting treatment for financial instruments is different under
          UK and US GAAP, as explained in the consolidated US GAAP financial
          statements in note 4.

Note 3    Amount represents the unrealised gain embedded in interest rate swaps
          which were marked to market for US GAAP purposes but not for UK GAAP
          purposes.

Telewest acquired SBCC on 3 October 1995. Pro forma information has been
included for 1995 to demonstrate the effect of including the results of former
SBCC franchises for the full year ended 31 December 1995. The pro forma
information is not commented upon in the Financial Review.

For the purposes of comparison, UK GAAP consolidated financial highlights for
1994 are shown to reflect the results of certain predecessor businesses which
were acquired by the Group in November 1994. The results of predecessor
businesses do not include the results of former SBCC franchises.

                                       3
<PAGE>
This decrease was mainly attributable to price reductions in per minute call
charges in response to price cutting by BT, the Group's main competitor in
residential telephony. The Group intends to continue to reduce per minute call
tariffs as necessary to compete effectively and to seek to mitigate the revenue
impact of these reductions through higher line rentals, increased call volumes
and sales of value added services such as call-waiting and voice-messaging.

The increase in business telephony revenue in 1997 over 1996 was primarily
attributable to a 58% increase (from 52,849 to 83,552) in the average number of
business telephony lines in 1997, which was partially offset by a 20% decrease
in the average monthly revenue per business line, from (pound)54.50 in 1996 to
(pound)43.62 in 1997. This decrease was mainly attributable to price reductions
in per minute call charges and increased volume discounts, together with
increased sales of Centrex, a business telecommunications product which provides
more lines to customers but has a lower average monthly revenue per line.

Other revenue increased by 70% from (pound)9.5 million in 1996 to (pound)16.1
million in 1997. Other revenue is derived primarily from management services
provided to Affiliated Companies, Internet sales, cable publications and network
management services provided to other operators, and advertising sales.


OPERATING COSTS AND EXPENSES
The Group's consolidated operating costs and expenses (which include direct
costs of programming and interconnection; selling, general and administrative
expenses; depreciation and amortisation expenses) increased by 23% from
(pound)419.6 million in 1996 to (pound)514.3 million in 1997 (21% under US GAAP
from (pound)445.7 million in 1996 to (pound)540.7 million in 1997).

Programming fees are the largest component of the Group's operating costs in
providing cable television services. The Group obtains most of its programming
under contracts which provide for payments based upon the number of subscribers.
As a percentage of cable television revenues, programming costs remained stable
at 58% in both 1996 and 1997.

Interconnection charges are the largest component of the Group's telephony
operating costs in providing telephony services. As a percentage of telephony
revenue, telephony operating costs decreased from 33% in 1996 to 24% in 1997 due
to the continuing reduction in interconnection charges in the UK telephony
market, a growing percentage of calls handled within the Telewest network and by
credits relating to interconnection charges from earlier periods, which have
been recalculated based on the final agreed rates applicable for that period.

Selling, general and administrative expenses, which include, among other items,
salary and marketing costs, decreased as a percentage of revenue from 58% in
1996 to 50% in 1997. The improvement is largely due to the rapid growth in
revenues and continued reduction in support costs per customer as the Group
benefits from the economies of scale resulting from its enlarged operations. The
Group expects that selling, general and administrative expenses will continue to
decline as a percentage of revenue as revenues increase, efficiency gains from
its fixed cost base are increasingly exploited, and the full year benefits of a
restructuring and redundancy programme, completed in 1997, take effect. The
restructuring programme announced in August 1997, resulted in a reduction in
headcount of 1,400 staff and contractors at a cost of approximately (pound)3
million, and is expected to result in cash savings of approximately (pound)40
million in 1998. Total labour and overhead costs capitalised in 1997 were
(pound)76.9 million, compared to (pound)54.0 million in 1996.


                                       4
<PAGE>
Depreciation expense increased 37% from (pound)129.7 million in 1996 to
(pound)177.3 million in 1997. The increase of (pound)47.6 million was
principally attributable to capital expenditure associated with the Group's
continuing construction activities ((pound)37.2 million) and a reclassification
of certain network assets in 1997 ((pound)10.4 million), as set out in Note 1 to
the UK GAAP financial statements and Note 3 to the US GAAP financial statements.
Under US GAAP, amortisation expense increased slightly from (pound)26.1 million
in 1996 to (pound)26.4 million in 1997. Under UK GAAP, all goodwill arising on
acquisitions is directly written off to reserves.

OTHER INCOME (EXPENSE)
The Group's share of the net losses of its Affiliated Companies accounted for
under the equity method, principally Birmingham Cable Corporation Limited and
Cable London plc, was (pound)21.3 million and (pound)15.2 million in 1997 and
1996, respectively, under UK GAAP ((pound)21.7 million and (pound)16.0 million
in 1997 and 1996, respectively, under US GAAP due to a difference in the
classification of tax expense).

Financial expenses, net, under UK GAAP consist primarily of interest expense of
(pound)139.0 million in 1997 ((pound)96.8 million in 1996), and foreign exchange
losses of (pound)31.0 million in 1997 ((pound)25.9 million in 1996) offset in
part by interest income earned on short-term investments and loans to Affiliated
Companies of (pound)9.1 million in 1997 ((pound)17.2 million in 1996). Under US
GAAP, financial expenses consist primarily of interest expense of (pound)141.7
million in 1997 ((pound)105.2 million in 1996), and foreign exchange losses of
(pound)23.5 million in 1997 ((pound)2.8 million in 1996) offset in part by
interest income earned on short-term investments and loans to Affiliated
Companies of (pound)8.0 million in 1997 ((pound)16.7 million in 1996).

Interest expense increased by (pound)42.2 million in 1997 ((pound)36.5 million
under US GAAP) primarily as a result of the interest expense on higher
outstanding borrowings relating to the Senior Secured Facility and the higher
accrued interest expense on the Senior Discount Debentures issued by the Group
in October 1995. The debentures are fully described in the following discussion
on Liquidity and Capital Resources. The foreign exchange losses under UK GAAP in
1997 primarily relate to the amortisation of the foreign currency option premium
which hedges the Senior Discount Debentures and the amortisation of exchange
losses arising on the translation of the debentures to Sterling using the
contracted exchange rate of the option. It is the Group's policy to hedge
non-Sterling denominated borrowings to reduce or eliminate exchange rate
exposure. The foreign exchange losses under US GAAP in 1997 arose principally
from the re-translation of the US Dollar denominated debentures to Pounds
Sterling, using the 31 December 1997 exchange rate, and marking the associated
hedging instruments to their market value at 31 December 1997.

SUMMARY OF OPERATIONS YEARS ENDED 31 DECEMBER 1996 AND 1995
The acquisition of SBCC on 3 October 1995 has been accounted for in the 1995
consolidated financial statements under the acquisition method of accounting.
Therefore, the 1995 consolidated profit and loss account includes the results of
SBCC from 3 October 1995 to 31 December 1995. The 1996 consolidated profit and
loss account includes the results of SBCC for the full year.

The Group's consolidated revenue increased by (pound)145.5 million or 100% from
(pound)144.8 million in 1995 to (pound)290.3 million in 1996. The increase was
attributable to the inclusion of the results of the former SBCC franchises for a

                                       5
<PAGE>
full year in 1996 and to the larger customer base created by the enlarged
Group's continuing network construction.

CABLE TELEVISION REVENUE
Cable television revenue increased by 87% from (pound)64.7 million in 1995 to
(pound)121.2 million in 1996. The increase was primarily attributable to a 74%
increase (from 253,049 to 440,212) in the average number of customers in 1996
over 1995. The increase in the average number of customers resulted from the
inclusion for a full year in 1996 of the results of the former SBCC franchises
(which contributed an average of 165,855 customers in 1996 compared to an
average of 35,192 customers in 1995) and from an increase in the number of homes
passed and marketed in the other franchises (from 1,142,860 at 31 December 1995
to 1,460,463 at 31 December 1996).

Average monthly revenue per cable television customer increased 8% from
(pound)21.32 in 1995 to (pound)22.95 in 1996. This was a result of an increase
in the basic channel charge implemented in December 1995 and the additional
revenue generated from pay per view programming. This was, however, partially
offset by a decrease in the average number of premium channels purchased per
customer due to the inclusion for a full year in 1996 of the results of the
former SBCC franchises which historically had a lower average number of premium
channels purchased per customer.

TELEPHONY REVENUE
Telephony revenue increased by 113% from (pound)75.0 million in 1995 to
(pound)159.6 million in 1996.

Residential telephony revenue increased by 117% from (pound)57.6 million in 1995
to (pound)125.0 million in 1996. Business telephony revenue increased by 98%
from (pound)17.4 million in 1995 to (pound)34.6 million in 1996.

The increase in residential telephony in 1996 over 1995 was primarily due to a
119% increase (from 234,400 to 514,156) in the average number of residential
lines. This increase resulted from the inclusion for a full year in 1996 of the
results of the former SBCC franchises (which contributed an average of 229,751
lines in 1996 compared to an average of 45,117 lines in 1995), and from an
increase in the number of homes passed and marketed in the other franchises
(from 968,863 at 31 December 1995 to 1,380,484 at 31 December 1996). The revenue
increase from the growth in the average number of residential lines was slightly
offset by a 1% decrease in the average monthly revenue per residential line,
from (pound)20.48 in 1995 to (pound)20.26 in 1996. This decrease was mainly
attributable to price reductions in per minute call charges in response to price
cutting by BT, which were offset by increases in line rental rates.

The increase in business telephony revenue in 1996 over 1995 was primarily
attributable to a 114% increase (from 24,681 to 52,849) in the average number of
business telephony lines in 1996, which was partially offset by an 8% decrease
in the average monthly revenue per business line, from (pound)58.92 in 1995 to
(pound)54.50 in 1996. This decrease was attributable to price reductions in per
minute call charges in response to competition and increased sales of Centrex.

Other revenue increased by 89% from (pound)5.0 million in 1995 to (pound)9.5
million in 1996. Other revenue was derived primarily from management services
provided to Affiliated Companies, cable publications and network management
services provided to other operators, and advertising sales.

                                       6
<PAGE>
OPERATING COSTS AND EXPENSES
The Group's consolidated operating costs and expenses (which include direct
costs of programming and interconnection; selling, general and administrative
expenses; depreciation expense and amortisation expense) increased by 84% from
(pound)228.6 million in 1995 to (pound)419.6 million in 1996 (90% under US GAAP
from (pound)235.0 million in 1995 to (pound)445.7 million in 1996).

As a percentage of cable television revenues, programming costs increased from
50% in 1995 to 58% in 1996 as a result of programming fee increases, providing
more channels in the basic cable television package with no price increase and
the inclusion for a full year in 1996 of the results of the former SBCC
franchises which have higher per channel programming costs.

Interconnection charges are the largest component of the Group's telephony
operating costs in providing telephony services. As a percentage of telephony
revenue, telephony operating costs decreased from 39% in 1995 to 33% in 1996 as
line rental income, which incurs no third-party cost, represented a larger
proportion of total average revenue per line in 1996 than in 1995.
Interconnection charges in 1996 also were reduced by credits relating to
interconnection charges from earlier periods which have been calculated based on
revised estimates of prevailing interconnection charges in the UK.

Selling, general and administrative expenses, which include, among other items,
salary and marketing costs, decreased as a percentage of revenue from 73% in
1995 to 58% in 1996. The majority of this improvement is due to the rapid growth
in revenues and continued reduction in support costs per customer, with the
balance accounting for 5 percentage points of the year-on-year reduction - due
to revised estimates used in determining the proportion of labour and overhead
costs which are capitalised as network assets. Total labour and overhead costs
capitalised in 1996 were (pound)54.0 million, compared to (pound)26.6 million in
1995.

Depreciation expense increased 111% from (pound)61.5 million in 1995 to
(pound)129.7 million in 1996 under UK GAAP and increased 116% from (pound)60
million under US GAAP. This increase was principally attributable to capital
expenditure associated with the Group's continuing construction activities, a
full year of depreciation expense recorded in the former SBCC franchises, and a
reduction in the estimated useful lives of certain network assets in 1996 as set
out in Note 1 to the UK GAAP financial statements and Note 3 to the US GAAP
financial statements. Under US GAAP, amortisation expense increased from
(pound)7.9 million in 1995 to (pound)26.1 million in 1996 primarily due to a
full year of amortisation of the goodwill arising on the acquisition of SBCC in
October 1995.

OTHER INCOME (EXPENSE)
The Group's share of the net losses of its Affiliated Companies accounted for
under the equity method, principally Birmingham Cable Corporation Limited and
Cable London plc, was (pound)15.2 million and (pound)12.1 million in 1996 and
1995, respectively, under UK GAAP ((pound)16.0 million and (pound)12.8 million
in 1996 and 1995, respectively, under US GAAP due to a difference in the
classification of tax expense).

Financial expenses, net, under UK GAAP consist primarily of interest expense of
(pound)96.8 million in 1996 ((pound)23.8 million in 1995), and foreign exchange
losses of (pound)25.9 million in 1996 ((pound)4.7 million in 1995) offset in
part by interest income earned on short-term investments and loans to Affiliated
Companies of (pound)17.2 million in 1996 ((pound)15.6 million in 1995). Under US
GAAP, financial expenses consist primarily of interest expense of (pound)105.2
million in 1996 ((pound)26.6 million in 1995), and foreign exchange losses of
(pound)2.8 million in 1996 ((pound)14.6 million in 1995) offset in part by
interest income earned on short-term investments and loans to Affiliated
Companies of (pound)16.7 million in 1996 ((pound)15.6 million in 1995). In 1995,
financial expenses under UK GAAP also included an accounting loss on the sale of
interest rate swaps of (pound)5.5 million ((pound)8.6 million under US GAAP).

                                       7
<PAGE>
Interest expense increased by (pound)73.0 million in 1996 ((pound)78.6 million
under US GAAP) primarily as a result of the interest payments and accrued
interest expense on the Senior Debentures and the Senior Discount Debentures,
issued by the Group in October 1995. The foreign exchange losses under UK GAAP
in 1996 primarily relate to the amortisation of the foreign currency option
premium which hedges the Senior Discount Debentures and the amortisation of
exchange losses arising on the translation of the debentures to Sterling using
the contracted exchange rate of the option. It is the Group's policy to hedge
non-Sterling denominated borrowings to reduce or eliminate exchange rate
exposure. The foreign exchange losses under US GAAP in 1996 arose principally
from the re-translation of the US Dollar denominated debentures to Pounds
Sterling using the 31 December 1996 exchange rate and marking the associated
hedging instruments to their market value at 31 December 1996.

LIQUIDITY AND CAPITAL RESOURCES
On May 22, 1996, the Group entered into a (pound)1.2 billion senior secured
credit facility with a syndicate of banks (the "Senior Secured Facility"). The
Senior Secured Facility is being used to finance the capital expenditure,
working capital requirements and other permitted related activities for the
construction and operation of the wholly owned telephony and television
franchises of the Group; to fund the payment of cash interest on the Senior
Debentures and Senior Discount Debentures (as described below); to fund the
repayment of existing secured borrowings of the Group in respect of certain
franchises; to fund loans to or investments in Affiliated Companies; to fund the
acquisition and subsequent construction of local delivery operators/franchises;
and to refinance advances and the payment of interest, fees and expenses in
respect of the Senior Secured Facility.

The Senior Secured Facility is divided into two tranches. The first (tranche A)
is available on a revolving basis for up to (pound)300 million, reducing to
(pound)100 million by 30 June 1998, with full repayment by 31 December 1998. The
second tranche (tranche B) is available on a revolving basis concurrently with
the first tranche for an amount up to 6.5 times the trailing, rolling six month
annualised consolidated net operating cash flow, gradually reducing throughout
the period of the facility to 4 times by 1 January 2000. Thereafter, the amount
outstanding under the facility converts to a term loan amortising over 5 years.
The aggregate drawing at any time under both tranches cannot exceed (pound)1.2
billion. Borrowings under the Senior Secured Facility are secured by assets,
including the partnership interests and shares of subsidiaries of the Group, and
bear interest at 2.25% above LIBOR for tranche A and between 0.5% and 1.875%
above LIBOR (depending on the ratio of borrowings to the trailing, rolling six
month annualised consolidated net operating cash flow) for tranche B. The
Group's ability to borrow under the Senior Secured Facility is subject to, among
other things, its compliance with the financial and other covenants and
borrowing conditions contained therein. The failure to comply with such
covenants could result, in extremis, in all such amounts outstanding under the
facility becoming due and payable. As at 31 December, 1997, the Group has
drawndown (pound)125 million and (pound)367.5 million under tranche A and
tranche B respectively.

Since 31 December 1997, this facility has been restructured with relaxed
financial covenants, a reduction in the amount available under the facility from
(pound)1,200 million to (pound)1,000 million, and a supplementary (pound)100
million revolving credit facility secured with a second fixed and floating
charge over the Group's assets, and interest costs on the latter ranging from
3.5% - 5.5% above LIBOR. As a result of this restructuring of the facility, the
repayment dates for tranche A, referred to above, have been accelerated by three
months.

                                       8
<PAGE>
The Group has entered into certain delayed-starting interest rate swap
agreements in order to manage interest rate risk on the Senior Secured Facility.
The interest rate swaps convert floating rate interest payable on drawdowns
under the facility to fixed interest rate payments in the range of 7.835% -
7.975%. The swap agreements, which commenced in early 1997, have a five-year
maturity and a notional principal amount which adjusts upwards on a semi-annual
basis to a maximum of (pound)750 million. As at 31 December 1997, the aggregate
notional principal amount of the swaps was (pound)440 million.

On 3 October 1995, the Group raised (pound)734 million through the issue of $300
million principal amount of 95/8% Senior Debentures due 2006 (the "Senior
Debentures") and $1,536 million principal amount at maturity of 11% Senior
Discount Debentures due 2007 (the "Senior Discount Debentures"). Interest on the
Senior Debentures is payable semi-annually and commenced on 1 April 1996;
interest on the Senior Discount Debentures will be payable semi-annually
commencing on 1 April 2001. The proceeds of the issue were used by the Group to
fund general working capital, capital expenditures and additional investments in
Affiliated Companies, to repay a credit facility entered into by a Group company
and to purchase the currency hedge arrangements as described below.

The Group's principal hedge instruments are a combined foreign currency and
interest rate swap ("Foreign Currency Swap") and a foreign currency option. The
Foreign Currency Swap fully hedges against adverse exchange rate fluctuations on
the principal amount of the Senior Debentures and the associated interest
payments. The foreign currency option provides protection against exchange rate
fluctuations on the Senior Discount Debentures below a rate of $1.452: (pound)1
and allows the Group to benefit from positive exchange rate movements. Both
hedging instruments provide protection up to 1 October 2000, the early
redemption date of the Senior Debentures and the Senior Discount Debentures.

The Group's results may be materially influenced by future exchange rate
movements, particularly in the US GAAP financial statements, due to the
requirement that the hedge instruments and the debentures are marked to their
market value at the end of the financial period and the US Dollar denominated
debentures are re-translated to Pounds Sterling using the period end exchange
rate.

The Group generated a net cash inflow/(outflow) from operating activities of
(pound)68.6 million, (pound)28.5 million, and ((pound)10.2) million in 1997,
1996 and 1995, respectively, under UK GAAP. On a US GAAP basis, net cash
provided by/(used in) operating activities was (pound)3.0 million, (pound)18.1
million and ((pound)6.6) million in 1997, 1996 and 1995, respectively. The
difference between UK and US GAAP is principally due to a difference in the
classification of interest on the cash flow statement.

The Group incurred net cash outflow from investing activities of (pound)439.7
million, (pound)483.2 million and (pound)265.8 million in 1997, 1996 and 1995,
respectively. The Group's principal investing activities continue to be the
construction of the network, the provision of funding to the Affiliated
Companies, and, in the year ended 31 December 1996, the acquisition of a
franchise covering the Worcester area from Bell Cablemedia plc for (pound)9.8
million. Total expenditure on fixed assets was (pound)440.6 million,
(pound)515.6 million and (pound)269.1 million in 1997, 1996 and 1995,
respectively. The Group has implemented a reduction in the pace of its network
construction and its expenditure on certain discretionary capital projects,
which is expected to result in a significant reduction in capital expenditure in
1998.

                                       9
<PAGE>
Cash inflow from financing activities was (pound)386.2 million, (pound)79.0
million and (pound)480.8 million in 1997, 1996 and 1995, respectively.

In 1997, the cash inflow from financing activities was principally generated
through a (pound)392.5 million drawdown under the Senior Secured Facility.
Similarly in 1996, such cash inflow was principally generated through a
(pound)100 million drawdown which was partially offset by costs incurred to
arrange the facility. In 1995, the cash inflow was principally generated by net
proceeds of (pound)734.2 million arising from the issue of the debentures which
were partially used to purchase the associated currency hedges and to repay a
credit facility entered into by a Group company.

Cash balances at 31 December 1997 were (pound)29.6 million.

The Group currently expects that the anticipated funding requirements (after
taking into account current cash and deposit balances and anticipated revenues)
required to substantially complete the construction of the owned and operated
network, to fund the Group's operations, to upgrade older portions of the
network, and to pay interest on the Group's debt will be provided by the Senior
Secured Facility and the supplementary revolving credit facility. There can be
no assurance that the Group will not elect to use alternative funding sources or
that the Group's actual funding requirements will be in line with expectations.


CHARLES BURDICK


--------------------------------------------------------------------------------
SAFE HARBOR STATEMENT UNDER THE US PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995:

The discussion above and contained elsewhere in this report includes certain
forward looking statements that involve risks and uncertainties that could lead
to actual results that are significantly different from those anticipated by the
Group. These risks and uncertainties relate to, among other things, the extent
consumer preference develops for cable television over other methods of
providing in-home entertainment and for the Group a viable alternative to BT and
others as a provider of telephony service; the ability of the Group to manage
growth and expansion; the ability of the Group to construct its network in a
cost efficient and timely manner; the ability of the Group to raise additional
financing if there is a material adverse change in the Group's anticipated
revenues or expenses; the ability of the Group to respond to changes or
increases in competition and adverse changes in government regulation; the
extent programming is available at reasonable costs; adverse changes in the
price of telephony interconnection; disruptions in supply of services and
equipment, and the performance of the Affiliated Companies (which are not
controlled by the Group).

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

                                       10
<PAGE>
Pages 30-33

REPORT OF THE REMUNERATION COMMITTEE

1. Compliance
The following report by the Remuneration Committee complies with Section A of
the Best Practice Provisions on remuneration committees as annexed to the
Listing Rules of the London Stock Exchange. Full consideration has also been
given to Section B of the Best Practice Provisions regarding remuneration
policy, service contracts and compensation, as annexed to the Listing Rules of
the London Stock Exchange. The Report is also in line with requirements under US
securities laws applicable to remuneration committee reports. Further
information on senior executive remuneration as required by US law can be found
in the proxy statement accompanying this document.

2. Composition
During the year the members of the Committee were Mr Ames (Chairman), Mr Stenham
and Mr Singer. The Committee submits reports regularly to the full board of
Directors concerning its activities and decisions. It has written terms of
reference which include the assessment and approval of the remuneration of the
executive Directors and senior executives. The Board determines the remuneration
of the non-executive Directors.

3. Remuneration policy for the executive Directors and senior executives

a) General policy
The Group aims to attract, motivate and retain high calibre executives by
rewarding them with competitive salary and benefit packages which are linked to
both individual and business performance. These packages are based on the
Group's philosophy of emphasising pay-for-performance. The Group recognises the
pressures for short-term as well as long-term performance and seeks to provide
an appropriate balance. The Group uses a market-based four-tiered salary
structure for its executive employees. Each senior executive is assigned to one
of these four tiers based on his or her level of responsibility and position in
relation to others inside and outside the Group.

The Committee believes that the Group's current remuneration policy
appropriately aligns the Group's senior executive compensation with the
performance of the Group and shareholder interests and offers competitive
compensation for its executives. The Committee does not believe in compensating
for poor performance and does not reward unsatisfactory performance. In the case
of early termination of employment, it is the Committee's policy to seek to
mitigate any liability.

b) Remuneration components
There are four components to the senior executive remuneration package: base
salary and benefits, annual cash bonus, long-term incentive arrangements and
pension.

i) Base salary and benefits
Salaries are established by the Committee by reference to those prevailing in
the employment market generally for executives of comparable status,
responsibility and skills. To assist in determining the comparability of
positions and competitive market pricing, the Group uses executive compensation
salary surveys prepared by recognised independent compensation consulting firms
in the UK. The Group uses surveys that specifically cover the UK cable

                                       11
<PAGE>
communications industry, as well as surveys of comparable companies of similar
size in similar industries. In general, and because of the competitive nature of
the market, the Group seeks to set overall executive compensation levels to rank
between the mid-market and upper quartile of the survey data.

Salary reviews are generally determined by the Committee on an annual basis.
Adjustments in base salary, if any, occur after a formal appraisal process,
taking account of individual performance, changes in job responsibilities,
changes in the marketplace and general economic conditions in the UK.

Benefits for senior executives typically include a car (or a cash payment in
lieu thereof) and payment of its operating expenses and fuel, and life,
disability and health insurance. The benefits are not pensionable.

ii) Annual cash bonuses
The Group's Short-Term Incentive Plan (the "STIP") provides all employees with
an opportunity to earn an annual cash award (which is not pensionable) based
upon the achievement of short-term Group targets (ie, one financial year). These
targets are set by the Remuneration Committee at the commencement of each
financial year and kept under review thereafter. Under the STIP, the senior
executive has an award opportunity expressed as a percentage of base salary. For
executive Directors, the award is up to 25% of salary for achieving target,
rising to a maximum of 50% of salary if the Group exceeds its STIP target. The
1997 STIP awards to the executive Directors represented approximately 53.3% of
the targeted bonus amount. The amount of the STIP is based upon the extent to
which the Group achieves certain specified objectives. In 1997, the STIP
objectives related to the achievement of targets set in respect of growth,
quality of operations (measured by customer satisfaction surveys), operating
cash flow and taking into account the completion of the restructuring programme.
The objective is to have payout tied to Group performance, thereby providing
higher than targeted payouts for better than expected performance and lower than
targeted payouts for performance below the targeted levels.


iii) Long-term incentive arrangements
The Group operates the following long-term share and option incentive plans: The
Telewest Restricted Share Scheme and The Telewest Long Term Incentive Plan (each
of the aforesaid plans is designed to operate in conjunction with an Employee
Share Ownership Plan ("ESOP")); an Inland Revenue approved executive share
option scheme, the Telewest 1995 (No.1) Executive Share Option Scheme; an
unapproved executive share option scheme, the Telewest 1995 (No.2) Executive
Share Option Scheme; an Equity Participation Plan ("EPP"); an Employee Sharesave
Scheme and a profit sharing scheme designed for Inland Revenue approval.

The Telewest Restricted Share Scheme was designed to replace a cash bonus scheme
in operation prior to the initial public offering in November 1994 and, for this
reason, exercise of the award is not subject to the satisfaction of a
performance condition. Under this scheme, awards were made of Telewest shares to
senior executives based on a percentage of salary and for no consideration. At
the time of the initial public offering Mr Davidson was granted an award over
475,183 Telewest shares. Awards generally vest over a three year period and, in
the case of Mr Davidson, the final vesting date was January 1998.

The Telewest Restricted Share Scheme has been replaced with a Long-Term
Incentive Plan ("LTIP") for share awards to executive Directors and senior
executives. It is intended that senior executives in the LTIP will not be
granted further options under the executive share option schemes (subject to

                                       12
<PAGE>
exceptions at the discretion of the Remuneration Committee). In future, options
under these schemes will generally be awarded to employees not participating in
the LTIP. Under the LTIP a senior executive will be awarded the provisional
right to receive, for no payment, a number of Telewest shares with a value
equating to a percentage of base salary. The shares will not vest unless certain
performance criteria, based on total shareholder return assessed over a three
year period, are met. The percentage of salary will be determined by the
Remuneration Committee and will be up to 100% of base salary for executive
Directors. The award is divided equally, with vesting of 50% depending on the
Company's TSR meeting a performance condition relating to the TSR of FT-SE 100
companies, and the remaining 50% depending on the Company's TSR meeting a
performance condition relating to the TSR of a group of comparative companies
(including cable, broadcasting and telecommunications companies listed on the
London Stock Exchange and cable companies operating in the UK and listed on
Nasdaq), in each case over a three year period. If the Company's TSR is in the
top quartile of the FT-SE 100 over that period, the executive will receive 50%
of the number of shares awarded to him; if the Company's TSR is 50th place in
the FT-SE 100, the executive will receive 12.5% of the number of shares awarded
to him; if below 50th place in the FT-SE 100, the executive will receive nothing
in respect of this portion of the award. Similarly, if the Company's TSR is in
the top quartile of the group of comparative companies in that period, the
executive will receive 50% of the number of shares awarded to him; if the
Company's TSR is at the median position the executive will receive 12.5% of the
number of shares awarded to him; if below the median position, the executive
will receive nothing in respect of that portion of the award. In either test a
proportionate number of shares will be received for intermediate positions. TSR
in each case will be calculated by reference to the cash flow generated by
dividends, and capital appreciation on a share purchased at the beginning and
sold at the end of the period. If the executive remains employed by the Group
and depending on the achievement of the performance criteria, at the end of the
third year after the date of grant, 50% of the vested award will be transferred
to the employee and the balance will be transferred at the end of the fourth
year after the date of grant if the employee remains so employed.

The executive share option schemes also form part of the Group's long-term
incentive arrangements. Options over Telewest shares are granted in phases,
generally on a one times salary basis up to a maximum of four times salary and
exercise is subject to a performance condition, namely out-performance of the
FT-SE 100 Index over any three-year period preceding exercise.

The option arrangements relating to Mr Davidson and Mr Burdick are set out on
page 28 of the Report of the Directors.

Under the STIP, employees may be due a cash bonus. The Remuneration Committee
has provided that, under the EPP, an employee with two years service or at
manager level or above, can use up to 50% of the pre-tax bonus payable to him to
acquire Telewest shares ("bonus shares"). The employee must deposit the bonus
shares with the Trustee of the existing Telewest ESOP. In return, the employee
is provisionally allocated for no payment a matching number of Telewest shares.
Provided the bonus shares are retained for three years and the employee remains
employed by the Group for three years, the bonus and matching shares would
thereafter be released to the employee.

The Inland Revenue approved sharesave scheme, which enables the Company to grant
options to employees to purchase Telewest shares at a 20% discount to market
price is designed to incentivise employees. These options can be exercised only
with funds saved by employees over time in a qualified savings account.

                                       13
<PAGE>
4. Pensions
The Group contributes to personal pension schemes established by individual
employees. The actual contribution of the Group to such schemes depends on the
contribution made by the employee and may vary according to length of service.
Generally the Group contribution varies from 3% of an employee's salary to a
maximum of 12% for executive Directors or up to the Inland Revenue limits. In
addition, there is a money purchase pension scheme to which the Group
contributes an amount equal to the employee's contribution, such contributions
varying between 3% and 6%. The Group's contribution is based on the employee's
salary excluding benefits or bonuses.

5. Executive Directors' agreements
Mr Davidson's employment agreement has a one year notice period in accordance
with the recommendation of the Code. However, the Remuneration Committee
believes that at this stage of the Group's development it may be necessary to
offer executives contracts (such as Mr Burdick as discussed below) in excess of
one year to attract candidates of the appropriate calibre. In February 1997 Mr
Davidson's salary was increased to (pound)335,000 (effective from July 1996, to
reflect his confirmation as Chief Executive). For the financial year ended 1997,
Mr Davidson was awarded an annual bonus, pursuant to the STIP, of (pound)45,000.

Mr Burdick has an initial two year, fixed term agreement commencing 12 February
1997 and to continue thereafter until terminated by either party giving no less
than 12 months' notice to expire on or at any time after the end of the initial
fixed term. The Remuneration Committee believes an initial notice period in
excess of one year is justified in view of his move from the US. Mr Burdick's
salary is (pound)225,000. For the financial year ended 1997, Mr Burdick was
awarded an annual bonus, pursuant to the STIP, of (pound)25,000.

Mr Van Valkenburg has been seconded to the Company from US WEST International
for an indefinite period and such arrangement is terminable without advance
notice by either US WEST International or the Company. The Company has agreed to
reimburse US WEST International for Mr Van Valkenburg's salary and related
benefits during his secondment to the Company. His salary is (pound)157,738 per
annum. Mr Van Valkenburg is eligible for an annual bonus of up to 40% of salary
for achieving target. For the financial year ended 31 December 1997, Mr Van
Valkenburg was awarded such bonus based on US WEST International plan criteria
and the Company has reimbursed US WEST International for the period Mr Van
Valkenburg spent with the Company amounting to (pound)41,584. For the financial
year ending 31 December 1998 he will be subject to the rules of the Telewest
STIP.

Under the current Remuneration Committee policy senior executives have
employment agreements with notice periods which range from three months to one
year, depending on their grade.

6.  DIRECTORS' REMUNERATION
The aggregate compensation for the Directors is as follows:-

                                           1997         1996
                                       (POUND)'000   (pound)'000
Base salary and benefits                   1,034        530
Annual bonus - STIP                        112          25
Pension                                    33           18
Compensation for loss of office            -            538
                                           1,179        1,112


                                       14
<PAGE>
Additional information required under US securities laws with respect to the
compensation of the Directors, the Chief Executive Officer and certain other
executives is set out under the caption "Executive Compensation" in the Proxy
Statement.


DIRECTORS COMPENSATION

<TABLE>
<CAPTION>
                        Salaries/fees    Taxable benefits Annual/ Special bonuses           Compensation for
  loss of office        Total emoluments excluding pension contributions    Pension contributions

                        1997    1996     1997    1996     1997    1996     1997     1996    1997     1996   1997    1996
                                                           (all amounts in (pounds)'000)
<S>                   <C>      <C>      <C>     <C>     <C>     <C>     <C>      <C>      <C>      <C>     <C>     <C>
  EXECUTIVE:
  S J Davidson          334     236      19      12       45      25       -        -       398      273      24      13
  A Michels             -       100      -       68       -       -        -        539     -        707       -       5
  D Van Valkenburg      94      -        170     -        42      -        -        -       306      -         3       -
  C J Burdick           225     -        9       -        25      -        -        -       259      -         6       -

  NON-EXECUTIVE:
  F A Vierra            -       -        -       -        -       -        -        -       -        -         -       -
  A G Ames              -       -        -       -        -       -        -        -       -        -         -       -
  A W P Stenham         108     50       -       -        -       -        -        -       108      50        -       -
  Lord Borrie QC        39      34       -       -        -       -        -        -       39       34        -       -
  Lord Griffiths        36      30       -       -        -       -        -        -       36       30        -       -
  J A Atterbury         -       -        -       -        -       -        -        -       -        -         -       -
  J O Robbins           -       -        -       -        -       -        -        -       -        -         -       -
  A N Singer            -       -        -       -        -       -        -        -       -        -         -       -
  R W Shaner            -       -        -       -        -       -        -        -       -        -         -       -
                        836     450      198     80       112     25       0        539     1,146    1,094    33      18
</TABLE>

Notes:

1    Certain amounts reflected in this table and elsewhere in this section were
     paid in US dollars, but are represented in this table in pounds sterling,
     based on an average exchange rate of $1.64 to (pound)1.00 for the year
     ended 31 December 1997.
2    Mr Van Valkenburg's principal taxable benefits were the provision of
     (pound)55,330 in respect of his income taxes, housing allowance of
     (pound)74,057 and relocation and foreign service allowances of
     (pound)27,527.
3    The independent non-executive Directors are paid (pound)1,000 for each
     Board or Committee meeting they attend in addition to their fees. The
     executive Directors' interests in Company share options and restricted
     share scheme awards are set out on page 28 of the Report of the Directors.
     No non-executive Director has any interests in Telewest shares.


                                       15
<PAGE>
4    Mr Stenham received additional fees for 1997 for increased responsibilities
     undertaken on behalf of the Company.

5    The pension contributions for the Directors were paid into their private
     pension schemes. None of the Directors are members of the Group's money
     purchase pension scheme.


7. Remuneration policy for non-executive Directors
The remuneration policy for non-executive Directors consists of fees for their
services in connection with Board and Board Committee meetings and, where
relevant, for additional services such as chairing a Committee. They are not
eligible for pension scheme membership and do not participate in any of the
Group's bonus, share option or other incentive schemes. Their remuneration is
approved by the Board of Directors.



A G Ames (Chairman)
A W P Stenham
A N Singer
The Remuneration Committee



                                       16
<PAGE>
Pages 57-77

FINANCIAL STATEMENTS UNDER US GAAP

Contents

58       Independent auditors' report

59       Consolidated statements of operations for each of the years in the
         three-year period ended December 31, 1997

60       Consolidated balance sheets at December 31, 1997 and 1996

61       Consolidated statements of cash flows for each of the years in the
         three-year period ended December 31, 1997

62       Consolidated statement of shareholders' equity for each of the years in
         the three-year period ended December 31, 1997

63       Notes to the consolidated financial statements

77       Supplementary financial information - five year summary





                                       17
<PAGE>
Independent auditors' report

TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
TELEWEST COMMUNICATIONS PLC

We have audited the accompanying consolidated balance sheets of Telewest
Communications plc and subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of operations, shareholders' equity and cash
flows for each of the years in the three year period ended December 31, 1997.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the consolidated financial statements on pages 59 to 76 present
fairly, in all material respects, the financial position of Telewest
Communications plc and subsidiaries as of December 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the years in the
three year period ended December 31,1997 in conformity with generally accepted
accounting principles in the United States of America.


KPMG AUDIT PLC
Chartered Accountants
Registered Auditors
London, England

March 18, 1998


                                       18
<PAGE>
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                Year ended December 31,
                                                   1997         1997            1996            1995
                                                   $'000  (POUND)'000     (pound)'000     (pound)'000
                                                   (NOTE 2)
------------------------------------------------------------------------------------------------------
<S>                                             <C>           <C>             <C>             <C>
REVENUE
Cable television                                   262,698      159,918         121,224         64,740
Telephony - residential                            273,748      166,645         125,013         57,597
Telephony - business                                72,085       43,882          34,562         17,449
Other ((pound)3,573, (pound)1,600 and
  (pound)1,451 in 1997, 1996 1995,
   respectively, from related parties)              26,370       16,053           9,467          4,998
------------------------------------------------------------------------------------------------------
                                                   634,901      386,498         290,266        144,784
------------------------------------------------------------------------------------------------------
OPERATING COSTS AND EXPENSES
Programming                                      (153,496)     (93,441)        (69,906)       (32,194)
Telephony                                         (82,373)     (50,145)        (52,572)       (29,526)
(Selling, general and administrative
  (including (pound)1,170, (pound)2,560
  and (pound)3,257 in 1997, 1996 and 1995,
  respectively, to related parties)              (317,591)    (193,335)       (167,323)      (105,388)
Depreciation                                     (291,318)    (177,341)       (129,716)       (60,019)
Amortization of goodwill                          (43,359)     (26,395)        (26,149)        (7,854)
------------------------------------------------------------------------------------------------------
                                                 (888,137)    (540,657)       (445,666)      (234,981)
------------------------------------------------------------------------------------------------------

OPERATING LOSS                                   (253,236)    (154,159)       (155,400)       (90,197)

OTHER INCOME/ (EXPENSE)
Interest income (including (pound)3,178,
  (pound)1,723 and (pound)1,583 in 1997,
  1996 and 1995, respectively, from
  related parties)                                 13,074        7,959          16,651         15,645
Interest expense                                 (232,805)    (141,721)       (105,172)       (26,649)
Loss on disposal of interest rate swaps                  -            -               -        (8,609)
Foreign exchange losses, net                      (38,676)      23,544)         (2,838)       (14,575)
Share of net losses of affiliates                 (35,640)     (21,696)        (15,973)       (12,777)
Gain/(loss) on disposal of assets                    1,871        1,139             571          (419)
Minority interests in profits of consolidated
  subsidiaries, net                                  (482)        (293)           (180)           (16)
Other, net                                               -            -               -             82

LOSS BEFORE INCOME TAXES                         (545,894)    (332,315)       (262,341)      (137,515)
Income tax expenses (note 14)                        (225)        (137)            (50)           (16)
------------------------------------------------------------------------------------------------------

NET LOSS                                         (546,119)    (332,452)       (262,391)      (137,531)
------------------------------------------------------------------------------------------------------


                                                                Year ended December 31,
                                                    1997          1997          1996          1995
                                                    $*      (POUND)*      (pound)*      (pound)*
------------------------------------------------------------------------------------------------
BASIC AND DILUTED LOSS PER ORDINARY
  SHARE
Weighted average number of ordinary shares
  outstanding                                       927,567,600   927,567,600  925,425,473   861,424,848
--------------------------------------------------------------------------------------------------------

BASIC AND DILUTED LOSS PER ORDINARY
 SHARE                                                   (0.59)        (0.36)       (0.28)        (0.16)
--------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes to the consolidated financial statements.

*Except number of shares


                                       19
<PAGE>
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                          December 31,
                                                                1997          1997            1996
                                                                $'000   (POUND)'000     (pound)'000
                                                               (note 2)
-----------------------------------------------------------------------------------------------------
<S>                                                           <C>           <C>             <C>
ASSETS
Cash and cash equivalents                                        48,595        29,582          79,116
Trade receivables (net of allowance for doubtful accounts
  of (pound)6,507 and(pound)5,405)                               60,167        36,627          29,305
Other receivables (note 7)                                       43,050        26,207          32,394
Prepaid expenses                                                 12,526         7,625           5,168
Investments in affiliates, accounted for under the equity
  method, and related receivables (note 8)                       98,081        59,707          69,420
Other investments, at cost                                       42,162        25,666          25,666
Property and equipment (less accumulated depreciation
  of (pound)481,451 and(pound)308,240) (note 9)               2,801,658     1,705,520       1,447,194
Goodwill (less accumulated amortization of(pound)64,301
  and (pound)37,907)                                            765,342       465,905         491,290
Other assets (less accumulated amortization of(pound)10,140
  and (pound)4,162)   (note 11)                                  92,833        56,513          62,387
-----------------------------------------------------------------------------------------------------------

TOTAL ASSETS                                                  3,964,414     2,413,352       2,241,940
-----------------------------------------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable                                                 43,877        26,710          46,855
Other liabilities (note 12)                                     326,345       198,664         190,200
Debt (note 13)                                                2,255,516     1,373,054         879,351
Capital lease obligations (note 17)                             124,080        75,534          54,390
-----------------------------------------------------------------------------------------------------

TOTAL LIABILITIES                                             2,749,818     1,673,962       1,170,796
-----------------------------------------------------------------------------------------------------

MINORITY INTERESTS                                                1,051           640             347
-----------------------------------------------------------------------------------------------------

SHAREHOLDERS' EQUITY (note 15)
Convertible preference shares, 10p par value; 661,000,000
  shares authorized and 496,066,708 shares issued and
  outstanding                                                    81,489        49,607          49,607
Ordinary shares, 10p par value; 2,010,000,000 shares
  authorized; 927,567,600 issued and outstanding in
1997 and 1996                                                   152,372        92,757          92,757
Additional paid-in capital                                    2,189,533     1,332,887       1,332,887
Accumulated deficit                                         (1,206,661)     (734,560)       (402,108)
-----------------------------------------------------------------------------------------------------
                                                              1,216,733       740,691       1,073,143
Ordinary shares held in trust for The Telewest Restricted
  Share Scheme (note 16)                                        (3,188)       (1,941)         (2,346)
-----------------------------------------------------------------------------------------------------

TOTAL SHAREHOLDERS' EQUITY                                    1,213,545       738,750       1,070,797
-----------------------------------------------------------------------------------------------------

Commitments and contingencies (note 17)

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                    3,964,414     2,413,352       2,241,940
-----------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes to the consolidated financial statements.

                                       20
<PAGE>
                      CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                    Year ended December 31,
                                                   1997         1997            1996             1995
                                                   $'000  (POUND)'000     (pound)'000      (pound)'000
                                                   (NOTE 2)
--------------------------------------------------------------------------------------------------------
<S>                                              <C>         <C>             <C>              <C>
CASH FLOWS FROM OPERATING
 ACTIVITIES:

Net loss                                         (546,119)    (332,452)       (262,391)        (137,531)
Adjustments to reconcile net loss to net
  cash provided by/(used in) operating activities:
    Depreciation                                   291,318      177,341         129,716           60,019
    Amortization of goodwill                        43,359       26,395          26,149            7,854
    Amortization of deferred financing costs and
      issue discount on senior discount debentures 127,280       77,482          74,104           16,605
    Accrued interest on senior debentures                -            -               -            5,451
    Unrealized loss on foreign currency translation 38,676       23,544           2,838           14,575
    Loss on disposal of interest rate swaps              -            -               -            8,609
    Share of net losses of affiliates               35,640       21,696          15,973           12,777
    (Gain)/loss on disposals of assets             (1,871)      (1,139)           (571)              419
    Minority interests in profits of consolidated
      subsidiaries                                     482          293             180               16
Changes in operating assets and liabilities,
  net of effect of acquisition of subsidiaries:
    Change in receivables                          (7,011)      (4,268)        (15,908)          (5,282)
    Change in prepaid expenses                     (4,036)      (2,457)             953          (3,367)
    Change in accounts payable                    (11,648)      (7,091)         (4,575)          (5,603)
    Change in other liabilities                     38,825       23,635          51,668           19,206
Other                                                    -            -               -            (356)
--------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY/(USED IN)
  OPERATING ACTIVITIES                               4,895        2,979          18,136          (6,608)
--------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Cash paid for property and equipment             (714,635)    (435,037)       (464,367)        (254,453)
Cash paid for acquisition of subsidiaries            (999)        (608)        (14,167)          (3,232)
Additional investments in and loans to affiliates (14,825)      (9,025)         (2,728)          (9,143)
Additions to other investments                           -            -         (5,000)                -
Proceeds from disposals of assets                    9,962        6,066           3,059              688
Other investing activities                               -            -               -              335
--------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES            (720,497)    (438,604)       (483,203)        (265,805)
--------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING
  ACTIVITIES:
Cash paid for credit facility arrangement costs          -            -        (18,400)                -
Proceeds from debenture issue                            -            -               -          754,812
Cash paid for foreign currency option                    -            -               -         (88,070)
Repayment of borrowings                            (3,901)      (2,375)           (937)        (157,930)
Cash paid for debenture issue costs                      -            -           (829)         (20,574)
Cash paid for share issue costs                          -            -               -          (6,141)
Proceeds from borrowings                           644,760      392,500         100,400                -
Capital element of finance lease repayments        (6,523)      (3,971)         (1,231)          (1,291)
--------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING
  ACTIVITIES                                       634,336      386,154          79,003          480,806
--------------------------------------------------------------------------------------------------------
NET (DECREASE)/INCREASE IN CASH
  AND CASH EQUIVALENTS                            (81,266)     (49,471)       (386,064)          208,393
EFFECT OF EXCHANGE RATE CHANGES
  ON CASH AND CASH EQUIVALENTS                       (103)         (63)             362            8,423
CASH AND CASH EQUIVALENTS AT
  BEGINNING OF YEAR                                129,964       79,116         464,818          248,002
--------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT
  END OF YEAR                                       48,595       29,582          79,116          464,818
--------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes to the consolidated financial statements.

                                       21
<PAGE>
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                Convertible     Ordinary      Shares held  Additional       Accumulated   Total
                                                preference      shares        in trust     paid-up capital  Deficit     (pound)'000
                                                (pound)'000    (pound)'000   (pound)'000    (pound)'000    (pound)'000
----------------------------------------------------------------------------------------------------------------------------------
<S>                                             <C>          <C>           <C>            <C>            <C>           <C>
BALANCE AT DECEMBER 31, 1994                      15,300       84,824       (7,280)        686,276        (2,186)       776,934
Conversion of ordinary shares into
  convertible preference shares (note 15)         11,227      (11,277)            -               -             -        -
Shares issued in connection with the
  acquisition of TCMN (notes 5 and 15)            23,080       18,399             -        636,695              -       678,174
Accrued employee compensation relating
  to the Telewest Restricted Share Scheme              -             -        5,171               -             -         5,171
Net loss                                               -             -            -               -      (137,531)     (137,531)
----------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1996                      49,607          91,996     (2,109)      1,322,971      (139,717)     1,322,748
Ordinary shares issued                                 -             761          -           9,916             -         10,677
Accrued employee compensation relating to
  the Telewest Restricted Share Scheme                 -             -         (237)              -             -           (237)
Net loss                                               -             -            -               -      (262,391)      (262,391)
----------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1996                      49,607          92,757     (2,346)      1,332,887      (402,108)     1,070,797
Accrued employee compensation relating to
  the Telewest Restricted Share Scheme                 -             -          405               -             -            405
Net loss                                               -             -            -               -      (332,452)      (332,452)
----------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1997                      49,607          92,757     (1,941)      1,332,887      (734,560)       738,750
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes to the consolidated financial statements.






                                       22
<PAGE>
              NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEARS
                     ENDED DECEMBER 31, 1997, 1996 AND 1995


1        ORGANIZATION AND HISTORY

Telewest Communications plc (the "Company") is a cable television and telephony
operator which offers these services to business and residential customers in
the United Kingdom ("UK"). The Company derives its cable television revenues
from installation fees, monthly basic and premium service fees and advertising
charges. The Company derives its telephony revenues from connection charges,
monthly line rentals, call charges, special residential service charges and
interconnection fees payable by other operators. The cable television and
telephony services account for approximately 41% and 54%, respectively, of the
Company's revenue. This revenue is predominantly derived from residential,
rather than business, customers.

The Company was incorporated on October 20, 1994 under the laws of England and
Wales in preparation for the October 2, 1995 internal reorganization of Telewest
Communications Cable Limited ("TCCL"), then called TeleWest Communications plc,
and its subsidiaries whereby the entire issued share capital of TCCL was
transferred to the Company in exchange for fully paid up shares of the Company.
TCCL had traded since November 22, 1994 when affiliates of Tele-Communications,
Inc. (the "TCI Affiliates") and affiliates of US WEST, Inc. (the "US WEST
Affiliates") contributed their UK cable interests to TCCL (the "Contribution").
These interests were previously held by the TCI Affiliates and US WEST
Affiliates through TCI/US West Cable Communications Group, a general
partnership. TCI/US WEST Cable Communications Group and its subsidiaries
collectively are referred to herein as the "Joint Venture" and the TCI
Affiliates and US WEST Affiliates collectively are referred to herein as the
"Joint Venturers."

2        BASIS OF PREPARATION

The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles in the United States of America ("US
GAAP"). The preparation of financial statements in conformity with US GAAP
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.

The economic environment and currency in which the Company operates is the UK
and hence its reporting currency is Pounds Sterling ((pound)). Certain financial
information for the year ended December 31, 1997 has BEEn translated into US
Dollars, with such US Dollar amounts being unaudited and presented solely for
the convenience of the reader, at the rate of $1.6427 = (pound)1.00, the Noon
Buying Rate of the Federal Reserve BANK of New York on December 31, 1997. The
presentation of the US Dollar amounts should not be construed as a
representation that the Pounds Sterling amounts could be so converted into US
Dollars at the rate indicated or at any other rate.

3        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
those of all majority-owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated upon consolidation.

                                       23
<PAGE>
All acquisitions have been accounted for under the purchase method of
accounting. Under this method, the results of subsidiaries and affiliates
acquired in the year are included in the consolidated statement of operations
from the date of acquisition.

Effective January 1, 1996, the Company adopted Statement of Financial Accounting
Standards No. 121 (FAS 121), "Accounting for Impairment of Long-Lived Assets and
Long-Lived Assets to Be Disposed Of." FAS 121 requires that long-lived assets
and certain identifiable intangibles, including goodwill, to be held and used by
an entity, be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Upon adoption of this standard, the Company evaluated its
long-lived assets using projected undiscounted future cash flows and operating
income for each subsidiary and determined that no material impairment of these
assets existed at January 1, 1996 and accordingly, no loss was recognized. The
Company believes that no material impairment existed at December 31, 1997.

Goodwill arising on consolidation (representing the excess of the fair value of
the consideration given over the fair value of the identifiable net assets
acquired) is amortized over the acquisition's useful life or over a maximum
period of 40 years. The Company assesses the recoverability of this intangible
asset by determining whether the amortization of the goodwill balance over its
remaining life can be recovered through projected undiscounted future operating
cash flows of the acquired operations. The assessment of the recoverability of
goodwill will be impacted if projected future operating cash flows are not
achieved. The amount of goodwill impairment, if any, is measured based on the
projected discounted future operating cash flows using a discount rate
reflecting the Company's cost of funds.

CASH AND CASH EQUIVALENTS
Cash and cash equivalents include highly-liquid investments with original
maturities of three months or less that are readily convertible into cash.

FINANCIAL INSTRUMENTS
The Company uses foreign currency option contracts which permit, but do not
require, the Company to exchange foreign currencies at a future date with
another party at a contracted exchange rate. The Company also enters into
combined foreign currency and interest rate swap contracts ("Foreign Currency
Swaps"). Such contracts are used to hedge against adverse changes in foreign
currency exchange rates associated with obligations denominated in foreign
currency.

The foreign currency option and Foreign Currency Swaps are recorded on the
balance sheet in other assets or other liabilities at their fair value at the
reporting period with changes in their fair value during the reporting period
being reported as part of the foreign exchange gain or loss in the consolidated
statement of operations. Such gains and losses are offset against foreign
exchange gains and losses on the obligations denominated in foreign currencies
which have been hedged.

Interest rate swap agreements which are used to manage interest rate risk on the
Company's borrowings are accounted for using the accruals method. Net income or
expense resulting from the differential between exchanging floating and fixed
rate interest payments is recorded on an accruals basis. To the extent that the
interest rate swap agreements are delayed starting, net income or expense is not
recognized until the effective date of the agreement.

                                       24
<PAGE>
Other interest rate swaps which are held as trading assets are recorded on the
consolidated balance sheet at their fair value at the end of each reporting
period with changes in their fair value being recorded as gains and losses in
the consolidated statement of operations.

INVESTMENTS
Investments in partnerships, joint ventures and subsidiaries in which the
Company's voting interest is 20% to 50%, and others where the Company has
significant influence, are accounted for using the equity method. Investments
which do not have a readily determinable fair value, in which the Company's
voting interest is less than 20%, and in which the Company does not have
significant influence, are carried at cost and written down to the extent that
there has been an other-than-temporary diminution in value.

ADVERTISING COSTS
Advertising costs are expensed as incurred. The amount of advertising costs
expensed was (pound)25,920,000, (pound)24,846,000 and (pound)10,246,000 for the
years ended December 31, 1997, 1996, and 1995, respectively.

PROPERTY AND EQUIPMENT
Property and equipment is stated at cost, including the historical carryover
basis cost from the Contribution. Except during the prematurity period as
described below, depreciation is provided to write off the cost, less estimated
residual value, of property and equipment by equal installments over their
estimated useful economic lives as follows:



                                       25
<PAGE>
Freehold and long leasehold buildings                   50 years
Cable and ducting                                       20 years
Electronic equipment
- System electronics                                     8 years
- Switching equipment                                    8 years
- Subscriber electronics                                 5 years
- Headend, studio and playback facilities                5 years
Other equipment
- Office furniture and fittings                          5 years
- Motor vehicles                                         4 years

During the prematurity period, depreciation of cable and ducting and system
electronics is charged monthly to write off the estimated cost at the end of the
prematurity phase over a useful life of 20 and 8 years, respectively. In
accordance with Statement of Financial Accounting Standard ("SFAS") No. 51,
"Financial Reporting by Cable Television Companies," the monthly charge is
scaled down by a ratio of average customers in the current period to the
estimated customer base at the end of the prematurity period. The prematurity
period covers the period between connecting the first customer and substantial
completion of the network.

Preconstruction costs which are included within cable and ducting are amortized
over the life of the franchise from the date of the first customer.

The Company accounts for costs, expenses and revenues applicable to the
construction and operation of its cable systems under SFAS No. 51.

The estimated useful lives of cable and ducting and systems electronics were
reassessed with effect from January 1, 1996, and were changed from 25-30 years
and 10 years to 20 years and 8 years, respectively. The net book value of these
assets are being written-off over their revised estimated remaining lives.

In 1997, the treatment of activation costs was reviewed. With effect from
January 1, 1997, activation labor was reclassified from "cable and ducting" to
"electronics" to be consistent with the classification of activation materials.
The assets are now depreciated over 8 years rather than 20 years.

FRANCHISE COSTS
Expenditure incurred on successful applications for franchise licenses is
included in property and equipment and is amortized over the remaining life of
the original franchise term. Costs relating to unsuccessful applications are
charged to the consolidated statement of operations.

DEFERRED FINANCING COSTS
Costs incurred in raising debt are deferred and recorded on the consolidated
balance sheet in other assets. The costs are amortized to the consolidated
statement of operations at a constant rate to the carrying value of the debt
over the life of the obligation.

MINORITY INTERESTS
Recognition of the minority interests' share of losses of consolidated
subsidiaries is limited to the amount of such minority interests' allocable
portion of the equity of those consolidated subsidiaries.


                                       26
<PAGE>
FOREIGN CURRENCIES
Transactions in foreign currencies are recorded using the rate of exchange in
effect at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are translated using the rate of exchange
ruling at the balance sheet date and the gains or losses on translation are
included in the consolidated statement of operations.

REVENUE RECOGNITION
Revenue is recognized as services are delivered. Other revenues include
connection fees which are recognized in the period of connection to the extent
that the fee is offset by direct selling costs. The remainder is recognized over
the estimated average period that customers are expected to remain connected to
the system.

PENSION COSTS
The Company operates a defined-contribution scheme or contributes up to
specified limits to third-party schemes on behalf of the employees. The amount
included in losses in 1997, 1996 and 1995 of (pound)2,801,000, (pound)2,580,000
and (pound)1,538,000, respectively, represents the contributions payable to the
selected scheMES in respect of the relevant accounting periods.

INCOME TAXES
Under the asset and liability method of SFAS No 109, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered.

SHARE-BASED COMPENSATION
SFAS No. 123, "Accounting for Stock-Based Compensation," encourages, but does
not require, companies to record compensation cost for share-based employee
compensation plans at fair value. The Company has chosen to continue to account
for share-based compensation using the intrinsic value method prescribed in
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" and related interpretations. Accordingly, compensation cost for share
options is measured as the excess, if any, of the quoted market price of the
Company's shares at the date of the grant over the amount an employee must pay
to acquire the shares.

Shares purchased by trustees in connection with the Telewest Restricted Share
Scheme, are valued at the market price on the date on which they are purchased
and are reflected as a reduction of shareholders' equity in the consolidated
balance sheet. This equity account is reduced when the shares are awarded to
employees based on the original cost of the shares to the trustees. The value of
awards of ordinary shares to be made to employees in future years is charged to
the consolidated statement of operations to the extent that the awards have been
awarded to and earned by employees in the current accounting period. The value
of shares which have been awarded to, but have not been earned by employees, is
included as deferred compensation expense within other assets.

NEW ACCOUNTING STANDARDS APPLICABLE TO THE COMPANY

EARNINGS PER SHARE AND CAPITAL STRUCTURE
The Company adopted the provisions of SFAS No. 128, "Earnings per Share." This
Statement required that all prior-period earnings per share calculations be
restated to conform with the provisions of this statement. Basic earnings per

                                       27
<PAGE>
share has been computed by dividing net income available to ordinary
shareholders by the weighted average number of ordinary shares outstanding
during the period. Diluted earnings per share is computed by adjusting the
weighted average number of ordinary shares outstanding during the period for all
dilutive potential ordinary shares outstanding during the period and adjusting
the net loss for any changes in income or loss that would result from the
conversion of such potential ordinary shares. There is no difference in net
income and number of shares used for basic and diluted net income per ordinary
share, as potential ordinary share equivalents are not included in the
computation as their effect would be to decrease the loss per share.

COMPREHENSIVE INCOME
In June 1997, the FASB issued SFAS No. 130 "Reporting Comprehensive Income"
which is effective for fiscal years beginning after December 15, 1997.
Reclassification of financial statements for earlier periods for comparative
purposes is required. It requires that all items that are required to be
recognized under accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same prominence as
other financial statements. It requires that an enterprise (a) classify items of
other comprehensive income by their nature in a financial statement and (b)
display the accumulated balance of other comprehensive income separately from
retained earnings and additional paid-in capital in the equity section of the
statement of financial position. The Company is currently reviewing the likely
impact on the classification of items included in the shareholders' equity.

SEGMENT INFORMATION
In June 1997, the FASB issued SFAS No. 131 "Disclosure about Segments of an
Enterprise and Related Information" which is effective for fiscal years
beginning after December 15, 1997. In the initial year of application
comparative information for earlier years is to be restated. It requires that
companies disclose segment data based on how management makes decisions about
allocating resources to segments and measuring their performance. It also
requires entity-wide disclosures about the products and services an entity
provides, the material countries in which it holds assets and reports revenues,
and its major customers. The Company is currently reviewing the likely impact on
the level of disclosure currently provided in its consolidated financial
statements.

PENSIONS AND OTHER POSTRETIREMENT BENEFITS
In February 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 132, "Employers' Disclosure About Pensions
and other Postretirement Benefits" ("SFAS No.132"). SFAS No. 132 revises
disclosure requirements about employers' pension and other postretirement
benefit plans. SFAS No. 132 is effective for fiscal years beginning after
December 15, 1997. The company has not determined the impact that SFAS No. 132
will have on its pension and post retirement benefit disclosures.

4        FINANCIAL INSTRUMENTS

FOREIGN CURRENCY OPTION CONTRACT
At December 31, 1997, the Company held a Pounds Sterling put option to purchase
US$1,537,000,000 to hedge its exposure to adverse fluctuations in exchange rates
on the principal amount at maturity of its US Dollar-denominated Senior Discount
Debentures due 2007 ("Senior Discount Debentures"). The expiration date of this
option contract is September 28, 2000. The put option has a strike price at
expiration of (pound)1.00 = US$1.4520. The foreign currency option has been
included in other assets at its fair value on December 31, 1997.

                                       28
<PAGE>
FOREIGN CURRENCY SWAP
The Company has entered into a Foreign Currency Swap to hedge its exposure to
adverse fluctuations in exchange rates on the principal amount of its US
Dollar-denominated Senior Debentures due 2006 ("Senior Debentures"). The terms
of the contract provided for the Company to make an initial exchange of
principal of US$300,000,000 in exchange for (pound)196,078,000. On expiration on
October 1, 2000, the initial principal amounts will be re-exchanged. The
interest element of the Foreign Currency Swap requires the Company to make
Pounds Sterling fixed-rate interest payments and to receive US Dollar fixed-rate
interest payments on the initial exchange amounts on a semi-annual basis. The
Foreign Currency Swap contract has been included in other liabilities at its
fair value on December 31, 1997.

INTEREST RATE SWAPS
The Company has also entered into certain delayed-starting interest rate swap
agreements in order to manage interest rate risk on its senior secured credit
facility ("Senior Secured Facility"). The effective dates of the swap agreements
are January 2, 1997 and March 31, 1997, and the agreements mature on December
31, 2001 and March 28, 2002. The aggregate notional principal amount of the
swaps adjusts upwards on a semi-annual basis to a maximum of (pound)750 million.
In accordance with the swap agreements, the Company receives interesT At the six
month LIBOR rate and pays a fixed interest rate in the range of 7.835 - 7.975%.

FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 119 "Disclosures about Derivative Financial Instruments and Fair Value
of Financial Instruments" requires disclosure of an estimate of the fair values
of certain financial instruments. SFAS No. 119 defines the fair value of a
financial instrument as the amount at which the instrument could be exchanged in
a current transaction between willing parties other than in a forced sale. Fair
value estimates are made at a specific point in time, based upon relevant market
information and information about the financial instrument. These estimates are
subjective in nature and involve uncertainties and matters of significant
judgment, and therefore cannot be determined precisely. Changes in assumptions
could significantly affect the estimates.

At December 31, 1997, the Company's significant financial instruments include
cash and cash equivalents, trade receivables, a foreign currency option
contract, a Foreign Currency Swap, interest rate swap agreements, trade payables
and long-term borrowings. The following table summarizes the fair value of the
foreign currency option contract, the Foreign Currency Swap, the interest rate
swap agreements, the Senior Discount Debentures and the Senior Debentures. The
fair value of the other financial instruments held by the Company approximates
their recorded carrying amount due to the short maturity of these instruments
and these instruments are not presented in the following table.

<TABLE>
<CAPTION>
                                               AT DECEMBER 31, 1997             At December 31, 1996
                                       -------------------------------    -----------------------------
                                         CARRYING                            Carrying
                                          AMOUNT           FAIR VALUE         amount       Fair value
                                       (POUND)'000        (POUND)'000      (pound)'000     (pound)'000
-------------------------------------------------------------------------------------------------------
<S>                                      <C>               <C>             <C>             <C>
Assets:
Foreign currency option contract           26,145           26,145           25,828          25,828

Liabilities:
Interest rate swap agreements                   -           25,543                -           4,776
Foreign Currency Swap                      18,039           18,039           26,481          26,481
Senior Discount Debentures                696,954          729,532          600,799         621,367
Senior Debentures                         182,626          189,931          175,203         179,582
-------------------------------------------------------------------------------------------------------
</TABLE>

The estimated fair value of the foreign currency option contract, the interest
rate swap agreements and the Foreign Currency Swap are based on quotations
received from independent, third-party financial institutions and represent the
net amount receivable or payable to terminate the position, taking into

                                       29
<PAGE>
consideration market rates and counterparty credit risk. The estimated fair
values of the Senior Discount Debentures and the Senior Debentures are also
based on quotations from independent third-party financial institutions and are
based on discounting the future cash flows to net present values using
appropriate market interest rates prevailing at the year end.

MARKET RISK AND CONCENTRATIONS OF CREDIT RISK
Market risk is the sensitivity of the value of the financial instruments to
changes in related currency and interest rates. Generally, the Company is not
exposed to such market risk because gains and losses on the financial
instruments are offset by gains and losses on the underlying assets and
liabilities.

The Company may be exposed to potential losses due to the credit risk of
non-performance by the counterparties to its foreign currency option, interest
rate swap agreements and Foreign Currency Swap contract, however such losses are
not anticipated as these counterparties are major international financial
institutions.

Temporary cash investments also potentially expose the Company to concentrations
of credit risk, as defined by SFAS No. 105 "Disclosure of Information about
Financial Instruments with Off-Balance-Sheet Risk and Financial Instruments with
Concentrations of Credit Risks." The Company places its temporary cash
investments with major international financial institutions and limits the
amount of credit exposure to any one financial institution. Concentrations of
credit risk with respect to trade receivables are limited due to the large
number of customers comprising the Company's customer base.

At December 31, 1997, the Company had no significant concentration of credit
risk.

5        BUSINESS COMBINATIONS

On January 10, 1996, the Company acquired the entire issued share capital of
Telewest Communications (Worcester) Limited, then called Bell Cablemedia
(Worcester) Limited and owner of the Worcester cable franchise, for cash
consideration of (pound)9,849,000. Telewest Communications (Worcester) Limited
was otherwise a dormant company with net assets of (pound)2 representing its
called up share capital. This acquisition has been accounted for under the
purchase method of accounting. The goodwill arising on acquisition was
(pound)9,849,000 and is being amortized on a straight-line basis over 20 years.

During 1996, the Company made various other minor acquisitions, largely for
share consideration. The goodwill arising on these acquisitions was
(pound)11,708,000 and is being amortized on a straight-line basis over 20 years.

On October 3, 1995, the Company acquired the entire share capital of Telewest
Communications (Midlands & North West) Limited ("TCMN"), then called SBC
CableComms (UK), a company which holds cable television and telephony interests
in the UK, from an affiliate of Cox Communications, Inc. and affiliates of SBC
Communications, Inc., in exchange for an aggregate of 183,994,960 ordinary
shares of 10 pence each and 230,790,208 convertible preference shares of 10
pence each. The value attributable to the shares issued was (pound)1.635 per
share, being the market price of the shares on June 8, 1995, the day the terms
of the acquisition were agreed to and announced. The fair value of the share
consideration using this share price was (pound)678,174,000. The aggregate cost
of acquisition was (pound)689,878,000 including the costs of acquisition. This
acquisition has been accounted for under the purchase method of accounting. The

                                       30
<PAGE>
goodwill arising on acquisition is (pound)464,872,000 and is being amortized on
a straight-line basis over 20 years.

6        SUPPLEMENTAL DISCLOSURES TO CONSOLIDATED STATEMENTS OF CASH FLOWS

Cash paid for interest was (pound)63,479,000, (pound)25,795,000 and
(pound)6,041,000 for the years ended December 31, 1997, 1996 and 1995,
respectively.

Significant non-cash investing activities of the Company are described below.
The amounts stated for 1996 represent the purchase of former minority
shareholders' interests in certain UK cable interests held by the Company. The
amounts stated for 1995 represent the purchase of TCMN for largely share
consideration as described in Note 5 to the consolidated financial statements.

<TABLE>
<CAPTION>
                                                          Year ended December 31,
                                               1997                1996                   1995
                                         (POUND)'000           (pound)'000            (pound)'000
-------------------------------------------------------------------------------------------------
<S>                                         <C>                <C>                    <C>
Purchase/contribution of cable interests:
  Assets                                        -                       -                 428,080
  Liabilities assumed                           -                       -                (45,144)
  Debt assumed                                  -                       -               (157,930)
-------------------------------------------------------------------------------------------------

Net assets acquired contributed                 -                       -                 225,006
Goodwill on acquisition                         -                   9,874                 464,872
-------------------------------------------------------------------------------------------------
                                                -                   9,874                 689,878
Share consideration capital contribution        -                   9,869                 678,174
Costs of acquisition                            -                       5                  11,704
-------------------------------------------------------------------------------------------------
                                                -                   9,874                 689,878
-------------------------------------------------------------------------------------------------
</TABLE>

7        OTHER RECEIVABLES

<TABLE>
<CAPTION>
                                                                    At December 31,
                                                            1997                     1996
                                                        (POUND)'000              (POUND)'000
--------------------------------------------------------------------------------------------
<S>                                                       <C>                     <C>
Value Added Tax refund                                       4,567                  10,633
Interconnection receivables                                  1,505
Interest receivable                                            807                      63
Accrued income                                               8,290                   4,356
Prepaid expenses                                             3,161                   5,714
Other                                                        7,877                   7,763
------------------------------------------------------------------------------------------
                                                            26,207                  32,394
------------------------------------------------------------------------------------------
</TABLE>


                                       31
<PAGE>
8        INVESTMENTS

The Company has investments in affiliates accounted for under the equity method
at December 31, 1997 and 1996 as follows:

<TABLE>
<CAPTION>
                                                                Percentage Ownership at
                                                                      December 31,
                                                             1997                    1996
                                                       (POUND)'000             (POUND)'000
------------------------------------------------------------------------------------------
<S>                                                       <C>                     <C>
Cable London plc                                             50.00%                 50.00%
Birmingham Cable Corporation Limited                         27.47%                 27.47%
London Interconnect Limited                                  16.67%                 16.67%
Central Cable Sales Limited                                  50.00%                 50.00%
Front Row Television Limited                                 40.00%                     -


The Company has accounted for its investment in London Interconnect Limited
under the equity method because it is in a position to exercise a significant
influence over London Interconnect Limited.

Summarized combined financial information for such affiliates which operate
principally in the cable television and telephony industries is as follows:

COMBINED FINANCIAL POSITION
                                                                     At December 31,
                                                             1997                      1996
                                                       (POUND)'000               (pound)'000
--------------------------------------------------------------------------------------------

Property and equipment, net                                  429,161                 391,183
Intangible assets, net                                         4,859                   3,845
Other assets, net                                             30,249                 105,475
--------------------------------------------------------------------------------------------

TOTAL ASSETS                                                 464,269                 500,503
--------------------------------------------------------------------------------------------

Debt                                                         293,492                 281,500
Other liabilities                                             98,758                  91,947
Owners' equity                                                72,019                 127,056
--------------------------------------------------------------------------------------------

TOTAL LIABILITIES AND EQUITY                                 464,269                 500,503
--------------------------------------------------------------------------------------------


COMBINED OPERATIONS
                                                                   Year ended December 31,
                                                                1997                    1996
                                                         (POUND)'000             (pound)'000
--------------------------------------------------------------------------------------------
Revenue                                                      120,468                  98,329
Operating expenses                                         (150,768)               (124,358)
--------------------------------------------------------------------------------------------
Operating loss                                              (30,300)                (26,029)
Interest expense                                            (26,311)                (15,945)
--------------------------------------------------------------------------------------------
Net loss                                                    (56,611)                (41,974)
--------------------------------------------------------------------------------------------

The Company's investments in affiliates are comprised as follows:

                                                                       At December 31,
                                                             1997                    1996
                                                             (POUND)'000         (pound)'000

Loans                                                       39,863                  29,089
Share of net assets                                         19,844                  40,331
------------------------------------------------------------------------------------------

                                                            59,707                  69,420
------------------------------------------------------------------------------------------
</TABLE>

Any excess of the purchase cost over the value of the net assets acquired is
treated as goodwill and amortized over 20 years on a straight-line basis.


                                       32
<PAGE>
9        PROPERTY AND EQUIPMENT

<TABLE>
<CAPTION>
                                                          Cable       Electronic  Other
                                    Land       Buildings  ducting     equipment   equipment     Total
                                                          (all values in (pound)'000)
------------------------------------------------------------------------------------------------------
<S>                               <C>          <C>      <C>          <C>         <C>        <C>
ACQUISITION COSTS
Balance at January 1, 1997         4,223        45,956   1,101,961    489,835     113,459    1,755,434
Reclassification                       -          (62)   (118,331)    117,954         439            -
Additions                             11         8,683     280,814    101,204      49,882      440,594
Disposals                              -             -       (182)      (556)     (8,319)      (9,057)
------------------------------------------------------------------------------------------------------

Balance at December 31,1997        4,234        54,577   1,264,262    708,437     155,461    2,186,971
------------------------------------------------------------------------------------------------------

ACCUMULATED DEPRECIATION
Balance at January 1, 1997             -         7,378     121,181    130,483      49,198      308,240
Reclassification                       -             -    (12,792)     12,792           -            -
Charge for year                        -         3,824      59,324     88,502      25,691      177,341
Disposals                              -             -       (182)      (229)     (3,719)      (4,130)
------------------------------------------------------------------------------------------------------

Balance at December 31, 1997           -        11,202     167,531    231,548      71,170      481,451
------------------------------------------------------------------------------------------------------

1997 NET BOOK VALUE                4,234        43,375   1,096,731    476,889      84,291    1,705,520
------------------------------------------------------------------------------------------------------


ACQUISITION COSTS
Balance at January 1, 1996         4,223        36,005     766,866    359,617      79,239    1,245,950
Additions                              -         9,951     335,844    130,783      39,012      515,590
Disposals                              -             -       (749)      (565)     (4,792)      (6,106)
------------------------------------------------------------------------------------------------------

Balance at December 31,1996        4,223        45,956   1,101,961    489,835     113,459    1,755,434
------------------------------------------------------------------------------------------------------

ACCUMULATED DEPRECIATION
Balance at January 1,1996              -         4,920      74,532     70,810      31,880      182,142
Charge for year                        -         2,458      47,374     60,220      19,664      129,716
Disposals                              -             -       (725)      (547)     (2,346)      (3,618)
------------------------------------------------------------------------------------------------------

BALANCE AT DECEMBER 31, 1996           -         7,378     121,181    130,483      49,198      308,240
------------------------------------------------------------------------------------------------------

1996 NET BOOK VALUE                4,223        38,578     980,780    359,352      64,261    1,447,194
------------------------------------------------------------------------------------------------------
</TABLE>

Cable and ducting consists principally of civil engineering and fibre optic
costs. In addition, cable and ducting includes net book value of preconstruction
and franchise costs of (pound)9,807,000 and (pound)13,220,000 as of December 31,
1997 and 1996, respectively. Electronic equipment includes the Company's
switching, headend and converter equipment. Other equipment consists principally
of motor vehicles, office furniture and fixtures and leasehold improvements.


                                       33
<PAGE>
10       VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
                                                            Additions
                                                            charged to
                                 Balance at    Acquisition   costs and                  Balance at
                                 January 1     of TCMN       expenses      Deductions   December 31
                                                          (all values in (pound)'000)
---------------------------------------------------------------------------------------------------
<S>                               <C>         <C>           <C>            <C>           <C>
1997
Allowance for doubtful accounts    5,405             -         8,815        (7,713)        6,507
---------------------------------------------------------------------------------------------------

1996
Allowance for doubtful accounts    4,695             -         9,020        (8,310)        5,405
---------------------------------------------------------------------------------------------------

1995
Allowance for doubtful accounts    1,736         1,063         5,920        (4,024)        4,695
---------------------------------------------------------------------------------------------------

</TABLE>

11       OTHER ASSETS

The components of other assets, net of amortization, are as follows:

<TABLE>
<CAPTION>
                                                                    At December 31,
                                                             1997                    1996
                                                       (POUND)'000             (pound)'000
-----------------------------------------------------------------------------------------
<S>                                                    <C>                      <C>
Deferred financing costs of debentures                      13,770                 17,510
Deferred financing costs of Senior Secured Facility         15,963                 18,186
Foreign currency option contract                            26,145                 25,828
Other                                                          635                    863
-----------------------------------------------------------------------------------------
                                                            56,513                 62,387
-----------------------------------------------------------------------------------------


12       OTHER LIABILITIES

Other liabilities are summarized as follows:

                                                                  At December 31,
                                                            1997                     1996
                                                      (POUND)'000             (pound)'000
-----------------------------------------------------------------------------------------

Amounts due to affiliated or other
  related parties                                               61                   1,901
------------------------------------------------------------------------------------------
Accrued interest                                            13,641                   8,921
Accrued construction costs                                  30,235                  36,397
Accrued expenses and deferred income                       112,198                  82,938
Foreign Currency Swap                                       18,039                  26,481
Other liabilities                                           24,490                  33,562
------------------------------------------------------------------------------------------

                                                           198,664                 190,200
------------------------------------------------------------------------------------------
</TABLE>


                                       34
<PAGE>
13       DEBT

Debt is summarized as follows at December 31, 1997 and 1996:

<TABLE>
<CAPTION>
                                      Weighted average interest rate
                                                                         1997              1996
                                      1997              1996       (POUND)'000       (pound)'000
---------------------------------------------------------------------------------------------------
<S>                                 <C>                <C>             <C>              <C>
Senior Debentures                      9.625%            9.625%          182,626          175,203
Senior Discount
Debentures                            11.000%           11.000%          696,954          600,799
Senior Secured
Facility                               9.071%            8.281%          492,500          100,000
Other debt                             8.719%            7.790%              974            3,349
----------------------------------------------------------------------------------------------------

                                                                       1,373,054          879,351
----------------------------------------------------------------------------------------------------
</TABLE>

SENIOR DEBENTURES
In October 1995, the Company issued US$300,000,000 principal amount of Senior
Debentures with a yield to maturity of 9.625%. The cash consideration received
at the date of issue was (pound)188,703,000. The Senior Debentures mature on
October 1, 2006. Interest on the Senior Debentures accrues semi-annually and is
payable in arrears. The Senior Debentures are redeemable, in whole or in part,
at the option of the Company at any time on or after October 1, 2000 at the
redemption price of 104.813% of the principal amount during the year commencing
October 1, 2000, 102.406% of the principal amount during the year commencing
October 1, 2001, and thereafter at 100% of the principal amount plus accrued and
unpaid interest.

The Senior Debentures and the Senior Discount Debentures, which are described
below, were issued to finance working capital, capital expenditure, foreign
currency swap and options to hedge against adverse fluctuations in exchange
rates, and additional investments in affiliated companies. A portion of the net
proceeds of the issue also was used to repay the (pound)157,930,000 indebtedness
outstanding under the loan facility held by TCMN at the date that it was
acquired by the Company.

The indenture under which the Senior Debentures were issued contains various
covenants which, among other things, restrict the ability of the Company to
incur additional indebtedness, pay dividends, create certain liens, enter into
certain transactions with shareholders or affiliates, or sell certain assets.
The Company was in compliance with the covenants at December 31, 1997.

The Company has entered into a Foreign Currency Swap to hedge its exposure to
adverse fluctuations in exchange rates on the principal amount which will be
outstanding on October 1, 2000, the earliest redemption date, and the associated
interest payments of the Senior Debentures. The terms of the Foreign Currency
Swap are described in Note 4 to the consolidated financial statements.

The Senior Debentures are unsecured liabilities of the Company.

SENIOR DISCOUNT DEBENTURES
In October 1995, the Company issued US$1,536,413,000 principal amount at
maturity of Senior Discount Debentures with a yield to maturity of 11%. The cash
consideration received at the date of issue was (pound)566,109,000
(US$900,000,000). At December 31, 1997, the unamortized portion of the discount
on issue was (pound)238,344,000 (US$391,528,000). The Senior Discount Debentures
mature on October 1, 2007. Interest on the Senior Discount Debentures accrues
semi-annually. Cash interest will not accrue on the Senior Discount Debentures
prior to October 1, 2000 and is thereafter payable in arrears on April 1 and
October 1 of each year at a rate of 11% per annum. The Senior Discount
Debentures are redeemable, in whole or in part, at the option of the Company at

                                       35
<PAGE>
any time on or after October 1, 2000 at the redemption price of 100% of the
principal amount plus accrued and unpaid interest.

The indenture under which the Senior Discount Debentures were issued contains
various covenants as set out for the Senior Debentures above and the Company was
in compliance with such covenants at December 31, 1997.

The Company has purchased a five year Pounds Sterling put option to purchase
US$1,537,000,000 to hedge its exposure to adverse fluctuations in exchange rates
on the principal amount which will be outstanding on October 1, 2000, the
earliest redemption date, of the Senior Discount Debentures. The terms of the
foreign currency option contract are described in Note 4 to the consolidated
financial statements.

The Senior Discount Debentures are unsecured liabilities of the Company.

SENIOR SECURED FACILITY
During 1996, a subsidiary of the Company entered into a senior secured credit
facility (the "Senior Secured Facility") with a syndicate of banks. The facility
is available to finance the capital expenditure, working capital requirements
and other permitted related activities involving the construction and operation
of all the Company's owned and operated franchises, to pay cash interest on the
Company's unsecured debentures, to fund the repayment of existing secured
borrowings in respect of the London South and South West Regional Franchise
Areas, to fund loans to or investments in affiliated companies, to bid for or
purchase, and subsequently construct, licenses or franchises which may become
available and to refinance advances and the payment of interest, fees, and
expenses in respect of the Senior Secured Facility.

The facility is divided into two tranches: the first portion (Tranche A) is
available on a revolving basis for up to (pound)300 million, reducing to
(pound)100 million by June 30, 1998 with full repayment by December 31, 1998;
the second portion (Tranche B) is available on a revolving basis concurrently
with Tranche A for an amount up to 6.5 times the trailing, rolling six month
annualized consolidated net operating cash flow, gradually reducing throughout
the period of the facility to 4 times by January 1, 2000. Thereafter, the amount
outstanding under the Tranche B facility converts to a term loan amortizing over
5 years. The aggregate drawing at any time under both tranches cannot exceed
(pound)1.2 billion. At December 31, 1997, (pound)125,000,000 (1996:
(pound)100,000,000) was outstanding under Tranche A and (pound)367,500,000 under
Tranche B (1996: (pound)nil).

Borrowings under the facility are secured by the assets of the Company,
including the partnership interests and shares of subsidiaries, and bear
interest at 2.25% above LIBOR for Tranche A and between 0.5% and 1.875% above
LIBOR (depending on the ratio of borrowings to the trailing, rolling six month
annualized consolidated net operating cash flow) for Tranche B. Since 31
December 1997, this facility has been restructured with revised financial
covenants, a reduction in the amount available under the facility from
(pound)1,200 million to (pound)1,000 million, and a supplementary (pound)100
million revolving credit facility secured with a second fixed and floating
charge over the Group's assets, and interest costs on the latter ranging from
3.5% - 5.5% above LIBOR. As a result of this restructuring of the facility, the
repayment dates for Tranche A, referred to above, have been accelerated by three
months.

In September 1996, the Company entered into certain delayed-starting interest
rate swap agreements in order to manage interest rate risk on the Senior Secured
Facility. The terms of the swap agreements are described in Note 4 to the
consolidated financial statements.

                                       36
<PAGE>
The Company's ability to borrow under the facility is subject to, among other
things, its compliance with the financial and other covenants and borrowing
conditions contained therein.

The Company was in compliance with the covenants at December 31, 1997.

OTHER DEBT
Other debt is represented by property loans which are secured on freehold land
and buildings held by the Company which mature from 1998 onwards. The property
loans bear interest at a rate of between 1.00% and 1.5% above LIBOR.

14       INCOME TAXES

Loss before income taxes is solely attributable to the UK.

The provisions for income taxes follow:

<TABLE>
<CAPTION>
                                                               Year ended December 31,
                                                       1997              1996              1995
                                                 (POUND)'000       (pound)'000       (pound)'000
------------------------------------------------------------------------------------------------
<S>                                               <C>                 <C>               <C>
Currently payable                                       137                50               16
------------------------------------------------------------------------------------------------

A reconciliation of income taxes determined using the statutory UK rate of 31.5%
(1996: 33%) to the effective rate of income tax is as follows:

                                                               Year ended December 31,
                                                       1997              1996              1995
                                                       %                 %                    %
------------------------------------------------------------------------------------------------
Corporate tax at UK statutory rates                  (31.5)              (33)               (33)
Permanent differences                                   0.5                 1                  3
Valuation allowance and other temporary differences      29                30                 26
Share of losses of affiliates                             2                 2                  4
------------------------------------------------------------------------------------------------
                                                          -                 -                  -
------------------------------------------------------------------------------------------------
</TABLE>

Deferred income tax assets and liabilities at December 31, 1997 and 1996 are
summarized as follows:

<TABLE>
<CAPTION>
                                                    1997                    1996
                                               (POUND)'000             (pound)'000
----------------------------------------------------------------------------------
<S>                                           <C>                     <C>
Deferred tax assets relating to:
Fixed assets                                        79,100                       -
Net operating loss carried forward                 181,800                 310,300
Other                                                2,400                   3,400
----------------------------------------------------------------------------------

Deferred tax asset                                 263,300                 313,700
Valuation allowance                              (247,400)               (175,200)
----------------------------------------------------------------------------------

                                                    15,900                 138,500
----------------------------------------------------------------------------------

Deferred tax liabilities relating to:
Fixed assets                                             -               (110,600)
Other                                             (15,900)                (27,900)
----------------------------------------------------------------------------------

Deferred tax liabilities                          (15,900)               (138,500)
----------------------------------------------------------------------------------

DEFERRED TAX ASSET
  PER BALANCE SHEET                                      -                       -
----------------------------------------------------------------------------------
</TABLE>

At December 31, 1997, the Company estimates that it has, subject to Inland
Revenue agreement, net operating losses ("NOLs") of (pound)587,000,000 available
to relieve against future profits. This excludes capital allowances on assets
which were available to the Company, but had not been claimed, of
(pound)465,000,000.

                                       37
<PAGE>
Due to a history of operating losses the Company has established a valuation
allowance with respect to deferred tax assets, except to the extent of deferred
tax liabilities.

The NOLs have an unlimited carry forward period under UK tax law, but are
limited to their use to the type of business which has generated the loss.

15       SHAREHOLDERS' EQUITY

MOVEMENTS IN SHARE CAPITAL
During 1996 the Company issued 7,604,200 ordinary shares of 10 pence each for
the following consideration: an additional 0.25% of the ordinary shares of Cable
London plc, the surrender by Trans-Global (UK) Limited of its option to acquire
9.9% of equity in the South East Regional Franchise Area, and the remaining 20%
of the ordinary shares of Telewest Communications (Cotswolds) Limited held by a
minority interest.

On October 3, 1995, the Company acquired the entire share capital of TCMN from
its former shareholders in exchange for an aggregate of 183,994,960 ordinary
shares of 10 pence each and 230,790,208 convertible preference shares of 10
pence each. On October 2, 1995, pursuant to a court-approved scheme of
arrangement (the "Scheme of Arrangement"), the Company exchanged 735,468,440
ordinary shares of 10 pence each and 265,276,500 convertible preference shares
of 10 pence each in consideration for the transfer of shares of TCCL to the
Company. Dealings in ordinary shares and ADSs representing ordinary shares of
TCCL ceased on the London Stock Exchange and NASDAQ National Market immediately
prior to the execution of the Scheme of Arrangement and upon completion of the
Scheme of Arrangement, dealings in the ordinary shares and ADSs representing
ordinary shares of the Company commenced. Immediately prior to the execution of
the Scheme of Arrangement on October 2, 1995, TCCL restructured its share
capital by converting 112,276,500 ordinary shares of 10 pence each into
112,276,500 convertible preference shares of 10 pence each.

CONVERTIBLE PREFERENCE SHARES
The convertible preference shares are convertible into fully paid up ordinary
shares at any time on the basis of one ordinary share for every convertible
preference share provided that, immediately following the conversion, the
percentage of the issued ordinary share capital of the Company held by members
of the public, as defined by the listing rules of the London Stock Exchange,
does not fall below 25%. The ordinary shares arising on conversion will rank
pari passu in all respects with the ordinary shares then in issue.

The holders of the convertible preference shares are entitled to receive a
dividend of such amount as is declared and paid in relation to each ordinary
share, subject to the dividend to be paid not exceeding 20 pence per share net
of any associated tax credit.

In the event of a winding-up of the Company or other return of capital, the
assets of the Company available for distribution will be paid first to the
holders of the convertible preference shares up to the sum of capital paid-up or
credited as paid-up unless the right of election upon a winding-up of the
Company has been exercised in respect of the convertible preference shares (the
"Elected Shares"). If the election has been exercised, the holders of the
ordinary shares and the Elected Shares will receive any surplus in accordance
with the amount paid-up or credited as paid-up on the shares held.

The holders of the convertible preference shares are not entitled to vote at any
general meeting of the Company unless the meeting includes the consideration of
a resolution for winding up the Company or a resolution modifying the rights or
privileges attaching to the convertible preference shares.

                                       38
<PAGE>
16       SHARE-BASED COMPENSATION PLANS

At December 31, 1997, the Company operated five types of share-based
compensation plans: the Telewest Executive Share Option Schemes, the Telewest
Sharesave Schemes, and the Telewest Restricted Share Scheme, as replaced in 1997
by the Telewest Long Term Incentive Plan ("LTIP") and an Equity Participation
Plan ("EPP").

The Company applies APB Opinion Bulletin No. 25 and related interpretations in
accounting for its share-based compensation plans. Accordingly, no compensation
cost has been charged to the consolidated statement of operations in respect of
performance-based option grants since the options do not have exercise prices
less than the market value of the Company's ordinary shares. Compensation cost
has been recognized for fixed option grants since the options have exercise
prices less than the market value of the Company's ordinary shares at the date
of grant. Compensation cost has also been recognized for awards over ordinary
shares made under the Telewest Restricted Share Scheme since the awards have no
exercise price. Compensation cost recognized for fixed option grants and awards
under the Telewest Restricted Share Scheme was (pound)496,000, (pound)1,380,000
and (pound)1,334,000 for 1997, 1996, and 1995, respectively.

If compensation cost for share option grants and for awards under the Telewest
Restricted Share Scheme and Long Term Incentive Plan had been determined based
on their fair value at the date of grant for 1997 and 1996 consistent with the
method prescribed by SFAS 123, the Company's net loss and basic and diluted loss
per share would have been adjusted to the pro forma amounts set out below:



                                       39
<PAGE>

<TABLE>
<CAPTION>
                                 1997                    1996                     1995
                             (POUND)'000             (pound)'000              (pound)'000
-----------------------------------------------------------------------------------------
<S>                           <C>                    <C>                        <C>
Net loss - As reported           (332,452)             (262,391)                 (137,531)
         - Pro forma             (336,737)             (264,579)                 (138,468)

                                  (pound)                (pound)                   (pound)
------------------------------------------------------------------------------------------
Basic and diluted loss per share
             - As reported          (0.36)                (0.28)                    (0.16)
             - Pro forma            (0.36)                (0.29)                    (0.16)
------------------------------------------------------------------------------------------
</TABLE>

PERFORMANCE-BASED SHARE OPTION COMPENSATION PLANS
The Company has two performance-based share option plans: the Telewest 1995 (No.
1) Executive Share Option Scheme and the Telewest 1995 (No. 2) Executive Share
Option Scheme. Under both plans, certain officers and key employees are granted
options to purchase ordinary shares of the Company. The exercise price of each
option generally equals the market price of the Company's ordinary shares on the
date of grant. The options are exercisable between three and ten years after the
date of the grant with exercise conditional on the Company's shares
out-performing by price the FT-SE100 Index over any three year period preceding
exercise. The Company may grant options for up to 92,000,000 ordinary shares.

The fair value of each option grant was estimated on the date of grant using the
Black-Scholes option-pricing model using a weighted-average risk-free interest
rate of 6.8%, 8.1% and 8.3% for grants in 1997, 1996 and 1995 respectively, and
an expected volatility of 30-45% used for grants in these years. The Company
does not expect to pay a dividend on its ordinary shares at any time during the
expected life of the option.

A summary of the status of the Company's performance-based share option plans as
at December 31, 1997, 1996 and 1995, the first year in which the options were
granted, and changes during the years ended on those dates is presented below:

<TABLE>
<CAPTION>
                                     1997                       1996                      1995
                                          WEIGHTED                    Weighted                   Weighted
                                          AVERAGE                     average                    average
                            NUMBER        EXERCISE      Number        exercise     Number        exercise
                            OF SHARES     PRICE         of shares     price        of shares     price
--------------------------------------------------------------------------------------------------------
<S>                        <C>            <C>       <C>              <C>         <C>             <C>
Outstanding at
  beginning of year          11,238,852    153.0p      8,645,229       160.4p              -           -
Granted                       8,994,654     83.7p      4,121,474       140.9p      8,871,398      160.3p
Forfeited                   (1,205,075)    147.1p    (1,527,851)       162.6p      (226,169)      158.0p
--------------------------------------------------------------------------------------------------------

Outstanding at end           19,028,431    120.6p     11,238,852       153.0p      8,645,229      160.4p
--------------------------------------------------------------------------------------------------------

Options exercisable at        3,375,739    152.3p      1,023,042       154.3p              -           -
  year end
Weighted average fair value       50.4p                    75.6p                       86.0p
  of options granted during
  the year

</TABLE>


                                       40
<PAGE>
The following table summarizes information about the Company's performance-based
share option plans outstanding at December 31, 1997.

<TABLE>
<CAPTION>
                                    Options outstanding                 Options exercisable
                                    -------------------                 -------------------
                                          Weighted
                           Number         average       Weighted      Number         Weighted
                           outstanding at remaining     average      exercisable at  average
                           December 31,   contractual   exercise      December 31,   exercise
Range of exercise prices   1997           life          price         1997           price
-----------------------------------------------------------------------------------------------
<S>                       <C>            <C>           <C>           <C>          <C>
71.0 -  73.0p               2,666,913     7.4 years     72.6p
 82.5 -  83.0p              5,297,509     7.6 years     82.9p
117.5 - 118.0p              765,847       9.2 years     117.5p
135.0 - 141.0p              3,674,467     6.2 years     140.6p        1,293,086    140.8p
154.5 - 155.5p              4,842,914     4.8 years     154.5p        1,502,527    154.6p
171.5 - 173.5p              1,780,781     5.9 years     172.4p        580,126      171.9p
-----------------------------------------------------------------------------------------------

 71.0 - 173.5p              19,028,431    6.5 YEARS     120.6p        3,375,739    152.3p
-----------------------------------------------------------------------------------------------
</TABLE>


FIXED SHARE OPTION COMPENSATION PLANS
The Company also operates the Telewest Sharesave Scheme, a fixed share option
compensation scheme. Under this plan, the Company grants options to employees to
purchase ordinary shares at a 20% discount to market price. These options can be
exercised only with funds saved by employees over time in a qualified savings
account. The options are exercisable between 37 and 66 months after the date of
grant.

The fair value of each option grant was estimated on the date of grant using the
Black-Scholes option-pricing model using a weighted-average risk-free interest
rate of 6.95 per cent, 7.4 per cent and 7.2 per cent for grants in 1997, 1996
and 1995, respectively, and an expected volatility of 30-45 per cent. The
Company does not expect to pay a dividend on its ordinary shares at any time
during the expected life of the option.

A summary of the status of the Company's fixed share option plans as of December
31, 1997, 1996, and 1995 and the changes during the years ended on those dates
is presented below:

<TABLE>
<CAPTION>
                                    1997                          1996                    1995
                                            WEIGHTED                                             Weighted
                                            AVERAGE                    Weighted                  average
                              NUMBER        EXERCISE      Number       average       Number      exercise
                              OF SHARES     PRICE         of shares    exercise      of shares   price
------------------------------------------------------------------------------------------------------------
<S>                         <C>            <C>         <C>            <C>           <C>        <C>
Outstanding at beginning
  of year                      4,076,635     119.8p      3,345,941     139.6p        1,666,534  150.0p
Granted                        5,341,783      58.0p      2,165,009     102.5p        2,168,157  134.0p
Forfeited                    (2,450,243)     120.7p    (1,434,315)     139.8p        (488,750)  150.0p
------------------------------------------------------------------------------------------------------------
Outstanding at end of year     6,968,175      72.1p      4,076,635     119.8p        3,345,941  139.6p
------------------------------------------------------------------------------------------------------------
Options exercisable at year end        -                         -                           -
Weighted average fair              42.7p                     49.7p                       79.3p
value of options granted
during the year

</TABLE>

                                       41
<PAGE>
The following table summarizes information about the Company's fixed share
options outstanding at December 31, 1997.


                             Options outstanding
                             -------------------
                                                        Weighted average
                             Number outstanding        remaining contractual
            Exercise price   at December 31. 1997           life
         ------------------------------------------------------------

                 58.0p            5,341,783                 3.6 years
                102.5p              941,444                 2.6 years
                134.0p              404,256                 3.6 years
                150.0p              280,692                 2.6 years
         58.0 - 150.0p            6,968,175                 3.4 years
         ------------------------------------------------------------


TELEWEST RESTRICTED SHARE SCHEME
The Company operates the Telewest Restricted Share Scheme in conjunction with an
employment trust, the Telewest Employees Share Ownership Plan Trust (the
"Telewest ESOP"), which has been designed to provide incentives to executives of
the Company based on the performance of the Company. Under the Telewest
Restricted Share Scheme, executives may be granted awards over ordinary shares
of the Company based on a percentage of salary. The awards are made for no
consideration. The awards generally vest three years after the date of the award
and are exercisable for up to seven years after the date when they vest. Awards
granted under the Telewest Restricted Share Scheme may be made over a maximum of
4,000,000 ordinary shares of the Company.

The fair value of each award is the share price of the ordinary shares on the
date the award was made.

A summary of the status of the Company's Restricted Share Scheme at December 31,
1997, 1996 and 1995, and changes during the years ended on those dates is
presented below:

<TABLE>
<CAPTION>
                                               1997                1996                 1995
                                               NUMBER OF           Number of            Number of
                                               SHARES              shares               shares
----------------------------------------------------------------------------------------------------
<S>                                         <C>                  <C>                 <C>
Outstanding at beginning of year                 2,648,433          2,616,857                   -
Granted                                            377,975            328,297           2,857,191
Exercised                                      (1,123,324)           (62,920)                   -
Forfeited                                        (155,922)          (233,801)           (240,334)
----------------------------------------------------------------------------------------------------

Outstanding at end of year                       1,747,162          2,648,433           2,616,857
----------------------------------------------------------------------------------------------------

Awards exercisable at year end                     924,008            646,341              49,867
----------------------------------------------------------------------------------------------------

WEIGHTED AVERAGE FAIR VALUE
  OF AWARDS GRANTED DURING THE YEAR            (POUND)1.25        (pound)1.47         (pound)1.72
----------------------------------------------------------------------------------------------------
</TABLE>

At December 31, 1997, the 1,747,162 awards outstanding and the 924,008 awards
exercisable have weighted average remaining contractual lives of 6.7 years and
6.6 years, respectively.


LONG-TERM INCENTIVE PLAN ("LTIP")

The Telewest Restricted Share Scheme has been replaced with a Long-Term
Incentive Plan ("LTIP") for share awards to executive Directors and senior
executives. Under the LTIP an executive will be awarded the provisional right to
receive, for no payment, a number of Telewest shares with a value equating to a
percentage of base salary. The shares will not vest unless certain performance


                                       42
<PAGE>
criteria, based on total shareholder return assessed over a three-year period
are met. The percentage of salary will be determined by the Remuneration
Committee and will be up to 100% of base salary for executive Directors.

                                                               1997
                                                         NUMBER OF SHARES
-----------------------------------------------------------------------------
Outstanding at beginning of year                                    -
Granted                                                       574,309
-----------------------------------------------------------------------------
Outstanding at end of year                                    574,309
-----------------------------------------------------------------------------
Awards exercisable at year end                                      -
-----------------------------------------------------------------------------
WEIGHTED AVERAGE FAIR VALUE
  OF AWARDS GRANTED DURING THE YEAR                       (POUND)0.81
-----------------------------------------------------------------------------

At December 31, 1997, the 574,309 awards outstanding have weighted average
remaining contractual lives of 9.8 years.

17       COMMITMENTS AND CONTINGENCIES

CAPITAL AND OPERATING LEASES
The Company leases a number of assets under arrangements accounted for as
capital leases, as follows:

<TABLE>
<CAPTION>
                                                                  Accumulated
                                          Acquisition costs      depreciation       Net book value
                                            (pound)'000           (pound)'000         (pound)'000
---------------------------------------------------------------------------------------------------
<S>                                      <C>                    <C>                <C>
At December 31, 1997
Electronic equipment                          58,465               (16,061)             42,404
Other equipment                               40,207                (8,050)             32,157

At December 31, 1996
Electronic equipment                          46,634                (8,376)             38,258
Other equipment                                8,780                (1,900)              6,880
---------------------------------------------------------------------------------------------------
</TABLE>

Depreciation charged on these assets was (pound)10,889,000 and (pound)7,106,000
for the years ended December 31, 1997 and 1996, respectively.

The Company leases business offices and uses certain equipment under lease
arrangements accounted for as operating leases. Minimum rental expense under
such arrangements amounted to (pound)3,198,000, (pound)3,065,000 and
(pound)2,276,000 for the years ended December 31, 1997, 1996 and 1995,
respectively.

Future minimum lease payments under capital and operating leases are summarized
as follows as at December 31,1997:

                                Capital                    Operating
                                 leases                     leases
-------------------------------------------------------------------------------
                                (pound)'000               (pound)'000
-------------------------------------------------------------------------------
1998                               15,712                     3,059
1999                               14,488                     2,989
2000                               12,740                     2,939
2001                               11,883                     2,885
2002                                8,741                     2,884
2003 and thereafter                38,413                    14,323
-------------------------------------------------------------------------------
                                  101,977

Imputed interest                 (26,443)
------------------------------------------
TOTAL                              75,534
------------------------------------------



                                       43
<PAGE>
It is expected that, in the normal course of business, expiring leases will be
renewed or replaced.

CONTINGENT LIABILITIES
The Company is a party to various legal proceedings in the ordinary course of
business which it does not believe will result, in aggregate, in a material
adverse effect on its financial condition.

18       RELATED PARTY TRANSACTIONS
The Company, in the normal course of providing cable television services,
purchases certain of its programming from UK affiliates of TCI. Such programming
is purchased on commercially-available terms. Total purchases in the years ended
December 31, 1997 and 1996 amounted to (pound)9,681,000 and (pound)6,951,000
respectively.

The Company has management agreements with TCI and US WEST under which amounts
are paid by the Company relating to TCI and US WEST employees who have been
seconded to the Company. For the years ended December 31, 1997, 1996 and 1995,
fees charged to the Company under the agreements were (pound)968,000,
(pound)2,185,000 and (pound)3,042,000, respectively. The Company has similar
management agreements with Cox Communications, Inc. and SBC Communications, Inc.
For the years ended December 31, 1997, 1996 and 1995, fees charged to the
Company under these agreements were (pound)202,000, (pound)374,000 and
(pound)233,000 respectively.

The Company has entered into consulting agreements with its affiliates pursuant
to which the Company provides consulting services related to telephony
operations. Under the agreements, the Company receives an annual fee from each
affiliate based upon the affiliate's revenues. Fees received for the years ended
December 31, 1997, 1996 and 1995 were (pound)786,000, (pound)642,000 and
(pound)566,000, respectively. The affiliate banking agreements contain certain
deferred payment arrangements for these fees. The Company also receives a fee
for providing switching support services, comprising of a fixed element based on
a number of switches and a variable element based on a number of lines. Fees
received for the years ended December 31, 1997, 1996 and 1995, were
(pound)740,000, (pound)741,000 and (pound)827,000, respectively.

19       QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

<TABLE>
<CAPTION>
                                                                        1997
                                       Total       Fourth quarter  Third quarter  Second quarter First quarter
                                    (pound)'000     (pound)'000     (pound)'000    (pound)'000    (pound)'000
--------------------------------------------------------------------------------------------------------------
<S>                                 <C>             <C>            <C>          <C>            <C>
Revenue                                   386,498       104,969       100,087       91,052        90,390
Operating loss                          (154,159)      (39,578)      (41,394)     (36,421)      (36,766)
Finance expenses, net                   (156,167)      (29,604)      (43,613)     (30,992)      (51,958)
Net loss                                (332,452)      (74,887)      (90,780)     (72,902)      (93,883)
Basic and diluted loss per
  ordinary share                       (36 pence)     (8 pence)    (10 pence)    (8 pence)    (10 pence)
--------------------------------------------------------------------------------------------------------------

                                                                    1996

                                       Total       Fourth quarter  Third quarter  Second quarter First quarter
                                    (pound)'000     (pound)'000     (pound)'000    (pound)'000    (pound)'000
--------------------------------------------------------------------------------------------------------------

Revenue                                   290,266        83,663        73,123       68,320      65,160
Operating loss                          (155,400)      (46,095)      (34,512)     (38,536)    (36,257)
Finance expenses, net                    (90,788)        28,222      (30,710)     (54,503)    (33,797)
Net loss                                (262,391)      (22,361)      (69,303)     (97,080)    (73,647)
Basic and diluted loss per
  ordinary share                       (28 pence)     (2 pence)     (7 pence)   (10 pence)   (8 pence)
--------------------------------------------------------------------------------------------------------------
</TABLE>

The Company regularly reviews estimated useful lives of its property and
equipment and the estimates in calculating the capitalised overheads which
relate to the construction of the cable network. With effect from January 1,
1996, the Company has revised the estimated lives of certain assets as set out
in Note 3 to the consolidated financial statements and certain estimates used in
calculating capitalizable overheads. The impact of these revisions was to
increase the depreciation charge for 1996 from (pound)110,223,000 to
(pound)129,716,000 and to increase the basic and diluted loss per ordinary share

                                       44
<PAGE>
for the year by 2 pence, and to increase the capitalization of overheads in 1996
from (pound)38,812,000 to (pound)54,019,000 and to reduce the basic and diluted
loss per share for the year by 2 pence. The impact was principally accounted for
in the fourth quarter of 1996.

In 1997, the treatment of activation costs was reviewed. With effect from
January 1, 1997, activation labor was reclassified from `Cable and Ducting' to
`Electronics' to be consistent with the classification of activation materials.
The impact of this change, was an additional depreciation charge of
(pound)10,359,000, with activation labor now depreciated over 8 years rather
than 20 years.

Finance expenses include foreign exchange gains and losses on the retranslation
or valuation of non sterling denominated financial instruments using period end
exchange rates and market valuations.




                                       45
<PAGE>
Page 77

SUPPLEMENTARY FINANCIAL INFORMATION - FIVE YEAR SUMMARY

<TABLE>
<CAPTION>
                                                Year ended December 31,

                                                 Company                 Joint         Predecessor
                                                                         Venture       Businesses
                                                                         (1)           (2)
                                     1997        1996        1995(3)     1994          1993
                               (POUND)'000   (pound)'000   (pound)'000  (pound)'000   (pound)'000
----------------------------------------------------------------------------------------------------
<S>                               <C>           <C>          <C>           <C>          <C>
BALANCE SHEET DATA:
Property and equipment (net)        1,705,520    1,447,194     1,063,808    454,843      269,974
Total assets                        2,413,352    2,241,940     2,289,720    878,156      413,865
Investment in affiliates               59,707       69,420        80,703     81,907       68,838
Debt(4)                             1,373,054      879,351       792,265      3,886       49,386
Equity                                738,750    1,070,797     1,322,748    776,934      311,695



INCOME STATEMENT DATA:
REVENUE
Cable television                      159,918      121,224        64,740     35,875       20,729
Telephony - residential               166,645      125,013        57,597     23,471       11,261
Telephony - business                   43,882       34,562        17,449      8,812        4,908
Other                                  16,053        9,467         4,998      3,869        3,440
----------------------------------------------------------------------------------------------------

TOTAL REVENUE                         386,498      290,266     144,784       72,027       40,338
----------------------------------------------------------------------------------------------------

OPERATING COSTS AND
  EXPENSES:
Programming                          (93,441)     (69,906)     (32,194)    (15,500)      (8,403)
Telephony                            (50,145)     (52,572)     (29,526)    (14,714)     (10,203)
Selling, general and administrative (193,335)    (167,323)     (105,388)   (60,414)     (32,505)
Depreciation                        (177,341)    (129,716)     (60,019)    (30,320)     (17,635)
Amortization                         (26,395)     (26,149)     (7,854)      (1,827)        (840)
----------------------------------------------------------------------------------------------------

OPERATING LOSS                      (154,159)    (155,400)     (90,197)    (50,748)     (29,248)
----------------------------------------------------------------------------------------------------

Share of loss of affiliates          (21,696)     (15,973)     (12,777)     (8,466)      (7,540)
Financial expenses, net(4)          (156,167)     (90,788)     (34,607)     (6,137)        (651)
Extraordinary gain                          -            -    7,287(5)            -
Net loss                            (332,452)    (262,391)     (137,531)   (58,050)     (37,439)

Basic and diluted (loss)/gain per
  ordinary share:
Before extraordinary gain
  (pro forma loss for 1994)        (36 PENCE)   (28 pence)  (16 pence)   (10 pence)
Extraordinary gain                          -            -           -      1 pence
Loss (pro forma loss for 1994)     (36 PENCE)   (28 pence)  (16 pence)    (9 pence)
----------------------------------------------------------------------------------------------------
</TABLE>

(1) See Note 1 (Organization and history) to the US GAAP Consolidated Financial
Statements.

(2) Predecessor Businesses refers to certain businesses owned by TCI prior to
the formation of the Joint Venture and which are now owned by the Company.

(3) See Note 5 (Business combinations) to the US GAAP Consolidated Financial
Statements.

(4) See Note 13 (Debt) to the US GAAP Consolidated Financial Statements.

(5) Extraordinary gain relates to the fair value of interest rate swaps in the
US GAAP Consolidated Financial Statements arising on repayment of debt following
the initial public offering of the Company in November 1994.


                                       46
<PAGE>
Page 78

SHARE AND ADS INFORMATION
Telewest shares trade under the symbol "TWT" on the London Stock Exchange.
American Depositary Shares ("ADSs") (evidenced by American Depositary Receipts
("ADRs")) representing Telewest shares trade on the Nasdaq Stock Market's
National Market under the symbol "TWSTY". Each ADS represents ten Telewest
shares.

The following table sets out, for the periods indicated, the high and low middle
market quotations for Telewest shares on the London Stock Exchange and the high
and low reported trade prices for the ADSs on the Nasdaq Stock Market's National
Market.

<TABLE>
<CAPTION>
                                               Ordinary Shares (1)           ADSs(2)
                                       High           Low          High              Low
                                   ---------------------------------------------------------
<S>                               <C>              <C>           <C>             <C>
1996     First Quarter                   156p          118p        $24.38          $17.81
         Second Quarter                188.5p          145p        $28.50          $21.63
         Third Quarter                   161p          119p        $25.13          $18.50
         Fourth Quarter                141.5p        117.5p        $23.25          $18.63

1997     First Quarter                 133.5p          106p        $22.00          $17.38
         Second Quarter                107.5p           63p        $17.50          $10.75
         Third Quarter                    95p           74p        $15.50          $12.13
         Fourth Quarter                 88.5p         68.5p        $14.88          $11.75

</TABLE>

(1) The prices set out for the Telewest shares are derived from the London Stock
Exchange Daily Official List.

(2) The prices set out for the ADSs are provided by the Nasdaq Stock Market's
National Market.


                                       47
<PAGE>
Pages 78-79

REGISTRAR AND DEPOSITARY
Enquiries concerning holdings of Telewest shares should be addressed to the
Registrars, who are Lloyds Bank Registrars, The Causeway, Worthing, West Sussex
BN99 6DA, Tel: (01903) 502541.

Changes in a holder's address should also be notified to the Registrars.

The Bank of New York is the Authorized Depositary Bank for the Telewest ADR
programme and all enquiries regarding ADR holder accounts and payment of
dividends should be directed to: The Bank of New York, ADR Department, 101
Barclay Street, New York NY 10286, Tel: (001) 800 524 4458.

In accordance with US securities laws, each year the Company prepares an Annual
Report on Form 10-K. A copy of the Form 10-K for the fiscal year ended 1997 is
available without charge upon written request made to the Company Secretary at
the address below.

The Company does not currently intend to pay dividends on the ordinary shares or
convertible preference shares as it intends to retain earnings, if any, for the
foreseeable future to fund the development and growth of the business of the
Group. In addition, the ability of certain direct and indirect subsidiaries of
the Company to pay dividends, or make advances or other payments to Telewest or
other members of the Group for payment of dividends is effectively prohibited by
the terms of certain financing arrangements. However, if any dividends are paid,
holders of ADSs will receive their dividends net of fees, expenses and taxes, if
any, withheld by the Depositary, pursuant to the terms of the Deposit Agreement
relating to the ADSs. For further information regarding the tax consequences of
ownership of Telewest shares and ADSs, refer to "Certain Tax Consequences of
Ownership of Telewest Ordinary Shares and ADSs" in the Proxy Statement.


                                       48
<PAGE>
Page 79

CREST - SHARE SETTLEMENT SYSTEM
The Company belongs to CREST, the settlement system for shares and other
securities. There are 426 CREST holders, holding 237,472,532 Telewest shares as
at 18 March 1998.











                                       49