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

                                    FORM 10-K
                        ________________________________

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
              (Mark One)

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

                                DECEMBER 31, 1996

                                       OR

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

                         Commission file number 0-24792

                        COMCAST UK CABLE PARTNERS LIMITED
             (Exact name of registrant as specified in its charter)

               BERMUDA                                 Not Applicable
   (State or other jurisdiction of                    (I.R.S. Employer 
   incorporation or organization)                     Identification No.)

            Clarendon House                          Comcast Corporation
          2 Church Street West                   1500 Market Street, 35th Floor
        Hamilton, HM 11, Bermuda                  Philadelphia, PA 19102-2148
            (809) 295-5950                             (215) 665-1700
     (Address, including zip code,                 (Name, address, including
        and telephone number,                        zip code, and telephone 
        including area code,                       number, including area code, 
      of Registrant's principal                       of agent for service)
         executive offices)
                        ________________________________

           SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
                                      NONE
                        ________________________________

           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

                 Class A Common Shares, (UK Pound)0.01 par value
                         ________________________________

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

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

As of March 1, 1997,  the  aggregate  market value of the Class A Common  Shares
held by non-affiliates of the Registrant was $317.1 million.
                        ________________________________

As of March 1, 1997,  there were 37,231,997 Class A Common Shares and 12,872,605
Class B Common Shares outstanding.
                        ________________________________

                       DOCUMENTS INCORPORATED BY REFERENCE
Part III - The Registrant's definitive Proxy Statement for its Annual Meeting of
Shareholders presently scheduled to be held in June 1997.

================================================================================
<PAGE>

                        COMCAST UK CABLE PARTNERS LIMITED
                          1996 FORM 10-K ANNUAL REPORT

                                TABLE OF CONTENTS

                                     PART I

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

Item  2   Properties........................................................15

Item  3   Legal Proceedings.................................................15

Item  4   Submission of Matters to a Vote of Security Holders...............15

Item  4A  Executive Officers of the Registrant..............................15

                                     PART II

Item  5   Market for the Registrant's Common Equity and 
             Related Shareholder Matters ...................................17

Item  6   Selected Financial and Other Data.................................18

Item  7   Management's Discussion and Analysis of Financial Condition 
             and Results of Operations......................................22

Item  8   Financial Statements and Supplementary Data.......................29

Item  9   Changes in and Disagreements with Accountants on Accounting
             and Financial Disclosure.......................................70

                                    PART III

Item  10  Directors and Executive Officers of the Registrant................70

Item  11  Executive Compensation............................................70

Item  12  Security Ownership of Certain Beneficial Owners 
             and Management.................................................70

Item  13  Certain Relationships and Related Transactions....................70

                                     PART IV

Item  14  Exhibits, Financial Statement Schedules and Reports on Form 8-K...71

SIGNATURES..................................................................74

This Annual  Report on Form 10-K for the year ended  December 31,  1996,  at the
time of  filing  with the  Securities  and  Exchange  Commission,  modifies  and
supersedes  all prior  documents  filed pursuant to Sections 13, 14 and 15(d) of
the  Securities  Exchange Act of 1934 for purposes of any offers or sales of any
securities after the date of such filing pursuant to any Registration  Statement
or Prospectus filed pursuant to the Securities Act of 1933 which incorporates by
reference this Annual Report.

This  Annual  Report on Form  10-K  contains  forward  looking  statements  made
pursuant to the "safe harbor"  provisions of the Private  Securities  Litigation
Reform Act of 1995.  Readers are cautioned that such forward looking  statements
involve  risks and  uncertainties  which  could  significantly  affect  expected
results  in the  future  from  those  expressed  in  any  such  forward  looking
statements  made by, or on behalf of the  Company.  Certain  factors  that could
cause actual  results to differ  materially  include,  without  limitation,  the
effects of  legislative  and  regulatory  changes;  the  potential for increased
competition;  technological  changes; the need to generate substantial growth in
the subscriber base by successfully launching,  marketing and providing services
in  identified  markets;  pricing  pressures  which could affect  demand for the
Company's services; the Company's ability to expand its distribution; changes in
labor, programming, equipment and capital costs; the Company's continued ability
to  create  or  acquire  programming  and  products  that  customers  will  find
attractive;  future  acquisitions,   strategic  partnerships  and  divestitures;
general business and economic conditions;  and other risks detailed from time to
time in the Company's  periodic  reports filed with the  Securities and Exchange
Commission.


<PAGE>
                                     PART I
ITEM 1    BUSINESS

Comcast UK Cable  Partners  Limited and its  subsidiaries  (the  "Company"),  an
indirect controlled subsidiary of Comcast Corporation  ("Comcast") (see Item 5 -
"Market for the Registrant's  Common Equity and Related  Shareholder  Matters"),
was incorporated in 1992 to develop, construct, manage and operate the interests
of Comcast in the United Kingdom ("UK") cable and  telecommunications  industry.
As of December  31, 1996,  the Company has  interests  in four  operations  (the
"Operating  Companies"):   Birmingham  Cable  Corporation  Limited  ("Birmingham
Cable"),  in which the Company owns a 27.5%  interest,  Cable London PLC ("Cable
London"), in which the Company owns a 50.0% interest,  Cambridge Holding Company
Limited  ("Cambridge  Cable"), in which the Company owns a 100% interest and two
companies   holding  the  franchises   for  Darlington  and  Teesside,   England
("Teesside"), in which the Company owns a 100% interest. 

When build-out of the Operating  Companies'  systems is complete,  these systems
will  have the  potential  to serve  approximately  1.6  million  homes  and the
businesses  within their franchise areas. As of December 31, 1996, the Operating
Companies'  systems passed more than 975,000 homes or  approximately  61% of the
homes in their franchise  areas and served more than 254,000 cable  subscribers,
268,000   residential   telephony   subscribers  and  8,300  business  telephony
subscribers.

The Company  accounts  for its  interests in  Birmingham  Cable and Cable London
under the equity method.  Through March 31, 1996, the Company also accounted for
its  interest  in  Cambridge   Cable  under  the  equity   method  (see  below).
Collectively, Birmingham Cable, Cable London and Cambridge Cable are referred to
herein as the "Equity  Investees"  (which term  excludes  Cambridge  Cable as of
March 31, 1996).

                        GENERAL DEVELOPMENTS OF BUSINESS

Industry Consolidation

Based on closed and announced transactions, it is apparent that the UK cable and
telecommunications  industry is  undergoing a significant  consolidation,  which
trend the Company expects to continue in the foreseeable future. The Company has
engaged an investment  advisor to assist it in  evaluating  the current state of
the UK marketplace,  the position of other  participants  and its  alternatives.
There can be no assurance that the Company will take any action, or in what time
frame any such action, if undertaken, might be accomplished.

SingTel Transaction

In March 1996, the Company completed the acquisition (the "Singtel Transaction")
of Singapore Telecom  International  Pte.  Limited's  ("Singapore  Telecom") 50%
interest in Cambridge Cable, pursuant to the terms of a Share Exchange Agreement
executed by the parties in December  1995. In exchange for  Singapore  Telecom's
50% interest in Cambridge Cable and certain loans made to Cambridge Cable,  with
accrued interest  thereon,  the Company issued  approximately 8.9 million of its
Class A Common Shares and paid approximately (UK Pound)11.8 million to Singapore
Telecom.  The  Company  has  accounted  for the  Singtel  Transaction  under the
purchase method.  As a result of the Singtel  Transaction,  the Company now owns
100% of Cambridge  Cable and Cambridge Cable was  consolidated  with the Company
effective March 31, 1996.

                      DESCRIPTION OF THE COMPANY'S BUSINESS

                                     General

Cable  communications,  residential  telephony  and business  telecommunications
services  are  similar in that they  involve  the  transmission  of  information
between two or more geographically separated sites. The cable/telephony operator
generally offers  subscribers these services for a monthly fee for access to the
distribution  network, plus additional charges for certain usage of the network,
premium services and other value-added services.
<PAGE>
                              Cable Communications

A  cable   communications   system  delivers  multiple  channels  of  television
programming,   primarily   entertainment  and  information,   to  the  homes  of
subscribers  who pay a monthly  fee for the  service.  The  Operating  Companies
currently offer their subscribers a choice of basic services and various premium
services,  including  news services,  sports  channels,  movies,  and ethnic and
foreign language programs.  Each Operating Company sets its own rates, including
a  monthly  fee for  cable  communications  services.  From  time to  time,  the
Operating Companies offer premium services on a trial basis without charge or at
a discount.

The demand for cable  communications  services  is, in part,  a function of both
over-the-air reception quality and alternative programming  availability.  While
signal  reception  in  the UK  has  been  considered  adequate,  the  increasing
availability  of cable and  satellite  programming  is providing  an  attractive
alternative to limited over-the-air and other sources of programming,  including
video tape rentals.

Various  sources of programming  are available to cable system  operators in the
UK. British Sky  Broadcasting  Group,  plc ("BSkyB") is currently the industry's
and the Operating  Companies' primary  programming  supplier.  BSkyB is also the
principal provider of multi-channel  direct-to-home ("DTH") satellite television
services  in  the  UK.  Certain  of the  Operating  Companies  have  programming
agreements  with BSkyB that expired in February 1997.  Effective  March 1, 1997,
BSkyB's  programming  services are provided to all of the Operating Companies in
accordance with the BSkyB rate card (see "Competition - Cable  Communications").
The  Company  does not  believe  that this will  have a  material  effect on the
Operating Companies' financial position, results of operations or liquidity.

Alternative  programming  sources are developing.  For example,  Flextech p.l.c.
("Flextech")  owns  interests in or manages  companies  that provide  additional
sources of programming to the Operating Companies. Flextech is a publicly listed
UK company  and is a majority  owned  subsidiary  of  Tele-Communications,  Inc.
("TCI"),  a co-owner of one of the Company's  strategic and financial  partners.
The Company cannot predict to what extent alternative  programming services will
become available or what affect future increases in the cost of programming will
have on its or the Operating  Companies' future financial  position,  results of
operations or liquidity.

The full extent to which cable  communications  systems  will be able to compete
with existing and future television delivery systems is currently not known. The
Company believes that the  architecture of the networks the Operating  Companies
are constructing  will enable them more easily to implement new technologies and
provide  enhanced or new  services.  There can be no  assurance,  however,  that
existing,  proposed or as yet undeveloped  technologies will not become dominant
in the future and render cable  communications  systems less  profitable or even
obsolete.  However,  the  Company  endeavors  to monitor  closely  all  relevant
technological  developments and to cause or encourage the Operating Companies to
position themselves to remain competitive.

                              Residential Telephony

Residential telephony service permits subscribers to place and receive telephone
calls to and from other telephone users in the local area, the rest of the UK or
the rest of the world.  The Operating  Companies  route most calls made by or to
its  subscribers  through  its  network  interconnections  with other  telephony
operators  which  include  British  Telecommunications  plc ("BT")  and  Mercury
Communications  Ltd.  ("Mercury"),  the two  principal  providers of  nationwide
telephony services in the UK.

Each public  telephony  operator is required  to  negotiate  an  interconnection
agreement  with any public  telephony  operator  that seeks one and may  request
Office of Telecommunications  ("OFTEL") intervention if the parties cannot agree
on certain  terms.  The  interconnection  agreements are  essentially  wholesale
arrangements  that set forth the fees charged for completing a call  originating
on,  carried  over  or  terminating  on a local  or  national  public  telephony
operator's network. BT provides interconnection to all Public Telecommunications
Operators  ("PTOs")  under the terms of a  standard  interconnection  agreement.
OFTEL determines the charges for all standard interconnection services.

The Operating Companies have installed high capacity, digital telephony switches
in their  systems.  By owning and operating  their own  switches,  the Operating
Companies are better able to monitor calling patterns and, without relying on BT
or Mercury,  can  provide  detailed  and  customized  billing and offer  premium
services to their subscribers.

                                      - 2 -
<PAGE>
Each  of the  Operating  Companies  (with  the  exception  of  Cambridge  Cable)
participates  with certain other cable  companies in a central  network  service
center in Woking, England (the "Network Service Center") established by TeleWest
Communications plc ("TeleWest"),  the Company's  strategic and financial partner
in  Birmingham  Cable and Cable  London.  Such  services  are  provided to cable
companies at a fee. The Network  Service  Center,  which provides  24-hour a day
centralized switch engineering,  interconnect access  administration and related
support services,  represents a centralized  cost-effective approach to managing
cable telephony networks with multiple switches.

                           Business Telecommunications

The business telecommunications market consists of the same services provided to
the  residential  telephony  market,  as well as the  provision  of a variety of
advanced  telecommunications  services. Business users frequently require higher
transmission  capacity  for  additional  services,  including  central  exchange
("Centrex"),   high-speed  data  services,  leased  access,  voice  mail,  video
conferencing and other services.

Operating Companies' Systems

The following table sets forth, for each Operating Company,  Homes Passed, Homes
Marketed,  Cable  Subscriber,  Residential  Telephony  Subscriber  and  Business
Telephony Subscriber information for the five years ended December 31, 1996. The
information presented below does not give effect to the Company's  proportionate
ownership interests in the Equity Investees.

<TABLE>
<CAPTION>
                                               1996         1995          1994         1993         1992
<S>                                           <C>          <C>           <C>          <C>          <C>    
Homes Passed (1)
Birmingham Cable                              374,451      292,503       227,110      156,720      104,076
Cable London                                  312,050      246,198       171,864      121,755       78,883
Cambridge Cable                               188,513      151,577       115,518       75,072       36,574
Teesside                                      100,542       40,608

Homes Marketed (2)
Birmingham Cable                              369,512      291,875       220,632      150,248       98,038
Cable London                                  296,416      230,325       163,564      121,755       78,845
Cambridge Cable                               174,868      142,237       107,987       64,846       32,584
Teesside                                       92,839       34,585

Cable Subscribers (3)
Birmingham Cable                              111,432       88,719        73,540       55,356       35,588
Cable London                                   67,877       52,871        42,977       30,111       20,452
Cambridge Cable                                45,378       36,799        30,763       16,007        6,827
Teesside                                       30,280       14,391

Residential Telephony Subscribers (4)
Birmingham Cable                              105,128       81,268        57,944       35,430       22,362
Cable London                                   57,495       39,608        31,121       17,577       11,967
Cambridge Cable                                56,448       43,002        33,302       12,012          221
Teesside                                       49,612       20,094

Business Telephony Subscribers (4)
Birmingham Cable                                2,994        2,154         1,504        1,158          688
Cable London                                    2,560        1,864         1,429          889          589
Cambridge Cable                                 2,227        1,779         1,253          474           22
Teesside                                          554           75
---------------
<FN>
(1)  A home is deemed  "passed"  if it can be  connected  to the system  without
     further extension of the transmission lines.
(2)  A home is  deemed  "marketed"  if it has  been  released  to the  Operating
     Companies' marketing departments for sales.

                                      - 3 -
<PAGE>
(3)  A  dwelling  with one or more  television  sets  connected  to a system  is
     counted as one cable subscriber.
(4)  A  dwelling  with one or more  telephone  lines  connected  to a system  is
     counted as one telephony subscriber.
</FN>
</TABLE>

Birmingham Cable Franchise Area. Birmingham Cable holds a franchise,  awarded in
1988, for the cities of Birmingham and Solihull with approximately 443,000 homes
and the local delivery operator license for the Wythall franchise,  a 4,000 home
franchise awarded in 1995.

Cable  London  Franchise  Area.   Cable  London  holds,   through  wholly  owned
subsidiaries,  the Camden, Haringey,  Enfield and Hackney/Islington  franchises,
which were  awarded in 1989 and 1990.  Cable  London's  franchise  area covers a
contiguous  area of  approximately  65 square  miles or  roughly  20% of Greater
London and contains approximately 437,000 homes.

Cambridge  Cable Franchise  Area.  Cambridge  Cable holds,  through wholly owned
subsidiaries,  the Cambridge,  Harlow and Ipswich/Colchester  franchises,  which
were awarded in 1990, and the local delivery operator license for the South East
Anglia  area (the "SEA  Franchise"),  which was  awarded  in January  1995.  The
franchise  areas  contain   approximately  490,000  homes,  although  the  build
milestones in the SEA Franchise only require  Cambridge Cable to pass 104,000 of
the 205,000 homes in the SEA Franchise.

Teesside  Franchise  Area.  Wholly  owned  subsidiaries  of the Company hold the
Darlington and Teesside franchises which contain approximately 254,000 homes.

Network Construction Costs

Construction  of  integrated   cable/telephony  systems  is  capital  intensive,
requiring substantial investment for "network costs" including civils (trenching
and  constructing  underground  ducts),  cable and  telephony  plant and network
electronics,  "subscriber costs",  including converters,  subscriber electronics
and installation of cable from the network to the  subscriber's  home, and other
costs  such as  head-end  equipment,  switching  offices,  land  and  buildings,
computers and furniture  and fixtures.  The Company and the Operating  Companies
estimate that from inception the total cost of developing and  constructing  the
Operating  Companies'  integrated  cable/telephony  systems  will range from (UK
Pound)1.2 billion to (UK Pound)1.3  billion,  although no assurance can be given
that the  actual  costs will not be  higher.  Through  December  31,  1996,  the
Operating  Companies  had  incurred   approximately  (UK  Pound)770  million  to
construct their systems.

Expenses  relating to the  construction of the Operating  Companies'  integrated
cable/telephony   systems  have  been  higher  than  costs  to  construct  cable
communications systems in the United States ("US"). This is due, in part, to the
nature of system  construction  in the UK which  requires  incremental  costs to
provide  residential  telephony  and  business  telecommunications  services  in
addition   to  cable   communications   services.   The  UK  does  not  have  an
infrastructure  of  existing  telephone  poles,  overhead  lines  or  electrical
conduits in which to run new fiber optic and coaxial cable. Therefore, all cable
installation requires newly constructed,  hand-trenched,  underground ducts. The
provision of  residential  telephony  and business  telecommunications  services
requires the  installation of additional  lines, as well as the  installation of
high capacity, digital telephony switches.

Revenue Sources

Cable Communications

The Operating  Companies offer varying levels of cable  communications  service,
depending  primarily on their  respective  channel  capacities.  Monthly service
rates and related charges vary in accordance  with the type of service  selected
by the subscriber. The Company may receive an additional monthly fee for premium
services,  the  charge  for  which  varies  with the type and  level of  service
selected  by  the   subscriber.   Additional   charges  are  often  imposed  for
installation  services,   commercial  subscribers,   program  guides  and  other
services.  The Company also  generates  revenue from  pay-per-view  services and
advertising  sales.  Subscribers  typically pay on a monthly basis and generally
may discontinue services at any time.

                                      - 4 -
<PAGE>
Residential Telephony

The Operating  Companies  currently charge residential  telephony  subscribers a
monthly  exchange line rental fee, usage fees, which are charges for each local,
long  distance or  international  call,  and fees for  additional  services  and
initial connections.

Business Telecommunications

The  Operating  Companies  charge  business  telecommunications   subscribers  a
connection  fee based  upon the  number  of lines  being  installed  and for the
initial  connection or reconnection to the company's network, a monthly exchange
line rental fee, usage fees, which are charges for each local,  long distance or
international call, and fees for additional services.

Competition

Cable Communications

The  Operating  Companies'  cable  communications  systems  compete  with direct
reception over-the-air broadcast television, DTH satellite-delivered  television
services and private satellite master antenna television ("SMATV") systems. They
also compete,  to varying degrees,  with other  communications and entertainment
media,  including home video products,  including  videotape cassette recorders,
movie theaters,  live theater, live sporting events,  newspapers and interactive
online computer  services.  The extent of such  competition  depends upon, among
other things,  price,  variety and quality of the programming  offered and, with
respect to broadcast television,  the quality of reception. In the future, cable
communications  companies may face competition from television  services offered
by national public telephony  operators and by other  competitors using existing
or new delivery systems.

There were an aggregate of approximately 3.4 million DTH subscribers compared to
approximately 1.9 million  broadband cable  subscribers  throughout the UK as of
December 31,  1996.  BSkyB offers DTH  television  service and  currently is the
predominant competitor in the UK multi-channel television market. Since DTH is a
satellite-based  system,  the DTH provider  does not need an  underground  cable
network to provide service to its subscribers.  A DTH subscriber,  however, must
purchase or rent a satellite  receiver and then pay monthly  subscriber  fees to
the DTH  provider  for the use of a decoder,  which makes the  satellite  signal
usable. Although DTH service currently presents substantial competition to cable
communications  service, the Company believes that cable communications may have
certain advantages over DTH. First, installation of satellite dishes may require
compliance  with  restrictive  zoning  ordinances  and, for renters,  landlord's
consent.  Second, the satellite dishes must be installed outside of the building
with a "line-of-sight"  orientation toward the transmitting satellite, which can
be problematic in urban areas.  Third, DTH subscribers who purchase,  as opposed
to rent, their satellite dishes must arrange and pay for any servicing  required
for the dish. Fourth,  without substantial  improvements in existing technology,
DTH providers will not be able to offer  telephony  services and  local-oriented
advertising and programming currently offered by cable communications operators,
or the interactive video services that the Operating Companies expect to be able
to offer in the future. The Company,  however, expects DTH providers,  including
BSkyB, to provide  substantial  competition  for the  foreseeable  future and no
assurances can be given that they will not become an even stronger competitor.

A significant  factor in favor of BSkyB is its role as the sole source  supplier
of many popular cable television programs, including most sports and movies. If,
in the future,  BSkyB chooses to restrict the  programming it makes available to
cable  communications  operators or offers it at relatively  higher prices,  the
Operating Companies could be at a significant competitive disadvantage. Pursuant
to informal  undertakings  given by BSkyB to the Office of Fair Trading  ("OFT")
announced in March 1995,  BSkyB agreed to offer cable  operators a new incentive
discount  plan which would not be  dependent on a cable  operator  taking all of
BSkyB's  channels.  In  addition,  BSkyB  agreed  to  charge  for the  supply of
programming  to its DTH business on a basis which is no more favorable than that
applied to cable operators and to maintain separate  accounting records for such
business. Subsequently, a number of UK cable operators expressed concerns to the
OFT about  BSkyB's  programming  charges and, in August 1995,  the OFT announced
that it had  approved a revision  by BSkyB of its  wholesale  price list for the
supply of programming to cable operators.  Following further  complaints from UK
cable  operators,  the OFT conducted a review of BSkyB's position in the premium
services  market,  particularly  with respect to sports  rights  (including  the
informal  undertakings  referred  to  above),  and a further  review of  BSkyB's
pricing structure and its impact on cable. In July

                                      - 5 -
<PAGE>
1996, the OFT reported that, although BSkyB's acquisition of premium programming
may have  created a barrier  to entry,  BSkyB had not acted  anti-competitively.
BSkyB has since revised its program supply rate card to allow cable operators to
buy its programs more selectively.

In the UK  Government's  1991  review of the  telecommunications  industry  (the
"Duopoly  Review"),  the UK  Government  stated that its policy was not to allow
national public telephony operators to convey or provide entertainment  services
over their  existing  telephony  network  until March  2001.  This policy may be
reviewed as it relates to the conveyance of such services as early as March 1998
if OFTEL determines that removal of the restrictions  would be likely to provide
more effective competition.  Because of the transmission capacity limitations of
twisted pair copper wires historically used in BT's telecommunications  network,
particularly between its local switching sites and its customers' homes, and the
age and condition of older portions of BT's network,  the Company  believes that
BT may not be able to provide cable  communications  service  comparable to that
offered by the Operating  Companies without  substantial  capital  investment or
unless  substantial  improvements  are  made in  digital  compression  or  other
technologies.

The Independent  Television  Commission  ("ITC") has recently confirmed that, in
its view,  a  video-on-demand  service  does not need to be  licensed as a local
delivery service. In addition,  the Department of Trade and Industry ("DTI") and
OFTEL have taken the view that the  existing  telecommunications  licenses of BT
and other  national  public  telephony  operators  would not prohibit  them from
providing  video-on-demand  services over their systems. The Operating Companies
similarly   are  not  prevented   from   providing   video-on-demand   services.
Video-on-demand services involve transmission of individual programs to a single
household in response to a particular request. In order to offer video-on-demand
services on a broad  scale,  the Company  believes  that BT would be required to
upgrade  its  existing   telecommunications   switches  and  to  install   video
distribution  facilities and subscriber decoder devices. After initial trials of
video-on-demand in Colchester and Ipswich using standard telephone lines, BT has
announced that in 1997 it will offer  video-on-demand  on a trial basis to up to
1,000  customers  connected to its  Westminster  cable  franchise in London.  No
assurance  can be  given  that  video-on-demand  will  not  provide  substantial
competition in the future.

A House of Commons select committee produced a report in July 1994 on the future
development  of  broadband  services  in the UK  through  national  fiber  optic
networks.  The  report  contained  recommendations  for the  lifting  of current
restrictions on the provision of entertainment  services over broadband networks
by persons other than licensed cable operators.  One  recommendation  (which has
been supported by the UK Labour Party) was that the UK Government  should reduce
uncertainty  concerning  such  restrictions  by  directing  OFTEL and the ITC to
provide,  on a franchise by franchise  basis,  specific dates for the lifting of
such restrictions  (which could be set earlier than March 2001), and that the UK
Government  make  clear  that all  restrictions  on public  telephony  operators
conveying or providing entertainment services will be lifted by the end of 2002.
However, none of these recommendations bind the UK Government which responded to
the report in November 1994 by stating that it remained committed to its Duopoly
Review  policies  restricting  the  conveyance  or  provision  of  entertainment
services by national public telephony operators as discussed above.

The  Conservative  Party has held power in the UK since 1979.  The next  general
election in the UK will be held on May 1, 1997.  At its annual party  conference
in October  1995,  the leader of the UK Labour Party (the primary UK  opposition
party)  announced that it had held  discussions with BT about the removal of the
restrictions  on BT providing  entertainment  services and had agreed that if it
were to be elected to office at the next general  election,  it would  implement
the  recommendations  of the House of Commons  Select  Committee  Report of July
1994. This would be in return for BT's agreement to connect to its optical fiber
network, at its own cost, every school, college, hospital and library in the UK.
The  Labour  Party has since  attempted  to  reassure  the cable  communications
companies  that  there  will  be an  open  market  for  all in  the  information
superhighway.  There can be no assurance  that the UK Labour Party,  if elected,
would not adopt  legislation  which may have a material  effect on the Company's
financial position, results of operations or liquidity.

The 1996  Broadcasting  Act (the  "1996  Act"),  which  became law in July 1996,
amended the 1990  Broadcasting Act (the  "Broadcasting  Act," which replaced the
Cable and  Broadcasting  Act 1984 (the "Cable Act")) and makes provision for the
broadcasting in digital form of television and sound program services.  The 1996
Act also  addresses  rights to  televise  sporting  or other  events of national
interest.  The  1996  Act  provided,  that  by  January  31,  1997,  terrestrial
television broadcasters must declare their intention to take up their guaranteed
places on terrestrial digital

                                      - 6 -
<PAGE>
multiplexes  and  offered  three  commercial  multiplexes  to  other  interested
parties. Two consortia have submitted bids for these commercial multiplexes, and
it is expected  that these  multiplexes  will be awarded to one of the consortia
during April 1997. The consortia are British  Digital  Broadcasting,  comprising
BSkyB,  Carlton  Communications  and Granada,  and Digital  Television  Network,
comprising  International  Cabletel. The introduction of digital terrestrial and
digital   satellite   television  will  provide  both  additional   programming,
terrestrial  channels  and  hence  additional   competition  for  the  Operating
Companies.

Residential Telephony

BT, which serves approximately 93% of the UK residential  telephony market as of
March 31, 1996, is the Operating  Companies'  principal  competitor in providing
local residential  telephony service.  As the principal  end-to-end  provider of
telecommunications  services in the UK, BT is, and can be expected to remain,  a
formidable  competitor.  BT has a  fully-built  national  network and  resources
substantially greater than those of the Company and the Operating Companies.  BT
also offers  promotional  programs and  additional  services in order to compete
more effectively with cable/telephony operators such as the Operating Companies.
There can be no assurance  that the Operating  Companies will be able to compete
successfully with BT. In addition, the Operating Companies compete with cellular
telephony  operators  (i.e.  Cellnet (60% owned by BT) and  Vodafone);  personal
communications  network  operators,  such as  "Mercury  one 2 one" (50% owned by
Mercury  and 50%  owned  by US West)  and  "Orange";  and  wireless  local  loop
providers.  They also  compete  with  Mercury,  which,  through an  interconnect
agreement with BT, is able to provide alternative access fixed-link  residential
telephony  service even though it generally has not built residential local loop
networks. Although the Operating Companies' licenses do not permit them to offer
cellular  telephony  services,  they are not prohibited from seeking  additional
licenses to do so or from entering into  distribution  agreements  with existing
cellular telephony operators.

Business Telecommunications

Competition in the business  telecommunications  area has been  substantial and,
because of the number of competitors in this area, is expected to intensify.  BT
is the principal competitor in providing business  telecommunications  services.
In addition to BT, the  Operating  Companies  compete with  Mercury,  as well as
other  telecommunications  companies,  including ENERGIS Communications Limited,
MFS Communications Limited and City of London Telecommunications Limited. BT and
Mercury,  which is a majority  owned  subsidiary of Cable and Wireless PLC, have
resources  substantially  greater  than those of the Company  and the  Operating
Companies,  and there can be no assurances that the Operating  Companies will be
able to  compete  successfully  with BT,  Mercury  or  other  telecommunications
companies.

In July 1996,  BT's  license was modified to ensure the  introduction  of number
portability  which  allows BT's  existing  customers  to retain  their  existing
telephone  number  when  they  switch  from BT to  another  carrier  such as the
Operating  Companies.  At  the  end  of  1995,  the UK  Monopolies  and  Mergers
Commission  ("MMC")  ruled  that BT should  pay  approximately  70% of the costs
involved in number  portability  while other  operators  would pay the rest. The
July  1996  BT  license  modification  provides  for  OFTEL  to  determine  BT's
reasonable  costs in providing  portability and the charges BT can make to other
operators in order to recover these costs.

Legislation and Regulation

General. The operation of a cable/telephony network in the UK is regulated under
both  the   Broadcasting   Act  and  the   Telecommunications   Act  1984   (the
"Telecommunications  Act"). The operator of a cable/telephony franchise covering
over  1,000  homes  must hold two  principal  licenses:  (i) a cable  television
license (called a "local delivery  operator license" under the Broadcasting Act)
issued in the past under the Cable Act or since 1990 under the Broadcasting Act,
which allows the operator to provide cable television  services in the franchise
area, and (ii) a telecommunications  license issued under the Telecommunications
Act, which allows the operator to operate and use the physical network necessary
to  provide  cable  television  and  telecommunications  services.  The  ITC  is
responsible  for the licensing and  regulation of cable  television.  The DTI is
responsible for issuing,  and OFTEL is responsible for regulating the holders of
the telecommunications  licenses. In addition, an operator is required to hold a
license under the Wireless  Telegraphy  Acts of 1949-67 for the use of microwave
distribution  systems.  Any  system  covering  1,000  homes or less  requires  a
telecommunications license but not a cable television license, and a system that
covers only one building or two adjacent  buildings  can operate  pursuant to an
existing general telecommunications license.

                                      - 7 -
<PAGE>
In addition,  cable  operators must comply with and are entitled to the benefits
of the New Roads and Street Works Act 1991, the principal benefit of which is to
allow  cable  operators  to "piggy  back"  their  construction  on that of local
utilities.  As a practical  matter,  however,  the  aggressive  build  schedules
followed by the Operating  Companies  make waiting for other local  utilities to
undertake construction impractical.

The cable  television  licenses held by subsidiaries of the Operating  Companies
were  initially  issued  under  the  Cable  Act for  15-year  periods.  With the
exception of the SEA Franchise (the cable  television  license which was granted
under the  Broadcasting  Act in 1995 for 15 years),  the terms of these licenses
have been  extended to 23 years and are  scheduled  to expire  beginning in late
2012  (see  "Cable  Television  License  - New  Cable  Television  Licenses  and
Renewals").  The  telecommunications   licenses  held  by  subsidiaries  of  the
Operating  Companies  are for  23-year  periods  and  are  scheduled  to  expire
beginning in late 2012 (see "Telecommunications License - New Telecommunications
Licenses; Renewal; Revocation; Transfer).

Cable Television License

General.  The stated policy of the ITC is that only one cable television license
will be granted in each franchise  area.  Each such license gives the holder the
right to provide cable television services within the franchise area using cable
(and in the case of cable  television  licenses  issued or renewed  for  15-year
periods  under the  Broadcasting  Act,  also by means of microwave  distribution
systems).  Affiliates  of  BT,  Mercury  and  other  national  public  telephony
operators are currently allowed to apply for and hold cable television  licenses
and,  since March  1994,  the  telephony  operators  have been  allowed to apply
directly for and hold licenses in new franchise areas.

Cable  operators are subject to competition  within their  franchise  areas from
direct reception  over-the-air  broadcast  television,  DTH  satellite-delivered
television services and SMATV systems.  With respect to the operation of a SMATV
system within a cable  operator's  franchise  area,  the DTI has stated that the
cable  operator  will have a right of first  refusal  to  provide  a similar  or
superior service at a reasonable price before the SMATV system will be permitted
to begin operations, subject to, among other things, the cable operator being in
compliance with the build schedules of its telecommunications licenses and other
previous commitments to provide service elsewhere in its franchise areas.

New Cable Television Licenses and Renewals. Cable television licenses originally
issued under the Cable Act were for a period of 15 years and,  upon  expiration,
may either be extended for an eight-year  period,  if the cable operator holds a
23-year  telecommunications  license,  or renewed for successive 15-year periods
under the Broadcasting Act. An application for renewal generally must be made to
the ITC within five years prior to the expiration of the license. A renewal will
be granted  if the  operator  agrees  with the ITC upon the fees to be paid and,
among  other  things,  the  operator's  proposed  telecommunications  system  is
acceptable to the DTI or OFTEL. If an operator chooses to extend its license for
an eight-year period, it will not be required to pay the annual fees referred to
below,  but at the end of the  eight-year  period the license  cannot be renewed
again and will be put out for  tender  and  awarded to the  highest  bidder,  as
described  below.  If an  operator  chooses to renew its  license  for a 15-year
period,  it will be  required to pay  annually,  during the  renewal  period,  a
percentage to be fixed by the ITC of the  operator's  cable  television  related
revenues, plus an additional amount that the ITC believes a successful applicant
would have bid for the franchise if it were being offered as a new franchise. At
present,  cable operators are only required to pay to the ITC annual fees, which
in the aggregate are intended to cover the ITC's administrative costs.

As of December 31, 1996,  cable  television  licenses had been granted in the UK
covering  franchise  areas with  approximately  17.8 million  homes.  The ITC is
continuing  to offer for tender,  cable  television  licenses for new  franchise
areas covering the remaining 5.6 million homes in the UK. Under the Broadcasting
Act, a new cable television license will be granted to the applicant who submits
the highest cash bid (i.e.  offers to pay the highest annual cash sum to the ITC
during each year of the license),  except where it appears to the ITC that there
are  "exceptional  circumstances"  which  make  it  appropriate  for  the  cable
television  license  to be awarded  to  another  applicant.  Under any new cable
television  license,  operators  will be  required  to pay  annually to the ITC,
during  the  term of the  license,  a  percentage  to be fixed by the ITC of the
operator's cable television related revenues, plus an additional amount equal to
the operator's cash bid. The percentage  fixed by the ITC for the new franchises
so far to come up for bid under the Broadcasting Act have varied from 0% for the
term of the license to a graduated fee structure of 0% for the first five years,
3.0% for the next five years and 8.0% for the last five years. Certain entities,
including local authorities, political bodies or groups, religious organizations
and advertising agencies, are presently

                                      - 8 -
<PAGE>
not  allowed to bid for or have  certain  interests  in entities  holding  cable
television  licenses.  Ownership  restrictions  also  apply to  holders of other
Broadcasting  Act  licenses  or local  newspapers  serving the same area as that
served by the cable  operator.  The  Secretary of State has broad  discretion to
amend the rules relating to cross-media ownership and accumulations of interests
in licensed  services.  In May 1995, the UK Government  published  proposals for
certain changes  relating to these rules which recognize the continuing need for
specific rules governing media ownership  beyond those which apply under general
competition law but also need to liberalize existing ownership  regulations both
within and across different media sectors.  The 1996 Act creates a new licensing
regulation for initially up to 18 new digital terrestrial  television  channels.
The channels will be accommodated on six frequency  groups known as multiplexes.
The  1996 Act set in  place a  two-tier  licensing  regulation  for  terrestrial
broadcasting  comprising  the  licensing  of  digital  program  service.  As  an
inducement to encourage  entrants into the digital  broadcasting  market, the UK
Government  has said that there will be no  requirements  for  licensees  to pay
"PQRs"  (percentage  of  qualifying  revenues) for the 12 years of the franchise
period, and further that, subject to various conditions, a multiplex license can
be rolled over at the end of the franchise period for an additional 12 years.

The 1996 Act also  established  new media  ownership  rules,  abolished  certain
ownership and control rules and  introduced  new rules which limit,  to 15%, the
total  audience   share   attainable  by  commercial   over-the-air   television
broadcasters as calculated over the preceding 12 months.

Transfers of Licenses. The Broadcasting Act permits the transfer of a license to
a third party with the prior  written  consent of the ITC.  The ITC has absolute
discretion to refuse any proposed  transfer of a license.  In addition,  certain
changes in ownership of the  licensee  and certain  acquisitions  of an interest
(direct or indirect) in the licensee require 28 days notification to the ITC.

Revocation of Licenses.  The ITC can, after consultation with the DTI and OFTEL,
revoke a cable  television  license  if an  operator  fails to  comply  with its
conditions or with any direction of the ITC and the ITC considers  revocation to
be in the  public  interest.  If there is any  change  in either  the  nature or
characteristics  of an operator that is a corporate entity, or any change in the
persons  controlling  or having an  interest in it, the ITC can decide to revoke
the license if due to such changes it would not have  awarded the license  under
the new  circumstances.  With respect to licenses issued under the  Broadcasting
Act, the ITC can also impose fines and shorten the license period.

Obligations of Licensees.  Under the Broadcasting Act, cable operators may carry
certain  licensed  program  services on their  systems and are  responsible  for
ensuring that  advertising and foreign  satellite  programs  included by them in
their  services   conform  to  the  restrictions  set  forth  in  the  codes  on
advertising,  sponsorship  and  programming  produced by the ITC. Both the cable
television  and  the  telecommunications  licenses  impose  obligations  on  the
licensees to provide any  information  which either OFTEL or the ITC may require
for purposes of exercising their statutory functions.

Telecommunications License

General. A telecommunications  license permits the cable operator to operate the
system  over  which it  provides  cable  communications  and  telecommunications
services.  It also  authorizes the operator to connect its system to other cable
communications  or  telecommunications  systems  including those operated by the
broadcasting  authorities,  satellite  systems and certain other systems outside
the UK.  Although  the  telecommunications  license is granted for a  particular
area,  it is not  exclusive,  and as a  result,  a cable  operator  will have to
compete in the provision of telephony and other telecommunications services with
national public telephony operators, such as BT and Mercury, and other telephony
companies in their franchise areas.

A cable  operator  who holds a  telecommunications  license  is  subject  to the
Telecommunications    Code   (the   "Code"),   which   is   contained   in   the
Telecommunications Act. The Code grants certain rights in respect of the keeping
of apparatus  such as ducts,  cables and equipment on private or public land and
the  procedures  to be used for  installation  of equipment on public  highways.
Cable  operators  are  generally  required  by the  Code to enter  into  bonding
obligations with local authorities in order to ensure reinstatement of roads and
streets  in the event the  operator  becomes  insolvent,  ceases to carry on its
business or has its telecommunications license terminated.

New    Telecommunications    Licenses;    Renewal;     Revocation;     Transfer.
Telecommunications  licenses  that have been  issued to date to cable  operators
have been for periods of either 15 or 23 years. In connection with the grant or

                                      - 9 -
<PAGE>
renewal  of  any   telecommunications   license   involving  new   construction,
construction  specifications and timetables (generally expressed in terms of the
number of homes passed) will be reviewed by the applicable  authorities and will
be incorporated in the terms of the license that is ultimately  granted,  except
for new franchises,  where the construction obligations are enforced by the ITC.
It is OFTEL's  responsibility to enforce compliance with the build schedules and
the other conditions of the license.  In addition,  certain changes in ownership
of the licensee and certain  acquisitions of an interest (direct or indirect) in
the licensee  require 30 days'  notification to DTI.  Failure to comply with the
build schedules or other conditions, the occurrence of certain insolvency events
or changes in control of the licensee which are deemed by the DTI to be contrary
to the UK's  national  security  interests or relations  with any other  country
could result in revocation of both the telecommunications  license and the cable
television  license.  Unlike a cable television  license,  a  telecommunications
license is not transferable.

Technical Requirements. The principal technical requirements for cable/telephony
systems are contained in the telecommunications  licenses,  which address, among
other things,  technical  requirements for transmissions,  performance and radio
interference restrictions.

Telephony Operations

Duopoly Review.  In 1991,  pursuant to the Duopoly Review,  the requirement that
cable operators provide voice telephony  services only as an agent for either BT
or Mercury was removed, thereby enabling cable operators to provide all forms of
wired telecommunications services, including the ability to independently switch
their own  traffic.  In  addition,  cable  operators  were  granted the right to
require BT and Mercury to provide interconnection.

Interconnection  Agreements.  The  commercial  viability of telephony  and other
telecommunications services provided by cable operators depends on their ability
to  connect  cost-effectively  with  other  telecommunications   systems.  Cable
operators'  systems  must  connect  with  systems  operated by  national  public
telephony  operators,  international  telephony  companies  or  other  telephony
operators,  as the case may be, for calls that do not originate and terminate on
their  systems.  Each  national  public  telephony  operator  (including  BT and
Mercury,  as well as the  Operating  Companies)  is  required  to  negotiate  an
interconnection  agreement  with any  other  such  operator  that  seeks one and
intervention  can be requested from OFTEL if the parties cannot agree on certain
terms.  OFTEL also has the power to enforce the  obligations of a party under an
interconnection agreement. In addition, BT is required by its license to publish
details of all interconnection agreements into which it enters.

In March 1994, OFTEL published a new framework for interconnection charges which
was to be developed in three  stages.  The first stage,  which became  effective
immediately, established an "interim list" of standard interconnect charges, for
guidance,  based on the  interconnection  determination  by OFTEL between BT and
Mercury in December  1993.  Any  disputes  on  conveyance  rates and  connection
charges  referred to OFTEL would be determined in accordance with the BT/Mercury
determination.  The second stage involved amendments to BT's license,  including
implementation of (i) a list of standard  interconnection  charges,  (ii) a more
transparent   process  for  relating  costs  to  charges  and  (iii)  accounting
separation  of  BT's  network,  access  and  retail  businesses.  The  necessary
modifications  have now been made to BT's license.  Charges are determined on an
interim  basis for each fiscal  year  commencing  April 1 based on BT's  interim
accounts.  A final  determination  and  retrospective  adjustments  are made, if
necessary,  once BT's final accounts are published. The Company does not believe
that this will have a  material  effect  on the  Company's  financial  position,
results of operations or liquidity.  In November  1996,  OFTEL issued an interim
determination  for the year ending  March 31, 1997,  based on BT's  accounts for
each of the fiscal years ended March 31, 1996 and 1995.  No final  determination
has yet been made for the fiscal year ended March 31,  1996.  The third stage in
this process  involved the  publication  by OFTEL in July 1995 of a statement on
the  future  of   interconnection,   competition  and  related  issues  entitled
"Effective  Competition:  Framework  for  Action"  (the  "Effective  Competition
Document").

With respect to  interconnection,  OFTEL proposed moving to an incremental  cost
basis for  interconnection  charges.  Following  earlier  consultations on price
control in December  1996,  OFTEL  published a  consultative  document  entitled
"Network  Charges from 1997," in which OFTEL redefined its proposals for network
charges.

                                     - 10 -
<PAGE>
The proposals  established a framework  effectively  comprising  four  different
approaches   OFTEL  intends  to  adopt  in  relation  to  the  pricing  of  BT's
interconnection services, dependent on the degree of competition as follows:

        (i)     for "competitive services", BT will be free to set the charges;

        (ii)    for "prospectively  competitive services", BT will be subject to
                a price cap on each such service equal to the percentage  change
                in the UK domestic retail price index ("RPI," plus zero);

        (iii)   for  bottleneck  and  non-competitive  services,  two baskets of
                services will be introduced,  each subject to a cap equal to RPI
                less X (a number yet to be determined); and

        (iv)    for  interconnection-specific  services,  BT will be  subject to
                individual  price  caps  equal to RPI less X (a number yet to be
                determined).

The  prices BT sets  will be  subject  to the  application  of the fair  trading
license  condition  (see below) and OFTEL intends to use "floors" and "ceilings"
as the main yardsticks to consider whether a charge is anti-competitive or not.

The  consultative  document  does not  propose  values  for X in the  price  cap
formulas but states that OFTEL is proposing that the statement to be released in
May 1997  (following  consultation  on the December  1996 document and a further
consultative document to be released in March 1997) will deal primarily with the
values of X and the starting values for  interconnect  charges.  If BT agrees to
modifications to its license to implement these  proposals,  it is intended that
the new charge controls be in place on August 1, 1997,  simultaneously with BT's
new  retail  price  cap  (see  "Price  Regulation").   As  with  other  proposed
modifications  to BT's  license,  BT's consent will be required and while BT has
accepted the retail price cap and the fair trading  condition,  no assurance can
be given that BT will accept modifications to implement these proposals. If that
consent is not forthcoming, OFTEL has indicated that the matter will be referred
to the MMC for  determination.  In such  event,  OFTEL  has  indicated  that the
present charges for setting  interconnect  charges will continue until such time
as the MMC determines the issue.

OFTEL  has also  stated  that  operators  may be  required  to  provide  network
information to BT for  interconnection  purposes in much the same way as BT must
publish  information  about its own network,  although  OFTEL does not currently
propose to require other operators to publish their interconnection  agreements.
In the future, requirements may also be applied to other operators in respect of
interconnection  obligations,  such as accounting separation and transparency of
calculation  of  interconnection  charges,  if  OFTEL  concludes  that  any such
operator  has market  power and is in a position to distort  competition  to the
detriment of consumers.

Cable operators with adjoining franchises were initially unable to connect their
networks without the involvement of BT or Mercury unless the combined areas were
relatively  small and the  franchises  were under  common  control.  The Duopoly
Review  relaxed this policy and operators of adjacent  cable  franchises are now
able to interconnect their systems irrespective of whether they are under common
ownership. In addition,  applications by cable operators to connect more distant
franchises will also be considered by the DTI.

The Duopoly  Review led to certain  amendments  being made to BT's license which
could  potentially  require operators who interconnect with BT to make a payment
(the "Access  Deficit  Payment")  to BT,  designed to  compensate  BT for losses
incurred by it in providing  local exchange lines and which arise because of the
restrictions  imposed on it in rebalancing its prices.  However,  as proposed in
the Effective Competition Document,  BT's license has more recently been further
amended to remove the  constraint  in BT's  license on its ability to raise line
rental prices and, accordingly,  the Access Deficit Payment requirement has been
terminated.

Price  Regulation.  BT is currently subject to price regulation on approximately
65% of its revenues.  Under these  regulations,  BT must, through July 31, 1997,
not increase its overall  prices for public  switched  telephony  services on an
annual basis by more than (or, as the case may be, must  decrease such prices by
at least) the amount of the change in the domestic  RPI minus 7.5%.  Within this
limitation,  BT may not increase its charges for certain  specified  services by
more than certain other price  limitations.  In particular,  BT may not increase
charges for connections,  private  circuits and other switched  services by more
than the domestic RPI minus 2%.

                                     - 11 -
<PAGE>
OFTEL's June 1996 statement on the pricing of  telecommunications  services from
1997 set out proposals to modify the retail price  control  imposed on BT. These
proposals  were agreed to by BT and  modifications  were made to BT's license in
October 1996 at the same time that the fair trading  condition was  incorporated
(see  below).  The new price  control will be RPI minus 4.5% and will apply from
August 1, 1997 until 2001, but only in relation to the bottom 80% of residential
customers by billed amounts. However, OFTEL has indicated that this is likely to
be the last retail price control imposed on BT. OFTEL has conceded that this, in
combination with the proposed changes to network charges, will result in "vastly
more price  freedom  for a still  dominant  BT" at both the  retail and  network
level.  However,  OFTEL expects that the new fair trading  provision  (described
below) will protect others from BT's dominant position.

The new price control (together with the new fair trading provision)  represents
a further  withdrawal by OFTEL of detailed  regulation giving BT greater pricing
freedom and reducing  the number of  activities  which  remain  subject to price
control.

In October  1996 OFTEL  modified  BT's  license to  introduce a new fair trading
condition  which provides for similar  prohibitions to those set out in Articles
85 and 86 of the EC Treaty.  The new license condition  prohibits  entering into
anti-competitive  agreements and the abuse of a dominant  position in the UK, in
addition  to the  prohibitions  contained  in the UK  Competition  Act and  Fair
Trading Act. It will replace  other,  more specific  fair trading  conditions in
BT's license.  While the condition will not render  anti-competitive  agreements
and  practices  void  from  the  outset  or  impose   automatic   penalties  for
non-compliance,  it  will  enable  the  Director  General  to  issue  final  and
provisional orders with respect to any such activity. The fair trading condition
is to be  introduced  in  Mercury's  license  following  the  current  statutory
consultation on its license modifications and will, in due course, be introduced
in other operators'  licenses  including those of the Operating  Companies.  The
Company does not believe that this will have a material  effect on the Operating
Companies financial position, results of operations or liquidity.

OFTEL linked the  acceptance  by BT of the fair trading  condition to the retail
price controls,  presenting the proposals as a single set of  modifications.  BT
consented  to OFTEL's  proposal  and the  license  modifications  but  initiated
judicial review proceedings in the High Court as to the legality under UK and EC
law of the  introduction  of the fair  trading  condition.  BT's  challenge  was
unsuccessful and BT has advised OFTEL that it will not be filing an appeal.

OFTEL has  published  draft  guidelines  on the  operation  of the fair  trading
condition  which explain how it will determine the relevant market and apply the
prohibitions set out in the new condition.  OFTEL has stated in these guidelines
that it proposes to follow the approach used by the European  Commission and the
European  Court of  Justice in  determining  issues  such as market  definition,
dominance and abuse of market  power.  These  measures  represent a reduction of
detailed  regulation  and  move  by  OFTEL  to  become  more  of a fair  trading
authority.

The Duopoly Review resulted in the  modification of BT's license to permit it to
offer discounts,  subject to several  conditions.  Most  importantly,  BT is not
allowed to offer  discounted  services in local  markets  without  offering them
nationally.  For so long as this  policy  remains  in  effect,  BT's  ability to
respond to local  competition will be restricted.  In its Effective  Competition
Document,  OFTEL has  proposed to make no change to its policy on  limiting  the
flexibility  available to BT to target large volume customers or on restrictions
on BT offering locally-discounted services.

In the Effective  Competition  Document,  OFTEL has also made certain  proposals
with respect to a relatively basic voice telephony universal service,  including
the funding of such service on a fair,  transparent and  proportional  basis. In
December 1995,  OFTEL  published a  consultation  document  entitled  "Universal
Telecommunications  Services,"  which  contains a proposal for an  independently
administered universal service fund (expected to be set up in August 1997) which
would receive  payments from  operators  (unless the operators  were prepared to
offer special  tariffs,  approved by OFTEL, in lieu of such payments) to be used
to make  payments  to  those  operators  who  incur a net  loss as a  result  of
delivering  universal  service to customers.  In February 1997, OFTEL issued for
consultation  its  further  proposals  for  universal  service in the UK. It has
concluded that,  after benefits,  the current net cost involved in the provision
of universal  service in the UK is not proven and does not justify  setting up a
universal  service fund in the short-term.  It has,  however,  proposed to amend
BT's license so as to require it to offer a "Life line"  service  package  which
will be low cost,  available to everyone and allow  incoming calls and emergency
outgoing  calls only.  Amendments  to BT's  existing  "Low User Scheme" are also
proposed  together  with an  agreement  with BT designed to reduce the number of
disconnections  for debt.  The  proposals  also  include  new  draft  guidelines
relating to the

                                     - 12 -
<PAGE>
provision  of public call boxes by BT, as well as  suggestions  for special help
for the  elderly  and  disabled.  OFTEL  intends  to carry out a full  review of
universal service arrangements in the UK in 1999.

The  rates  of  other  telecommunications  companies,  including  the  Operating
Companies,  are not regulated by any UK Government entity,  although  conditions
prohibiting undue discrimination and unfair cross-subsidy are commonly contained
in telecommunications  licenses (including those held by the Operating Companies
and BT).

Equal Access.  One advantage  cable operators have maintained in marketing their
telephony  services has been their  ability to offer direct access to the system
of  another   operator  (i.e.   Mercury),   whose  long  distance  charges  have
historically been less than those charged by BT. At present,  in most areas, the
only way in which a  residential  BT customer can choose to route calls over the
Mercury trunk network is by purchasing a special  telephone or using an indirect
access through which it is possible to select the Mercury  network in preference
to the BT network.  The stated policy of the UK Government in the Duopoly Review
is to introduce true equal access, whereby all local telephony systems will have
to offer access to each fixed link trunk system without discrimination. BT's and
Mercury's  licenses  have been  amended to enable  OFTEL to require them to make
available  equal access,  either by  pre-selection  or on a call-by-call  basis,
subject to, among other things,  a cost-benefit  study indicating that the gains
to consumers will outweigh the likely costs.  A cost-benefit  study has now been
conducted  and OFTEL has concluded  that the study does not justify  introducing
such equal access arrangements.  Under existing licenses, a cable operator could
not be required  by OFTEL to  introduce  equal  access  until it had  acquired a
market share of 25% of local exchange lines.  Many cable  operators  opposed the
equal access  proposals  in the Duopoly  Review in this  respect  because  equal
access  would  reduce  one of the  current  attractions  of a  cable  operator's
telephony  system.   BT's  willingness,   however,   to  offer  cable  operators
interconnection  on competitive terms potentially will enable cable operators to
offer equal access benefits to their customers on attractive  terms.  The timing
and terms of the introduction of equal access is unclear.  However, OFTEL stated
in July 1996 that it considers the "well established  operator" threshold of 25%
of customer connections in a relevant market to be a useful guide in determining
whether a  non-dominant  operator  should,  in the future,  be required to grant
indirect access to other operators.  This threshold would not automatically mean
that the operator  would be required to grant indirect  access,  but OFTEL would
investigate  the issue further in respect of that  operator once that  threshold
was reached.

Telephone  Number  Portability.   Telephony  subscribers  changing  their  phone
services to a cable operator must currently change their telephone  numbers.  BT
does not offer customers number portability (the ability of telephony  customers
to keep their telephone  number when changing  telephony  providers),  which has
proven to be a serious  impediment  for cable  operators in  obtaining  business
telephony  customers.  Cable  operators  have  responded by trying,  among other
things, to convince business customers to use cable/telephony lines for outbound
telephone calls while  maintaining  their Mercury or BT lines for inbound calls.
The Duopoly  Review led to BT's license being amended to enable OFTEL to require
BT to  allow  number  portability,  and  OFTEL  directed  BT to  provide  number
portability for certain BT customers who wish to transfer  telephony services to
the cable operator Videotron. BT's charges for providing number portability were
referred to OFTEL, which proposed modifications to BT's license giving OFTEL the
power to determine such charges. In April 1995, OFTEL announced that,  following
BT's failure to accept the proposed license modification concerning the costs of
portability,  the  matter  was  being  referred  to the MMC for  resolution.  In
December 1995, it was announced that the MMC had concluded that modifications to
BT's license were  necessary to prevent BT from being able to recover from other
operators  all  its  costs  in  bringing  about  number  portability.   The  MMC
recommended  that the split of costs  between BT and other  operators  should be
approximately   70%:  30%,  with  BT  bearing  the  larger  share.  The  Network
Interoperability  Consultants  Committee  (the  "NICC") has produced a technical
specification  for number  portability  based on  existing  capabilities  within
exchanges.  OFTEL has stated that it is looking to cable  operators to implement
the NICC  specifications  as  quickly  as  possible  and that,  although  number
portability  will be phased in gradually,  it is expected to become a widespread
option for customers over the next few years.  BT's license was modified in July
1996 to  incorporate a condition  which  supports the  implementation  of number
portability.  Commercial terms for number portability are now included in the BT
standard interconnect agreement.

Future Developments

In August  1995,  OFTEL  issued a  consultative  document  entitled  "Beyond the
Telephone, the Television and the PC," which looks at the way in which broadband
switched  mass-market  services ("BSM services") may develop in the UK, examines
the  regulatory  issues  they  will  give rise to and  considers  some  possible
solutions. Of importance to

                                     - 13 -
<PAGE>
cable operators is the suggestion that dominant  operators should be required to
provide  broadband  conveyance  (including  switching) as a network  business to
service providers who should be allowed to have direct commercial  relationships
with  individual  customers.  Requirements  for  accounting  separation  and the
possible  need  for  some  form of  price  control,  if this  were to  become  a
regulatory  issue, are also considered.  OFTEL suggests that BT is likely, at an
early stage, to be considered a dominant operator,  possibly when, even allowing
for  the  existing  policy  restrictions  on BT's  conveyance  or  provision  of
broadcast  entertainment  services  (mentioned above), it starts to roll out BSM
services aimed at covering a significant portion of the UK, either nationally or
in a specific regional market.  OFTEL suggests that regulation,  along the above
lines,  should only be introduced to the cable sector when it becomes  dominant,
either  nationally or in a specific  regional market,  and is able to compete on
equal terms with BT and any other BSM services distributor. In the meantime, the
document recognizes the importance of encouraging continuing local investment in
the cable  industry's  infrastructure.  The  document  also raises the  question
whether license  obligations on cable operators to provide cable  communications
services  where  their  systems  have  been  installed  should  not apply to BSM
services  (other than the broadcast  entertainment  services for which they have
exclusive cable distribution  rights in their franchise areas) until they become
dominant in their relevant markets.

In December  1996,  OFTEL  published a  consultative  document on the  practical
regulation of conditional access services for digital television. OFTEL has five
key objectives:

        (i)     To ensure that the control of conditional  access  technology is
                not used to distort, restrict or prevent competition. This would
                be of significance  where a conditional  access service provider
                has an  associated  programming  supply  business  and  is  also
                providing conditional access services to its competitors.

        (ii)    To ensure that control of conditional access technology does not
                lead  to  consumer  choice  being  artificially  constrained  in
                relation  to  consumers'  choice  of  equipment  or the range of
                services available via that equipment.

        (iii)   To facilitate  consumers  being able to access  services on more
                than  one  delivery   mechanism  or  switch   between   delivery
                mechanisms,  without  having  to  incur  unnecessary  additional
                expense.

        (iv)    To  facilitate  consumer  choice by  ensuring  ease of access to
                information  about the range of services  available  and ease of
                selection of those services.

        (v)     To ensure control of proprietary  conditional  access technology
                is not exploited  anti-competitively  (e.g. by excessive pricing
                for the use of that technology).

The guidelines  set out the approach  OFTEL will take in regulating  conditional
access systems.  This includes,  in particular,  enforcing the conditions of the
Conditional   Access  Service  Class  and  the  Advances   Television   Standard
Regulations (the "Regulations"), which both came into force in January 1997.

The Regulations include requirements on :

        o       The  offer  of   technical   conditional   access   services  to
                broadcasters  "on  a  fair,  reasonable  and  non-discriminatory
                basis".

        o       The licensing on fair, reasonable and  non-discriminatory  terms
                of industrial  property rights in conditional  access technology
                to  manufacturers  of  consumer  equipment.  This would  prevent
                licensors  from including in the license  agreements  conditions
                that would  prohibit  or  discourage  manufacturers  of consumer
                decoder  units  from  including  a  common  interface   allowing
                connection  with  other  conditional  access  systems  or  means
                specific to another conditional access system.

        o       The  provision  for   cost-effective   trans-control   by  cable
                operators.

In February 1997, OFTEL issues a statement containing proposed measures designed
to  promote  competition  in  services  over  telecommunications   networks  and
addressing a number of issues of  particular  relevance to  independent  service
providers  ("ISP").  The  measures  include  an updated  classification  of BT's
systems (or network  services)  business  ("SB") and  supplemental  services (or
enhanced services) business ("SSB") (the importance of which is that

                                     - 14 -
<PAGE>
this  classification  underpins the prices that BT charges itself since BT's SSB
must pay the  same for BT's  network  services  as any ISP is  required  to) and
additional information to be published in BT's financial statements with respect
to the split between its SB and SSB. BT is being allowed greater  flexibility to
offer lower prices to ISPs in order to promote  competitively priced services to
all levels (although access to cost-based  interconnection  prices is largely to
be limited to operators installing networks).  ISPs are now becoming entitled to
allocations   of  numbering   capacity   without   having  to  have   individual
telecommunications licenses.

International Facilities Liberalization

In June 1996, the DTI invited  applications  for licenses to install and operate
telecommunications  systems for the provision of all types of telecommunications
services between the UK and the rest of the world.

The  granting  of  international  facilities  licenses  in  December  1996 to 44
applicants  marked the  removal  of one of the few  remaining  barriers  to full
competition in the  provisioning  of  infrastructure  and services in the UK. On
January 1, 1998, the European Union will follow suit.

Employees

Comcast,   through  Comcast  UK  Cable  Partners   Consulting,   Inc.  ("Comcast
Consulting"),   a  wholly  owned  subsidiary  of  Comcast  U.K.  Holdings,  Inc.
("Holdings"), which is an indirect, wholly owned subsidiary of Comcast, provides
all  administrative  services to the Company and  provides  all  management  and
consulting  services to the Operating Companies that the Company is obligated to
provide.

As of December 31, 1996, Teesside,  Birmingham Cable, Cable London and Cambridge
Cable had  approximately  330,  680, 520 and 460  employees,  respectively.  The
Company  believes  that  the  Operating  Companies'   relationships  with  their
employees are good.

ITEM 2    PROPERTIES

The Company  does not own or lease any  significant  real or  personal  property
other than through its interests in the Operating Companies.

The Operating  Companies  own their cable and telephony  plant and equipment and
generally own or lease,  under long-term leases, the head-end and switching node
sites.  The  Company  believes  that the  Operating  Companies'  facilities  are
adequate to serve their existing customers.

ITEM 3    LEGAL PROCEEDINGS

The Company and the Operating  Companies are not party to litigation  which,  in
the opinion of the Company's management,  will have a material adverse effect on
the Company's financial position, results of operations or liquidity.

ITEM 4    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders,  through a solicitation
of proxies or otherwise,  during the fourth  quarter of the year ended  December
31, 1996.

ITEM 4A   EXECUTIVE OFFICERS OF THE REGISTRANT

The Company has no executive  officers.  Certain officers of Comcast Consulting,
however,  are deemed by the Company to be executive officers of the Company (the
"Designated Executive Officers") for purposes of US federal securities laws. The
current term of office of each of the officers  expires at the first  meeting of
the Board of  Directors  of the Company  following  the next  Annual  Meeting of
Shareholders, presently scheduled to be held in June 1997, or as soon thereafter
as each of their successors is duly elected and qualified.

                                     - 15 -
<PAGE>
The following  table sets forth  certain  Designated  Executive  Officers of the
Company, and their ages and designated positions as of February 1, 1997.

<TABLE>
<CAPTION>
Name                                  Age              Positions
<S>                                    <C>         <C>
Ralph J. Roberts                       76          Chairman of the Board of Directors; Director
Julian A. Brodsky                      63          Vice Chairman of the Board of Directors; Director
Brian L. Roberts                       37          President; Director
Lawrence S. Smith                      49          Executive Vice President; Director
John R. Alchin                         48          Senior Vice President and Treasurer; Director
Stanley L. Wang                        56          Senior Vice President
---------------
</TABLE>

Ralph J.  Roberts  was  elected as  Chairman  of the Board of  Directors  of the
Company in September  1994. Mr. Roberts has served as a Director and Chairman of
the Board of  Directors  of Comcast  for more than five  years.  He has been the
President  and a  Director  of Sural  Corporation  ("Sural"),  a  privately-held
investment  company and  Comcast's  controlling  shareholder  for more than five
years. Mr. Roberts  currently has voting control of Sural. Mr. Roberts devotes a
major portion of his time to the business and affairs of Comcast. Mr. Roberts is
also a Director of Storer Communications, Inc.

Julian A.  Brodsky  was  elected  to the Board of  Directors  of the  Company in
September  1992.  He has served as a Director  and Vice  Chairman of Comcast for
more than five years.  He serves as Treasurer and a Director of Sural,  and is a
Director of Storer Communications, Inc. and RBB Fund, Inc. Mr. Brodsky devotes a
major portion of his time to the business and affairs of Comcast.

Brian L.  Roberts  was  elected  to the Board of  Directors  of the  Company  in
September 1992 and was elected  President in August 1995. Mr. Roberts has served
as President and as a Director of Comcast for more than five years. He presently
serves as Vice  President  and a Director of Sural and is a Director of Teleport
Communications Group Inc. and Storer Communications,  Inc. Mr. Roberts devotes a
major portion of his time to the business and affairs of Comcast. He is a son of
Ralph J. Roberts.

Lawrence S. Smith was elected to the Board of Directors in September  1994.  Mr.
Smith has served as Executive  Vice President of the Company since June 1996 and
Senior  Vice   President-Accounting  and  Administration  of  the  Company  from
September 1994 to June 1996. Mr. Smith has served as Executive Vice President of
Comcast  since  December  1995  and  as  Senior  Vice  President-Accounting  and
Administration  of Comcast for more than five years prior to December  1995. Mr.
Smith is the Principal  Accounting Officer of the Company and Comcast,  and is a
Director  of  Teleport  Communications  Group Inc.  and is a  Partnership  Board
Representative  of Sprint Spectrum  Holdings  Company,  L.P. Mr. Smith devotes a
substantial amount of his time to the business and affairs of Comcast.

John R. Alchin was elected to the Board of Directors and designated  Senior Vice
President  and  Treasurer  of the Company in  September  1994.  He has served as
Treasurer  and Senior Vice  President  of Comcast for more than five years.  Mr.
Alchin is the Principal Financial Officer of the Company and Comcast. Mr. Alchin
devotes a substantial amount of his time to the business and affairs of Comcast.

Stanley L. Wang was designated Senior Vice President of the Company in September
1992.  Mr.  Wang has served as Senior  Vice  President,  Secretary  and  General
Counsel  of  Comcast  for more  than  five  years  and is a  Director  of Storer
Communication,  Inc.  Mr. Wang devotes a  substantial  amount of his time to the
business and affairs of Comcast.

                                     - 16 -
<PAGE>
                                     PART II

ITEM 5    MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER 
          MATTERS

The Class A Common  Shares of the  Company  are  traded in the  over-the-counter
market  and  are  included  on  Nasdaq  under  the  symbol  CMCAF.  There  is no
established  public trading market for the Class B Common Shares of the Company.
The Class B Common  Shares are  convertible,  on a share for share  basis,  into
Class A Common  Shares.  The  following  table  sets  forth,  for the  indicated
periods,  the high and low sale  price  range of the  Class A Common  Shares  as
furnished  by  Nasdaq.  Such  price  ranges  have been  rounded  to the  nearest
one-eighth.

                                                          Class A
                                                   High               Low

1996
  First Quarter..................                 $14  1/4          $11  1/2
  Second Quarter.................                  14  1/4           11  7/8
  Third Quarter..................                  13  7/8            9  5/8
  Fourth Quarter.................                  14                10

1995
  First Quarter..................                 $19  1/4          $13  7/8
  Second Quarter.................                  16  5/8           13  1/4
  Third Quarter..................                  17  3/8           14  1/8
  Fourth Quarter.................                  16  1/4           11  3/4


The Company does not  anticipate  paying any cash dividends on its common shares
for the  foreseeable  future  (see  "Management's  Discussion  and  Analysis  of
Financial   Condition  and  Results  of  Operations  --  Liquidity  and  Capital
Resources").  The Company is  prohibited  from paying  dividends  on the Class B
Common  Shares  without  also  paying pro rata  dividends  on the Class A Common
Shares.  The  Company  has not paid cash  dividends  since  inception.  The 2007
Discount  Debentures  contain  restrictive  covenants  which limit the Company's
ability to pay dividends.

The Class A Common Shares and Class B Common Shares vote  together.  Each record
holder  of Class A Common  Shares  is  entitled  to one vote per  share and each
record  holder of Class B Common  Shares is entitled to ten votes per share.  In
the election of  directors,  Class A Common  Shares and Class B Common Shares do
not have cumulative voting rights.

As of March 1, 1997,  there  were 29 record  holders  of the  Company's  Class A
Common Shares.  Holdings,  through its ownership of the Company's Class B Common
Shares,  controls  77.6% of the  total  voting  power of all of the  outstanding
shares of the Company.

                                     - 17 -
<PAGE>
ITEM 6   SELECTED FINANCIAL AND OTHER DATA

The following  selected  consolidated  financial data have been derived from and
should be read in conjunction  with the  consolidated  financial  statements and
notes thereto included in Part II Item 8 of this Form 10-K.

The Company (1)(5)
<TABLE>
<CAPTION>
                                                                             Year Ended December 31,
                                                     1996           1995               1994             1993             1992 (1)
                                                                         (In thousands, except per share data)
<S>                                         <C>              <C>              <C>               <C>                 <C> 
Statement of Operations Data:
Service income............................  (UK Pound)31,358 (UK Pound)1,530  (UK Pound)        (UK Pound)          (UK Pound)
Consulting fee income.....................             1,070           1,313             1,356              1,248
Operating loss............................           (24,553)        (11,809)           (2,824)            (1,124)              (32)
Equity in net losses of affiliates........           (18,432)        (23,677)          (16,289)           (13,143)           (8,260)
Net loss..................................           (40,575)        (28,962)          (16,266)           (13,183)           (8,251)
Net loss per share (2)....................              (.84)          (0.70)            (0.54)             (0.50)            (0.31)

Balance Sheet Data:
At year end:
     Total assets.........................           484,492         431,889           254,739             95,239            61,993
     Noncurrent liabilities...............           216,027         207,978             9,106
     Contributed capital..................           359,049         287,810           287,863            127,162            82,662
     Accumulated deficit..................          (120,017)        (79,442)          (50,480)           (34,214)          (21,031)
</TABLE>

See Notes to Selected Financial and Other Data on page 21.


                                     - 18 -
<PAGE>
Birmingham Cable - Selected Consolidated Financial and Other Data

<TABLE>
<CAPTION>
                                                                             Year Ended December 31,
                                                  1996              1995             1994                1993               1992
                                                                                (In thousands)
Statement of Operations Data:
<S>                                      <C>               <C>               <C>                <C>                <C>  
Service income ........................  (UK Pound)52,472  (UK Pound)39,004  (UK Pound)27,505   (UK Pound)18,345   (UK Pound)7,218
Operating loss ........................           (11,694)          (11,345)           (9,674)            (7,864)           (5,485)
Net loss ..............................           (20,378)          (14,279)           (9,293)            (8,967)           (6,401)

Balance Sheet Data:
At year end:
     Total assets .....................           325,646           331,589           160,044            119,018            78,123
     Noncurrent liabilities ...........           188,863           185,864             6,222              4,989               827

Other Data:
Operating income (loss) before 
     depreciation and amortization(4)..             7,996             3,110                25             (2,217)           (3,240)
</TABLE>

Cable London - Selected Consolidated Financial and Other Data
<TABLE>
<CAPTION>
                                                                             Year Ended December 31,
                                                  1996              1995             1994                1993               1992
                                                                                (In thousands)
Statement of Operations Data:
<S>                                      <C>               <C>               <C>                <C>                 <C>  
Service income ........................  (UK Pound)40,091  (UK Pound)30,277  (UK Pound)21,830   (UK Pound)14,403   (UK Pound)6,907
Operating loss ........................           (13,906)          (13,808)          (10,524)            (9,863)           (7,392)
Net loss ..............................           (21,241)          (17,675)          (11,354)           (11,304)           (8,945)

Balance Sheet Data:
At year end:
     Total assets .....................           170,497           136,450           104,994             85,648            61,323
     Noncurrent liabilities ...........            60,831            73,772            27,659             21,118            15,894

Other Data:
Operating income (loss) before 
     depreciation and amortization(4)..               956            (2,961)           (3,531)            (5,869)           (5,431)
</TABLE>

Cambridge Cable - Selected Consolidated Financial and Other Data (5)

<TABLE>
<CAPTION>
                                                                             Year Ended December 31,
                                                  1996              1995             1994                1993               1992
                                                                                (In thousands)
Statement of Operations Data:
<S>                                      <C>              <C>               <C>                 <C>                  <C>
Service income ........................   (UK Pound)6,401  (UK Pound)20,585  (UK Pound)12,064    (UK Pound)3,571     (UK Pound)725
Operating loss ........................            (2,133)          (12,838)           (8,807)            (7,437)           (3,702)
Net loss ..............................            (4,419)          (20,398)          (12,223)            (7,930)           (3,354)

Balance Sheet Data:
At year end:
     Total assets .....................                             118,885            99,275             56,799            24,263
     Noncurrent liabilities ...........                             109,662            74,916             22,163             1,174

Other Data:
Operating income (loss) before 
     depreciation and amortization(4)..                35            (5,688)           (4,171)            (4,770)           (2,565)
</TABLE>

See Notes to Selected Financial and Other Data on page 21.

                                     - 19 -
<PAGE>
Operating Companies - Proportionate Combined Selected Consolidated Financial and
Other Data

The following  proportionate  combined selected consolidated financial data have
been  derived  from  the  consolidated  financial  statements  of  the  Company,
Birmingham  Cable  and  Cable  London,  after  giving  effect  to the  Company's
ownership  interests in each of the Operating Companies as of December 31, 1996.
As of December 31, 1996, the Company had a 27.5% interest in Birmingham Cable, a
50.0%  interest in Cable London,  a 100% interest in Cambridge  Cable and a 100%
interest in Teesside.  The Company  believes that  presentation of proportionate
combined selected  consolidated  financial data, although not in accordance with
US  Generally  Accepted   Accounting   Principles   ("GAAP"),   facilitates  the
understanding  and  assessment  of its operating  performance  since the Company
accounts for its interests in Birmingham Cable and Cable London under the equity
method.  Prior to March 31,  1996,  the Company  accounted  for its  interest in
Cambridge  Cable under the equity  method (see Note 5 to Selected  Financial and
Other Data on page 21).  Beginning on March 31, 1996, the financial position and
results of operations  of Cambridge  Cable were  consolidated  with those of the
Company.  The  financial  position  and results of  operations  of Teesside  are
consolidated with those of the Company.

<TABLE>
<CAPTION>
                                                                        Year Ended December 31,
                                            1996                1995              1994                 1993                 1992
                                                      (In thousands, except homes passed and subscriber information)
<S>                                <C>                 <C>                 <C>                 <C>                 <C>  
Statement of Operations Data:
Service income ................... (UK Pound)72,057    (UK Pound)47,965    (UK Pound)30,532    (UK Pound)15,810    (UK Pound)6,161
                                   ----------------    ----------------    ----------------    ----------------    ---------------

Operating, selling, general
  and administrative expenses ....           74,728              60,629              37,093              24,123             12,331
Depreciation and amortization ....           30,570              18,923              10,839               6,215              2,734
                                   ----------------    ----------------    ----------------    ----------------    ---------------

Operating loss ...................          (33,241)            (31,587)            (17,400)            (14,528)            (8,904)
                                   ----------------    ----------------    ----------------    ----------------    ---------------

Interest expense, net ............           15,172              10,160               3,726               1,516                680
                                   ----------------    ----------------    ----------------    ----------------    ---------------


Operating Companies' proportionate
  net loss .......................          (48,413)            (41,747)            (21,126)            (16,044)            (9,584)
Reconciliation to the Company's
  consolidated net loss (3) ......            7,838              12,785               4,860               2,861              1,333
                                   ----------------    ----------------    ----------------    ----------------    ---------------

Company's consolidated net loss ..((UK Pound)40,575)  ((UK Pound)28,962)  ((UK Pound)16,266)  ((UK Pound)13,183)  ((UK Pound)8,251)
                                   ================    ================    ================    ================    ===============


Other Data:
Operating loss before depreciation
  and amortization (4) ........... ((UK Pound)2,671)  ((UK Pound)12,664)   ((UK Pound)6,561)   ((UK Pound)8,313)  ((UK Pound)6,170)
Homes passed (6) .................          547,910             395,610             263,820             178,988            104,597
Cable subscribers (7) ............          140,200             101,991              72,449              46,266             26,827
Telephony subscribers (8) ........          168,563             108,598              67,157              31,768             12,852
</TABLE>
See Notes to Selected Financial and Other Data on page 21.

                                     - 20 -
<PAGE>
Notes to Selected Financial and Other Data

(1)  Since the transfer of the interests in the Equity  Investees  from Holdings
     to the  Company in 1992 did not result in a change in control of the Equity
     Investees,  the  financial  information  of the Company has been  presented
     herein  as  if  the  Company  held  such  interests   since  their  initial
     acquisition by Holdings.

(2)  For 1992 through 1994, net loss per share has been presented on a pro forma
     basis as if the restructuring of the Company's equity in September 1994 and
     the conversion of the redeemable  convertible  preference  shares issued in
     connection  with the  acquisition  of  Teesside  were  outstanding  for all
     periods presented.

(3)  Includes  the  effects  of  differences  between  the  Company's  ownership
     percentages in the Operating  Companies during the relevant periods and its
     ownership  percentages  as of  December  31,  1996,  as well as net  income
     (losses) of the  Company  and its  subsidiaries,  other than  Teesside  and
     Cambridge in 1996.

(4)  Operating  income (loss) before  depreciation  and amortization is commonly
     referred to in the Company's  business as "operating cash flow  (deficit)."
     Operating  cash flow  (deficit)  is a measure  of a  company's  ability  to
     generate  cash  to  service  its   obligations,   including   debt  service
     obligations, and to finance capital and other expenditures.  In part due to
     the capital intensive nature of the Company's  business and the significant
     level of non-cash  depreciation  and amortization  expense,  operating cash
     flow  (deficit)  is  frequently  used  as one of the  bases  for  comparing
     cable/telephony  companies.  Operating cash flow (deficit) does not purport
     to represent  net income or net cash provided by operating  activities,  as
     those terms are  defined  under GAAP,  and should not be  considered  as an
     alternative  to such  measurements  as an  indicator  of the  Company's  or
     Operating Companies' performance.

(5)  As a result of the Singtel Transaction,  the Company owns 100% of Cambridge
     Cable and has consolidated the financial position and results of operations
     of  Cambridge  Cable  beginning  on March 31,  1996.  The 1996  results  of
     operations  information  for Cambridge  Cable is for the three months ended
     March 31, 1996.

(6)  A home is deemed  "passed"  if it can be  connected  to the system  without
     further extension of the transmission lines.

(7)  A dwelling  with one or more  television  sets  connected  to the system is
     counted as one cable subscriber.

(8)  A dwelling  with one or more  telephone  lines  connected  to the system is
     counted as one telephony subscriber.

                                     - 21 -
<PAGE>

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

Overview

Comcast UK Cable  Partners  Limited and its  subsidiaries  (the  "Company"),  an
indirect controlled subsidiary of Comcast Corporation  ("Comcast") (see Item 5 -
"Market for the Registrant's  Common Equity and Related  Shareholder  Matters"),
was incorporated in 1992 to develop, construct, manage and operate the interests
of Comcast in the United Kingdom ("UK") cable and  telecommunications  industry.
As of December  31, 1996,  the Company has  interests  in four  operations  (the
"Operating  Companies"):   Birmingham  Cable  Corporation  Limited  ("Birmingham
Cable"),  in which the Company owns a 27.5%  interest,  Cable London PLC ("Cable
London"), in which the Company owns a 50.0% interest,  Cambridge Holding Company
Limited  ("Cambridge  Cable"), in which the Company owns a 100% interest and two
companies   holding  the  franchises   for  Darlington  and  Teesside,   England
("Teesside"), in which the Company owns a 100% interest.

When build-out of the Operating  Companies'  systems is complete,  these systems
will  have the  potential  to serve  approximately  1.6  million  homes  and the
businesses  within their franchise areas. As of December 31, 1996, the Operating
Companies'  systems passed more than 975,000 homes or  approximately  61% of the
homes in their franchise  areas and served more than 254,000 cable  subscribers,
268,000   residential   telephony   subscribers  and  8,300  business  telephony
subscribers.

The Company  accounts  for its  interests in  Birmingham  Cable and Cable London
under the equity method.  Through March 31, 1996, the Company also accounted for
its  interest  in  Cambridge   Cable  under  the  equity   method  (see  below).
Collectively, Birmingham Cable, Cable London and Cambridge Cable are referred to
herein as the "Equity  Investees"  (which term  excludes  Cambridge  Cable as of
March 31, 1996).

General Developments of Business

Industry Consolidation

Based on closed and announced transactions, it is apparent that the UK cable and
telecommunications  industry is  undergoing a significant  consolidation,  which
trend the Company expects to continue in the foreseeable future. The Company has
engaged an investment  advisor to assist it in  evaluating  the current state of
the UK marketplace,  the position of other  participants  and its  alternatives.
There can be no assurance that the Company will take any action, or in what time
frame any such action, if undertaken, might be accomplished.

SingTel Transaction

In March 1996, the Company completed the acquisition (the "Singtel Transaction")
of Singapore Telecom  International  Pte.  Limited's  ("Singapore  Telecom") 50%
interest in Cambridge Cable, pursuant to the terms of a Share Exchange Agreement
executed by the parties in December  1995. In exchange for  Singapore  Telecom's
50% interest in Cambridge Cable and certain loans made to Cambridge Cable,  with
accrued interest  thereon,  the Company issued  approximately 8.9 million of its
Class A Common Shares and paid approximately (UK Pound)11.8 million to Singapore
Telecom.  The  Company  has  accounted  for the  Singtel  Transaction  under the
purchase method.  As a result of the Singtel  Transaction,  the Company now owns
100% of Cambridge  Cable and Cambridge Cable was  consolidated  with the Company
effective March 31, 1996.

Liquidity and Capital Resources

The Company

Historically,  the Company has financed  its cash  requirements,  including  its
investments in the Equity  Investees,  through  capital  contributions  from its
shareholders,  as well as with the proceeds  from the Company's  initial  public
offering of 15.0  million of its Class A Common  Shares (net  proceeds of $209.4
million or (UK  Pound)132.6  million) in September  1994 and from the  Company's
offering  of its $517.3  million  principal  amount at  maturity  11.20%  Senior
Discount  Debentures due 2007 (the "2007 Discount  Debentures") (net proceeds of
$291.1 million or (UK Pound)186.9 million)

                                     - 22 -
<PAGE>
in November 1995.  Interest  accretes on the 2007 Discount  Debentures at 11.20%
per annum compounded  semi-annually from November 15, 1995 to November 15, 2000,
after which date  interest  will be paid in cash on each May 15 and  November 15
through  November 15, 2007.  The 2007 Discount  Debentures  contain  restrictive
covenants  which limit the  Company's  ability to pay  dividends.  The Operating
Companies  have not paid any  dividends  or  advances to the Company and are not
expected to pay any dividends or advances in the foreseeable future.

Except for its  working  capital  requirements,  the  Company's  cash needs will
depend on management's investment decisions.  Investment  considerations include
(i) whether further capital  contributions will be made to the Equity Investees,
(ii) whether the Operating  Companies can obtain debt  financing,  (iii) whether
the Operating  Companies will be able to generate positive  operating cash flow,
(iv) the timing of the build-out of the Operating  Companies'  systems,  and (v)
whether  there may be future  acquisitions  and trades funded in cash or Company
shares.   There  are  no  agreements  or  negotiations  for  specific   material
acquisitions currently pending.

Historically,  the  Company  has made  investments  in the Equity  Investees  in
conjunction  with  proportionate  investments  by its  strategic  and  financial
partners.  The Company made capital  contributions and advances to the Operating
Companies in the aggregate of (UK Pound)92.1 million, (UK Pound)71.4 million and
(UK Pound)49.3  million during the years ended December 31, 1996, 1995 and 1994,
respectively.  Of these amounts,  (UK Pound)10.7 million, (UK Pound)25.2 million
and (UK Pound)47.0  million relate to capital  contributions and advances to the
Equity  Investees  during the years  ended  December  31,  1996,  1995 and 1994,
respectively.  Although the Company is not  contractually  committed to make any
additional capital contributions or advances to any of the Equity Investees,  it
currently  intends  to fund  its  share of the  amounts  necessary  for  capital
expenditures and to finance  operating  deficits.  Failure to do so could dilute
the Company's ownership interests in the Equity Investees.

The Company estimates that the Operating  Companies will require an aggregate of
approximately  (UK  Pound)420  million to (UK  Pound)520  million  after 1996 to
complete the build-out of their systems.  Although the Company  expects that its
strategic  and  financial  partners in the Equity  Investees  will provide their
share of such funds, they are not contractually  obligated to do so, and thus no
assurance of such funding can be given. If the Company's strategic and financial
partners fail to provide such financing,  the Equity  Investees will be required
to seek additional  funds  elsewhere.  Such  additional  funds may come from the
Company,  from new strategic  and  financial  partners,  from  borrowings  under
existing or new credit  facilities or from other sources,  although there can be
no assurance that any such financing would be available on acceptable  terms and
conditions.  The Company and its strategic and financial partners generally have
veto rights over the Equity Investees' debt financing decisions.  Failure of any
Operating Company to obtain financing necessary to complete the build-out of its
system could result in loss of its cable franchises and licenses.

The  Company is exposed to market  risk  including  changes in foreign  currency
exchange  rates.  To manage the  volatility  relating  to these  exposures,  the
Company enters into various  derivative  transactions  pursuant to the Company's
policies in areas such as counterparty exposure and hedging practices. Positions
are monitored using techniques including market value and sensitivity  analysis.
The Company  does not hold or issue any  derivative  financial  instruments  for
trading purposes and is not a party to leveraged  instruments.  The credit risks
associated with the Company's  derivative  financial  instruments are controlled
through  the  evaluation  and   monitoring  of  the   creditworthiness   of  the
counterparties.  Although  the  Company may be exposed to losses in the event of
nonperformance by the  counterparties,  the Company does not expect such losses,
if any, to be significant.

The Company has entered into certain  foreign  exchange  option  contracts  ("FX
Options")  as a normal part of its foreign  currency  risk  management  efforts.
During  1995,  the Company  entered  into  certain  foreign  exchange put option
contracts  ("FX Puts") which may be settled only on November 16, 2000.  These FX
Puts are used to limit the Company's exposure to the risk that the eventual cash
outflows  related to net monetary  liabilities  denominated in currencies  other
than its functional currency (the UK Pound Sterling or "UK Pound")  (principally
the 2007  Discount  Debentures)  are  adversely  affected by changes in exchange
rates. As of December 31, 1996 and 1995, the Company has (UK Pound)250.0 million
notional  amount of FX Puts to  purchase  United  States  ("US")  dollars  at an
exchange rate of $1.35 per (UK Pound)1.00  (the "Ratio").  The FX Puts provide a
hedge,  to the  extent the  exchange  rate falls  below the Ratio,  against  the
Company's  net monetary  liabilities  denominated  in US dollars since gains and
losses  realized on the FX Puts are offset  against  foreign  exchange  gains or
losses realized on the underlying net liabilities. Premiums paid for the FX Puts
of (UK Pound)13.9 million are included in foreign exchange put options and other
in the Company's consolidated balance sheet, net of related amortization.  These
premiums are being amortized over the terms of the related

                                     - 23 -
<PAGE>
contracts.  As of December  31,  1996,  the FX Puts had a carrying  value of (UK
Pound)10.7  million and an estimated  fair value of (UK Pound)3.2  million.  The
differences  between the carrying amounts and the estimated fair value of the FX
Puts were not significant as of December 31, 1995.

In the fourth  quarter of 1995, in order to reduce  hedging  costs,  the Company
sold  foreign  exchange  call option  contracts  ("FX  Calls") to  exchange  (UK
Pound)250.0  million notional amount. The Company received (UK Pound)3.4 million
from the sale of these  contracts.  These contracts may only be settled on their
expiration dates. Of these contracts,  (UK Pound)200.0  million notional amount,
with an  exchange  ratio of $1.70 per (UK  Pound)1.00,  expired  unexercised  in
November  1996  while the  remaining  contract,  with a (UK  Pound)50.0  million
notional  amount  and an  exchange  ratio of  $1.62  per (UK  Pound)1.00,  has a
settlement  date in November  2000.  In the fourth  quarter of 1996, in order to
continue to reduce  hedging  costs,  the Company sold  additional FX Calls,  for
proceeds of  approximately  (UK Pound)2.1  million,  to exchange (UK Pound)200.0
million  notional amount at average  exchange ratio of $1.75 per (UK Pound)1.00.
These contracts may only be settled on their  expiration dates during the fourth
quarter of 1997.  The FX Calls are  marked-to-market  on a current  basis in the
Company's consolidated statement of operations.

As of December 31, 1996 and 1995,  the estimated  fair value of the  liabilities
related to the FX Calls,  as  recorded  in the  Company's  consolidated  balance
sheet,  was (UK  Pound)7.2  million  and (UK  Pound)3.7  million,  respectively.
Changes  in fair  value  between  measurement  dates  relating  to the FX  Calls
resulted  in  exchange  losses of (UK  Pound)1.3  million  during the year ended
December 31, 1996 in the Company's consolidated  statement of operations.  There
were not  significant  exchange gains or losses  relating to these contracts for
the year ended December 31, 1995.

The Company's ability to meet its long-term  liquidity and capital  requirements
is contingent upon the Operating Companies' ability to obtain external financing
and  generate  positive  operating  cash flow and the  continued  funding by the
Company's  strategic and financial  partners.  The Company believes that the net
proceeds  from the sale of the 2007  Discount  Debentures  along with  strategic
partner  funding,  to the  extent  necessary,  will be  sufficient  to fund  the
Company's  expected capital  contributions  and advances to Birmingham Cable and
Cable London and to fund development and construction  costs for Cambridge Cable
and Teesside through April 1998.

The Operating Companies

The following is a discussion of the liquidity and capital  resources of each of
the Operating  Companies.  Such financial  information has not been adjusted for
the Company's proportionate ownership percentages in the Operating Companies.

Birmingham Cable.  Historically,  Birmingham  Cable's primary sources of funding
have been  capital  contributions  and loans from the Company and the  Company's
strategic and financial partners.

In February 1995, a subsidiary of Birmingham Cable issued 175,000 cumulative (UK
Pound)1.00  redeemable five year term  preference  shares for a paid up value of
(UK Pound)175.0  million.  The cash received from the preference shares is being
used by  Birmingham  Cable,  subject to certain  restrictions  contained  in the
Birmingham  Facility  (as defined  below) for capital  expenditures  and working
capital  requirements  relating to the build-out of its systems.  The preference
shareholder  has  an  option  to  require   Birmingham  Cable  to  purchase  its
shareholding. This option is guaranteed by a syndicate of 15 banks which granted
the Birmingham  Facility and is exercisable on or before  February 14, 2000. The
preference  shares  have  an  effective   dividend  rate,   including   advanced
corporation tax, of 8.00%.

In February 1995, the Company entered into a (UK  Pound)175.0  million five year
revolving  credit  facility  (the  "Birmingham  Facility")  which  provided  for
conversion  into a five year term loan on March 31,  2000.  In March  1997,  the
terms of the Birmingham Facility were amended to extend the maturity of the term
loan to  December  31,  2005 and to amend  the  required  cash flow  levels  (as
defined) and certain other terms.  The  Birmingham  Facility will be used by the
Company,  subject  to  certain  restrictions,  to  fund  the  redemption  of the
preference shares.

The Birmingham Facility contains restrictive covenants which limit the Company's
ability to enter into  arrangements for the acquisition and sale of property and
equipment,  investments,  mergers and the incurrence of additional debt. Certain
of these covenants  require that certain minimum build  requirements,  financial
ratios and cash flow levels be maintained and contain  restrictions  on dividend
payments.   The  Company's  three  principal   shareholders'  right  to  receive
consulting  fee  payments  from the Company has been  subordinated  to the banks
under the  Birmingham  Facility.  The payment of  consulting  fees is restricted
until the Company meets certain financial ratio tests under the

                                     - 24 -
<PAGE>
Birmingham  Facility.  The  Company  has  pledged  the  shares  of its  material
subsidiaries to secure the Birmingham  Facility.  Upon a change of control,  all
amounts due under the Birmingham Facility become immediately due and payable.

Birmingham  Cable enters into interest rate exchange  agreements  ("Swaps") as a
normal  part of its risk  management  efforts to limit its  exposure  to adverse
fluctuations  in  interest  rates.  Using  Swaps,  Birmingham  Cable  agrees  to
exchange,  at specified  intervals,  the  difference  between fixed and variable
interest amounts  calculated by reference to an agreed upon notional amount.  In
conjunction with the Birmingham  Facility,  a subsidiary of Birmingham Cable and
Barclays Bank PLC entered into a five year (UK Pound)175.0 million Swap, whereby
the subsidiary receives fixed interest at a rate of 8.83% and pays floating rate
interest at the six month London Interbank Offered Rate ("LIBOR").  In addition,
a subsidiary  of  Birmingham  Cable  entered  into a second  series of five year
interest Swaps with three banks. Under the agreements, the subsidiary pays fixed
rate  interest at 9.20% and receives  floating rate interest at six month LIBOR,
based upon the  outstanding  notional  amount of the Swaps.  As of December  31,
1996,  the notional  amount  outstanding  on the second  series of Swaps was (UK
Pound)106.0  million and will increase to (UK Pound)160.0  million by January 2,
1998. While Swaps represent an integral part of Birmingham Cable's interest rate
risk management  program,  their incremental  effect on interest expense for the
years ended December 31, 1996 and 1995 was not significant.

The Company estimates that approximately (UK Pound)53.0 million will be required
in  1997  to  continue   development  and  construction  of  Birmingham  Cable's
cable/telephony  network. An additional (UK Pound)20.0 million to (UK Pound)40.0
million is  expected to be required to  complete  the  build-out  in  subsequent
years.  The Company  expects that the majority of such funds will be provided by
the Birmingham Facility. Any additional funding may come from the Company or its
strategic and financial  partners,  borrowings under new credit  facilities,  or
from other  sources,  although there can be no assurance that any such financing
will be available on acceptable terms and conditions.

Cable London.  Historically,  Cable London's  primary source of funding has been
capital contributions and loans from the Company and the Company's strategic and
financial  partner.  In June 1995,  Cable London  entered into a (UK  Pound)60.0
million  revolving  credit facility (the "London  Facility") with various banks.
The London  Facility has a two year term and an interest rate at LIBOR plus 2.5%
(8.75% as of December  31,  1996).  The London  Facility  has been used by Cable
London for capital expenditures and working capital requirements relating to the
build-out of its systems. The Company's right to receive consulting fee payments
from Cable London has been  subordinated to the banks under the London Facility.
In addition,  the  Company's  shares in Cable London have been pledged to secure
the London Facility.  Upon a change of control, all amounts due under the London
Facility become immediately due and payable.

Cable London is obligated to repay the London  Facility on June 30, 1997.  Cable
London is in the process of refinancing  the London Facility and will attempt to
complete this  refinancing by June 30, 1997,  although there can be no assurance
that any such  refinancing will be available on acceptable terms and conditions.
The Company believes that Cable London's obligation to repay the London Facility
does not result in the impairment of the Company's investment in Cable London as
of December 31, 1996.

The Company estimates that approximately (UK Pound)42.0 million will be required
in  1997  to  continue   development   and   construction   of  Cable   London's
cable/telephony network. An additional (UK Pound)80.0 million to (UK Pound)100.0
million is  expected to be required to  complete  the  build-out  in  subsequent
years.  The Company  expects that the majority of such funds and Cable  London's
1997 debt  maturity  requirements  will be  provided by the  refinancing  of the
London  Facility and by the Company's  strategic and financial  partner,  to the
extent  necessary.  Any  additional  funding  may come from the  Company  or its
strategic and financial partner,  borrowings under new credit facilities or from
other  sources,  although there can be no assurance that any such financing will
be available on acceptable terms and conditions.

Cambridge Cable.  Historically,  Cambridge Cable's primary source of funding has
been  capital  contributions  and loans from the Company and  Singapore  Telecom
prior to March 1996.  The Company  estimates that  approximately  (UK Pound)33.0
million will be required in 1997 to continue  development  and  construction  of
Cambridge Cable's cable/telephony  network. An additional (UK Pound)90.0 million
to (UK Pound)120.0  million is expected to be required to complete the build-out
in subsequent  years.  The Company  expects that a portion of such funds will be
provided by the  Company,  borrowings  under  credit  facilities,  or from other
sources,  although  there can be no assurance  that any such  financing  will be
available on acceptable terms and conditions.

                                     - 25 -
<PAGE>
Teesside.  Historically,  Teesside's  primary source of funding has been capital
contributions   and  loans  from  the  Company.   The  Company   estimates  that
approximately  (UK  Pound)53.0  million  will be  required  in 1997 to  continue
development  and  construction  of  Teesside's   cable/telephony   network.   An
additional  (UK Pound)50.0  million to (UK Pound)70.0  million is expected to be
required to complete the build-out in subsequent years. The Company expects that
such  funds  will be  provided  by the  Company,  borrowings  under  new  credit
facilities,  or from other sources,  although there can be no assurance that any
such financing will be available on acceptable terms and conditions.

Statement of Cash Flows

Cash and cash  equivalents  decreased (UK Pound)98.9  million as of December 31,
1996 from December 31, 1995, increased (UK Pound)62.1 million as of December 31,
1995 from December 31, 1994 and increased (UK Pound)96.9  million as of December
31, 1994 from December 31, 1993.  Changes in cash and cash equivalents  resulted
from cash flows from  operating,  financing and investing  activities  which are
explained below.

Net cash (used in) provided by operating  activities amounted to ((UK Pound)3.0)
million,  (UK  Pound)491,000  and (UK  Pound)5.3  million  for the  years  ended
December 31, 1996, 1995 and 1994, respectively. The changes in net cash provided
by operating  activities for the respective periods are primarily due to changes
in working capital as a result of the timing of receipts and disbursements.

Net cash  provided by financing  activities,  which  includes  the  issuances of
securities as well as borrowings,  was (UK Pound)2.1  million,  (UK  Pound)176.0
million and (UK Pound)155.0  million for the years ended December 31, 1996, 1995
and 1994,  respectively.  During  1995,  the  Company  received  proceeds of (UK
Pound)192.5  million  in  connection  with its  offering  of the  2007  Discount
Debentures  and paid premiums of (UK Pound)13.9  million in connection  with the
purchase  of the FX Puts.  During  1994,  the Company  received  proceeds of (UK
Pound)134.6   million  from  its  initial  public  offering  and  proceeds  from
borrowings from shareholders, net of repayments, of (UK Pound)20.5 million.

Net  cash  used  in  investing   activities  was  (UK  Pound)98.0  million,  (UK
Pound)114.3  million and (UK Pound)63.5 million for the years ended December 31,
1996,  1995,  and 1994,  respectively.  During 1996,  net cash used in investing
activities  includes  the  acquisition  of  Cambridge  Cable  of (UK  Pound)10.4
million,  net of cash acquired,  capital  expenditures of (UK Pound)72.3 million
and capital  contributions and advances to affiliates of (UK Pound)10.7 million.
In 1995, the Company purchased (UK Pound)43.1 million of short-term investments,
made capital  contributions and advances to affiliates of (UK Pound)25.8 million
and had capital expenditures of (UK Pound)45.3 million. During 1994, the Company
purchased  (UK  Pound)14.1  million of short-term  investments  and made capital
contributions and advances to affiliates of (UK Pound)47.0 million.

Results of Operations

The Company

The Company  recognized  net losses of (UK  Pound)40.6  million,  (UK Pound)29.0
million and (UK Pound)16.3  million for the years ended December 31, 1996,  1995
and 1994 respectively,  representing  increases of (UK Pound)11.6 million or 40%
from  1995 to 1996 and (UK  Pound)12.7  million  or 78% from  1994 to 1995.  The
increases in the  Company's  net losses are due to interest  expense on the 2007
Discount Debentures in 1996 and 1995, the effects of the continuing construction
of Teesside's cable/telephony network and the effects of the Singtel Transaction
in 1996.

Substantially  all of the  increases  in  service  income,  operating  expenses,
selling,  general and administrative expenses, and depreciation and amortization
expense  from 1995 to 1996 are  attributable  to the  effects of the  continuing
construction of Teesside's  cable/telephony network and the consolidation of the
results of operations of Cambridge Cable beginning on March 31, 1996.  Cambridge
Cable's service income, operating expenses,  selling, general and administrative
expenses and depreciation and amortization  expense were (UK Pound)20.4 million,
(UK  Pound)8.0  million,  (UK  Pound)12.8  million  and (UK  Pound)9.2  million,
respectively,  for the nine months ended December 31, 1996. Substantially all of
the  increases  in service  income,  operating  expenses,  selling,  general and
administrative  expenses and depreciation and amortization  expense from 1994 to
1995  are  attributable  to  the  effects  of  the  continuing  construction  of
Teesside's cable/telephony network which commenced in the third quarter of 1994.

Comcast U.K.  Consulting,  Inc. ("UK Consulting"),  a wholly owned subsidiary of
the Company,  earns consulting fee income under  consulting  agreements with the
Equity  Investees.  The consulting fee income is generally based on a percentage
of gross  revenues or a fixed amount per dwelling unit in the Equity  Investees'
franchise areas.

                                     - 26 -
<PAGE>
Management fee expense is incurred under  agreements  between the Company on the
one hand, and Comcast and Comcast UK Cable Partners  Consulting,  Inc. ("Comcast
Consulting"),  an indirect  wholly owned  subsidiary  of Comcast,  on the other,
whereby Comcast and Comcast Consulting provide consulting services to the Equity
Investees on behalf of the Company and management services to the Company.  Such
management  fees  are  based  on  Comcast's  and  Comcast  Consulting's  cost of
providing such services.

Interest  expense for the years ended  December 31, 1996,  1995 and 1994 was (UK
Pound)23.6   million,   (UK  Pound)3.5   million  and  (UK  Pound)1.0   million,
respectively, representing increases of (UK Pound)20.1 million from 1995 to 1996
and (UK  Pound)2.5  million  from  1994 to 1995.  The  increases  are  primarily
attributable to interest expense on the 2007 Discount Debentures.

Investment  income for the years ended December 31, 1996,  1995 and 1994 was (UK
Pound)12.6   million,   (UK  Pound)11.8   million  and  (UK  Pound)3.9  million,
respectively, representing increases of (UK Pound)800,000 from 1995 to 1996, and
(UK  Pound)7.9   million  from  1994  to  1995.   The  increases  are  primarily
attributable to the increase in the average  balance of cash,  cash  equivalents
and  short-term  investments  held by the Company,  primarily as a result of the
proceeds from the offering of the 2007 Discount  Debentures in November 1995 and
the proceeds from the Company's initial public offering in September 1994.

Equity in net losses of affiliates for the years ended  December 31, 1996,  1995
and 1994 was (UK Pound)18.4  million,  (UK Pound)23.7 million and (UK Pound)16.3
million,  respectively,  representing a decrease of (UK Pound)5.3 million or 22%
from 1995 to 1996 and an increase of (UK  Pound)7.4  million or 45% from 1994 to
1995. The decrease from 1995 to 1996 is  attributable  to the  consolidation  of
Cambridge  Cable effective  March 31, 1996,  partially  offset by the effects of
increases in the net losses of Birmingham  Cable and Cable London.  The increase
from 1994 to 1995 is  attributable  to the increases in net losses of the Equity
Investees.

Exchange  (gains) losses and other for the years ended  December 31, 1996,  1995
and  1994  were  ((UK  Pound)13.5)   million,  (UK  Pound)1.7  million  and  (UK
Pound)18,000,  respectively, representing changes of (UK Pound)15.2 million from
1995 to 1996  and (UK  Pound)1.7  million  from  1994  to  1995.  These  changes
primarily  result from the impact of  fluctuations  in the  valuation  of the UK
Pound on the 2007 Discount Debentures,  which are denominated in US Dollars, and
on the Company's foreign exchange call option  contracts.  The Company's results
of operations will continue to be affected by exchange rate fluctuations.

The Operating Companies

Due to the similar nature of their  operations,  the following  discussion  with
respect to the Operating  Companies'  results of operations  for the years ended
December  31,  1996,  1995 and 1994 is  based  on their  proportionate  combined
results of operations.  Such  proportionate  combined results of operations have
been  derived  from the  financial  statements  of the  Company  and the  Equity
Investees,  after giving effect to the Company's  ownership interests in each of
the  Operating  Companies  as of December 31, 1996.  The Company  believes  that
presentation  of  proportionate   combined  financial  data,   although  not  in
accordance  with  generally  accepted  accounting  principles,  facilitates  the
understanding  and  assessment  of its operating  performance  since the Company
accounts for its interests in Birmingham Cable, Cable London and Cambridge Cable
(through March 31, 1996) under the equity  method.  The results of operations of
Teesside and Cambridge  Cable  (subsequent  to March 31, 1996) are  consolidated
with those of the Company.

The  Operating  Companies  account  for costs  and  expenses  applicable  to the
construction and operation of their cable  telecommunications  systems under the
provisions  of  Statement  of Financial  Accounting  Standards  ("SFAS") No. 51,
"Financial  Reporting by Cable Television  Companies." Under SFAS No. 51, during
the period  while a system is  partially  under  construction  and  partially in
service (the "Prematurity Period"), costs of telecommunications plant, including
materials,   direct   labor   and   construction   overhead   are   capitalized.
Subscriber-related  costs and general and  administrative  costs are expensed as
incurred.  Costs incurred in anticipation of servicing a fully operating  system
that  will not vary  regardless  of the  number  of  subscribers  are  partially
expensed and partially  capitalized  based upon the percentage of average actual
or  estimated  subscribers,  whichever  is  greater,  to  the  total  number  of
subscribers  expected at the end of the  Prematurity  Period  (the  "Fraction").
During the Prematurity Period, depreciation and amortization of system assets is
determined  by  multiplying  the  depreciation  and  amortization  of the  total
capitalized  system assets expected at the end of the Prematurity  Period by the
Fraction. At the end of the Prematurity Period, depreciation and amortization of
system assets is based on the remaining undepreciated cost at that date.

                                     - 27 -
<PAGE>
Proportionate combined service income was (UK Pound)72.1 million, (UK Pound)48.0
million and (UK Pound)30.5  million for the years ended December 31, 1996,  1995
and 1994, respectively,  representing increases of (UK Pound)24.1 million or 50%
from  1995  to  1996  and (UK  Pound)17.5  million  or 57%  from  1994 to  1995.
Substantially  all of the growth in service  income during these periods was due
to increases in the number of cable  communications  and telephony  subscribers,
primarily as a result of additional homes passed.  Approximately one-half of the
Operating  Companies' service income for the years ended December 31, 1996, 1995
and 1994,  respectively,  is derived from monthly  subscription charges relating
primarily to cable communications  services and approximately  one-half of their
service  income  for these  periods  is derived  primarily  from  usage  charges
relating to telephony services.

Proportionate combined operating,  selling,  general and administrative expenses
were (UK Pound)74.7  million,  (UK Pound)60.6 million and (UK Pound)37.1 million
for the years ended December 31, 1996, 1995 and 1994, respectively, representing
increases of (UK Pound)14.1  million or 23% from 1995 to 1996 and (UK Pound)23.5
million  or 63%  from  1994 to 1995.  Substantially  all of the  increases  were
attributable to the continued development of Teesside's operations and increased
business  activity  resulting from the growth in the number of  subscribers  and
development of the Operating Companies' franchise areas.

Proportionate  combined depreciation and amortization expense was (UK Pound)30.6
million,  (UK Pound)18.9  million and (UK Pound)10.8 million for the years ended
December 31, 1996, 1995 and 1994,  respectively,  representing  increases of (UK
Pound)11.7  million  or 62% from 1995 to 1996 and (UK  Pound)8.1  million or 75%
from  1994 to  1995.  These  increases  were  due to  certain  of the  Operating
Companies'  discrete  build areas  ending their  Prematurity  Periods as set out
under SFAS No. 51, as well as an increase in the  percentage  used to  calculate
depreciation  expense as a result of an increased number of subscribers in those
discrete franchise areas remaining in their Prematurity Period.

Proportionate   combined  interest  expense  was  (UK  Pound)18.0  million,  (UK
Pound)13.8  million and (UK Pound)4.2  million for the years ended  December 31,
1996,  1995 and 1994,  respectively,  representing  increases  of (UK  Pound)4.2
million or 30% from 1995 to 1996 and (UK Pound)9.6  million or 229% from 1994 to
1995.  The  increases  were  primarily  attributable  to  additional  loans from
shareholders and borrowings under credit facilities.

Proportionate   combined  investment  income  was  (UK  Pound)2.9  million,  (UK
Pound)3.6  million and (UK  Pound)478,000 for the years ended December 31, 1996,
1995 and 1994, respectively, representing a decrease of (UK Pound)700,000 or 19%
from 1995 to 1996 and an increase of (UK  Pound)3.1  million  from 1994 to 1995.
The  decrease  from  1995  to 1996  and  the  increase  from  1994 to 1995  were
attributable to a decrease and increase, respectively, in the average balance of
cash,  cash  equivalents  and  restricted  cash held by the Operating  Companies
during the respective periods.

                                     - 28 -
<PAGE>
ITEM 8    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


INDEPENDENT AUDITORS' REPORT

Board of Directors and Shareholders
Comcast UK Cable Partners Limited

We have audited the accompanying  consolidated balance sheet of Comcast UK Cable
Partners  Limited (a company  incorporated  in Bermuda) and  subsidiaries  as of
December  31,  1996  and  1995,  and  the  related  consolidated  statements  of
operations,  shareholders'  equity and of cash  flows for the years then  ended.
These financial  statements are the responsibility of the Company's  management.
Our responsibility is to express an opinion on these financial  statements based
on our audits.

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

In our opinion,  such consolidated  financial  statements present fairly, in all
material  respects,  the financial position of Comcast UK Cable Partners Limited
and  subsidiaries  as of December  31,  1996 and 1995,  and the results of their
operations  and their cash flows for the years  then  ended in  conformity  with
accounting principles generally accepted in the United States of America.




/s/ Deloitte & Touche LLP

Philadelphia, Pennsylvania
February 28, 1997

                                     - 29 -
<PAGE>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

Board of Directors and Shareholders
Comcast UK Cable Partners Limited

We  have  audited  the  accompanying   consolidated  statements  of  operations,
shareholders'  equity and cash flows of  Comcast  UK Cable  Partners  Limited (a
company  incorporated in Bermuda) and  subsidiaries  for the year ended December
31, 1994.  These financial  statements are the  responsibility  of the Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audit.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the results of operations  and cash flows of Comcast UK
Cable Partners  Limited and subsidiaries for the year ended December 31, 1994 in
conformity  with the  accounting  principles  generally  accepted  in the United
States.




                                   /s/ Arthur Andersen LLP

Philadelphia, Pennsylvania
February 17, 1995


                                     - 30 -
<PAGE>
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET
(in (UK Pound)000's, except share data)
<TABLE>
<CAPTION>
                                                                                                     December 31,
                                                                                                1996               1995
<S>                                                                                     <C>               <C>    
ASSETS

CURRENT ASSETS
    Cash and cash equivalents ........................................................  (UK Pound)63,314  (UK Pound)162,231
    Short-term investments ...........................................................            61,466             57,240
    Accounts receivable, less allowance for
       doubtful accounts of (UK Pound)1,338 and(UK Pound)40 ..........................             2,922                135
    Other current assets .............................................................             5,219              4,585
                                                                                        ----------------  -----------------
       Total current assets ..........................................................           132,921            224,191
                                                                                        ----------------  -----------------

INVESTMENTS IN AFFILIATES ............................................................            69,472            127,858
                                                                                        ----------------  -----------------

PROPERTY AND EQUIPMENT ...............................................................           231,616             47,750
    Accumulated depreciation .........................................................           (12,885)            (1,271)
                                                                                        ----------------  -----------------
    Property and equipment, net ......................................................           218,731             46,479
                                                                                        ----------------  -----------------

DEFERRED CHARGES .....................................................................            60,734             23,162
    Accumulated amortization .........................................................            (8,368)            (3,600)
                                                                                        ----------------  -----------------
    Deferred charges, net ............................................................            52,366             19,562
                                                                                        ----------------  -----------------

FOREIGN EXCHANGE PUT OPTIONS AND OTHER, net ..........................................            11,002             13,799
                                                                                        ----------------  -----------------

                                                                                       (UK Pound)484,492  (UK Pound)431,889
                                                                                        ================   ================

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
    Accounts payable and accrued expenses ............................................  (UK Pound)23,208   (UK Pound)11,658
    Current portion of long-term debt ................................................             1,463                 84
    Foreign exchange call options ....................................................             4,086              1,577
    Due to affiliates ................................................................               676              2,224
                                                                                        ----------------  -----------------
       Total current liabilities .....................................................            29,433             15,543
                                                                                        ----------------  -----------------

LONG-TERM DEBT, less current portion .................................................           202,626            196,341
                                                                                        ----------------  -----------------

FOREIGN EXCHANGE CALL OPTIONS AND OTHER ..............................................             3,079              2,184
                                                                                        ----------------  -----------------

LONG-TERM DEBT, due to shareholder ...................................................            10,322              9,453
                                                                                        ----------------  -----------------

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY
    Preferred shares, (UK Pound).01 par value - authorized,
       10,000,000 shares; issued none ................................................
    Class A common shares, (UK Pound).01 par value -
       authorized, 50,000,000 shares; issued, 37,231,997
       and 28,372,334 ................................................................               372                284
    Class B common shares,(UK Pound).01 par value -
       authorized, 50,000,000 shares; issued, 12,872,605 .............................               129                129
    Additional capital ...............................................................           358,548            287,397
    Accumulated deficit ..............................................................          (120,017)           (79,442)
                                                                                        ----------------  -----------------
       Total shareholders' equity ....................................................           239,032            208,368
                                                                                        ----------------  -----------------

                                                                                       (UK Pound)484,492  (UK Pound)431,889
                                                                                        ================   ================
</TABLE>

See notes to consolidated financial statements.

                                     - 31 -
<PAGE>
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS
(Amounts in (UK Pound)000's, except per share data)

<TABLE>
<CAPTION>
                                                            Year Ended December 31,
                                                  1996                 1995               1994
<S>                                      <C>                  <C>                <C>
REVENUES
   Service income ...................... (UK Pound)31,358     (UK Pound)1,530    (UK Pound)
   Consulting fee income ...............            1,070               1,313               1,356
                                        -----------------   -----------------   -----------------
                                                   32,428               2,843               1,356
                                        -----------------   -----------------   -----------------

COSTS AND EXPENSES
   Operating ...........................           12,211                 683
   Selling, general and administrative .           25,073               7,815                 777
   Management fees .....................            2,997               3,105               2,175
   Depreciation and amortization .......           16,700               3,049               1,228
                                        -----------------   -----------------   -----------------
                                                   56,981              14,652               4,180
                                        -----------------   -----------------   -----------------

OPERATING LOSS .........................          (24,553)            (11,809)             (2,824)

OTHER (INCOME) EXPENSE
   Interest expense ....................           23,627               3,539               1,036
   Investment income ...................          (12,555)            (11,758)             (3,901)
   Equity in net losses of affiliates ..           18,432              23,677              16,289
   Exchange (gains) losses and other ...          (13,482)              1,695                  18
                                        -----------------   -----------------   -----------------
                                                   16,022              17,153              13,442
                                        -----------------   -----------------   -----------------

NET LOSS ...............................((UK Pound)40,575)  ((UK Pound)28,962)  ((UK Pound)16,266)
                                        =================   =================   =================

NET LOSS PER SHARE (PRO FORMA IN 1994) .   ((UK Pound).84)     ((UK Pound).70)     ((UK Pound).54)
                                        =================   =================   =================

WEIGHTED AVERAGE NUMBER OF COMMON SHARES
   OUTSTANDING (PRO FORMA IN 1994) .....           48,216              41,245              30,117
                                        =================   =================   =================
</TABLE>

See notes to consolidated financial statements.

                                     - 32 -
<PAGE>
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS
(in (UK Pound)000's)
<TABLE>
<CAPTION>
                                                                                 Year Ended December 31,
                                                                       1996               1995               1994
<S>                                                          <C>                <C>                <C>       
OPERATING ACTIVITIES
   Net loss ................................................ ((UK Pound)40,575) ((UK Pound)28,962) ((UK Pound)16,266)
   Adjustments to reconcile net loss to net cash
    (used in) provided by operating activities:
     Depreciation and amortization .........................            16,700              3,049              1,228
     Amortization on foreign exchange contracts ............             2,752                (75)              (150)
     Non-cash interest expense .............................            23,209              3,539                723
     Non-cash investment income ............................            (2,854)            (5,016)            (1,761)
     Exchange (gains) losses ...............................           (18,857)               944
     Equity in net losses of affiliates ....................            18,432             23,677             16,289
     Net increase in foreign exchange contracts and other ..              (199)               619                567
                                                              ----------------  -----------------  -----------------
                                                                        (1,392)            (2,225)               630

     Increase in accounts receivable and other
       current assets ......................................            (1,154)            (2,658)            (1,292)
     Increase in accounts payable and accrued expenses .....             1,045             10,002              1,225
     (Decrease) increase in due to affiliates ..............            (1,548)            (4,628)             4,734
                                                              ----------------  -----------------  -----------------
         Net cash (used in) provided by operating activities            (3,049)               491              5,297
                                                              ----------------  -----------------  -----------------

FINANCING ACTIVITIES
   Proceeds from borrowings ................................                              192,542
   Repayment of debt .......................................               (38)
   Debt acquisition costs ..................................                               (6,089)
   Purchase of foreign exchange put options ................                              (13,855)
   Proceeds from sale of foreign exchange call options .....             2,125              3,415
   Borrowings from shareholders ............................                                                  32,647
   Repayment of loans to shareholders ......................                                                 (12,193)
   Issuances of shares, net ................................                                                 134,560
   Other ...................................................                                  (53)
                                                              ----------------  -----------------  -----------------
         Net cash provided by financing activities .........             2,087            175,960            155,014
                                                              ----------------  -----------------  -----------------

INVESTING ACTIVITIES
   Acquisition, net of cash acquired .......................           (10,373)
   Purchases of short-term investments, net ................            (4,226)           (43,141)           (14,099)
   Capital contributions and advances to affiliates ........           (10,667)           (25,829)           (46,963)
   Capital expenditures ....................................           (72,297)           (45,308)            (1,718)
   Deferred charges and other ..............................              (392)               (59)              (680)
                                                              ----------------  -----------------  -----------------
         Net cash used in investing activities .............           (97,955)          (114,337)           (63,460)
                                                              ----------------  -----------------  -----------------

(DECREASE) INCREASE IN CASH AND CASH
   EQUIVALENTS .............................................           (98,917)            62,114             96,851

CASH AND CASH EQUIVALENTS, beginning of year ...............           162,231            100,117              3,266
                                                              ----------------  -----------------  -----------------

CASH AND CASH EQUIVALENTS, end of year .....................  (UK Pound)63,314  (UK Pound)162,231  (UK Pound)100,117
                                                              ================  =================  =================
</TABLE>

See notes to consolidated financial statements.

                                     - 33 -
<PAGE>



COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(in thousands)
<TABLE>
<CAPTION>
                                                                                                                               
                                       A1 Preferred           A2 Preferred            A3 Preferred              B Preferred
                                   Shares     Amount      Shares      Amount      Shares       Amount       Shares       Amount
<S>                              <C>     <C>              <C>   <C>               <C>    <C>               <C>     <C>   
  BALANCE,
   JANUARY 1, 1994.............. 51,425  (UK Pound)514    8,075 (UK Pound)8,075   24,009 (UK Pound)24,009   43,653 (UK Pound)43,653
     Net loss...................                                                                                                   
     Shares issued under
       former shareholders
       agreement................  1,729             18      271             271                                                    
     Shares issued in
       connection with
       Teesside acquisition ....                                                                                                   
     Shares issued in
       connection with
       Initial Public Offering .                                                                                                   
     Conversion of shares
       in connection with
       Initial Public Offering .                                                                                                   
     Restructuring..............(53,154)          (532)  (8,346)         (8,346) (24,009)         (24,009) (43,653)         (43,653)
                                 ------  -------------    ----- ---------------   ------ ----------------   ------ -----------------

  BALANCE,
   DECEMBER 31, 1994............                                                                                                    
     Net loss...................                                                                                                    
     Other......................                                                                                                    
                                 ------  -------------    ----- ---------------   ------ ----------------   ------ -----------------

  BALANCE,
   DECEMBER 31, 1995............                                                                                                    
     Net loss...................                                                                                                    
     Shares issued in 
       connection with 
       Singtel Transaction......                                                                                                    
                                 ------  -------------    ----- ---------------   ------ ----------------   ------ -----------------

  BALANCE,
   DECEMBER 31, 1996............         (UK Pound)             (UK Pound)               (UK Pound)                (UK Pound)       
                                 ======  =============    ===== ===============   ====== ================   ====== =================
</TABLE>
<TABLE>
<CAPTION>
                                                                                Redeemable Convertible
                                       A Ordinary               B Ordinary            Preference                   A Common       
                                  Shares        Amount       Shares     Amount  Shares            Amount     Shares        Amount
<S>                                <C>       <C>              <C>    <C>        <C>      <C>               <C>     <C> 
  BALANCE,
   JANUARY 1, 1994..............      6      (UK Pound)6        4   (UK Pound)           (UK Pound)                (UK Pound)
     Net loss...................                                                                                                    
     Shares issued under
       former shareholders
       agreement................                                                                                                    
     Shares issued in
       connection with   
       Teesside acquisition ....                                                 13,620            13,620                           
     Shares issued in
       connection with
       Initial Public Offering .                                                                            15,000             150  
     Conversion of shares
       in connection with
       Initial Public Offering .                                                (13,620)          (13,620)   1,431              14  
     Restructuring..............     (6)              (6)      (4)                                          11,941             120  
                                    ---      -----------       ---   ----------  -------   --------------   ------   -------------

  BALANCE,
   DECEMBER 31, 1994............                                                                            28,372             284  
     Net loss...................                                                                                                    
     Other......................                                                                                                    
                                    ---      -----------       ---   ----------  -------   --------------   ------   -------------
          
  BALANCE,
   DECEMBER 31, 1995............                                                                            28,372             284  
     Net loss...................                                                                                                    
     Shares issued in    
       connection with 
       Singtel Transaction......                                                                             8,860              88  
                                    ---      -----------       ---   ----------  -------   -------------    ------   -------------

  BALANCE,
   DECEMBER 31, 1996............             (UK Pound)             (UK Pound)             (UK Pound)       37,232   (UK Pound)372  
                                    ===      ===========       ===   =========== =======    ============   =======   =============
</TABLE>
<TABLE>

                                          B Common             Additional         Accumulated
                                   Shares         Amount         Capital            Deficit             Total
<S>                              <C>      <C>            <C>                  <C>                  <C>      
  BALANCE,
   JANUARY 1, 1994..............           (UK Pound)      (UK Pound)50,905    ((UK Pound)34,214)  (UK Pound)92,948
     Net loss...................                                                         (16,266)           (16,266)
     Shares issued under
       former shareholders
       agreement................                                      1,714                                   2,003
     Shares issued in
       connection with   
       Teesside acquisition ....                                                                             13,620
     Shares issued in
       connection with
       Initial Public Offering .                                    132,407                                 132,557
     Conversion of shares
       in connection with
       Initial Public Offering .                                     13,606
     Restructuring..............   12,873            129             88,818                                  12,521
                                   ------  -------------  -----------------   ------------------  -----------------

  BALANCE,
   DECEMBER 31, 1994............   12,873            129            287,450              (50,480)           237,383
     Net loss...................                                                         (28,962)           (28,962)
     Other......................                                        (53)                                    (53)
                                   ------  -------------  -----------------   ------------------  -----------------
          
  BALANCE,
   DECEMBER 31, 1995............   12,873            129            287,397              (79,442)           208,368
     Net loss...................                                                         (40,575)           (40,575)
     Shares issued in    
       connection with 
       Singtel Transaction......                                     71,151                                  71,239
                                   ------  -------------  -----------------   ------------------  -----------------

  BALANCE,
   DECEMBER 31, 1996............   12,873  (UK Pound)129  (UK Pound)358,548   ((UK Pound)120,017) (UK Pound)239,032
                                   ======  =============  =================   ==================  =================
</TABLE>

See notes to consolidated financial statements.


                                     - 34 -

<PAGE>
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

1.   BUSINESS

     Comcast UK Cable  Partners  Limited and  subsidiaries  (the  "Company"),  a
     Bermuda  company  incorporated  in 1992, was formed to develop,  construct,
     manage and operate the interests of Comcast Corporation  ("Comcast") in the
     United Kingdom ("UK") cable and telecommunications industry. The Company is
     a controlled  subsidiary of Comcast U.K.  Holdings,  Inc.  ("Holdings"),  a
     Delaware corporation indirectly wholly owned by Comcast. As of December 31,
     1996,  the  Company  has  interests  in  four  operations  (the  "Operating
     Companies"):  Birmingham Cable Corporation Limited ("Birmingham Cable"), in
     which the Company owns a 27.5% interest, Cable London PLC ("Cable London"),
     in which the  Company  owns a 50.0%  interest,  Cambridge  Holding  Company
     Limited ("Cambridge  Cable"), in which the Company owns a 100% interest and
     two companies  holding the franchises for Darlington and Teesside,  England
     ("Teesside"),  in which the Company  owns a 100%  interest.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Basis of Accounting
     Subsidiaries of the Company  maintain their books and records in accordance
     with accounting  principles  generally accepted in the UK. The consolidated
     financial  statements  have been  prepared  in  accordance  with  generally
     accepted accounting principles as practiced in the United States ("US") and
     are stated in UK pounds  sterling ("UK Pound").  There were no  significant
     differences  between  accounting  principles  followed  for UK purposes and
     generally accepted accounting  principles practiced in the US. The UK Pound
     exchange  rate as of December  31, 1996 and 1995 was US $1.71 and US $1.55,
     respectively.

     Basis of Consolidation
     The consolidated  financial  statements include the accounts of the Company
     and all wholly owned subsidiaries.  All significant  intercompany  accounts
     and transactions among the consolidated entities have been eliminated.

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

     Fair Values
     The estimated fair value amounts  presented in these notes to  consolidated
     financial  statements  have been  determined by the Company using available
     market  information and appropriate  methodologies.  However,  considerable
     judgment is required in  interpreting  market data to develop the estimates
     of  fair  value.  The  estimates   presented  herein  are  not  necessarily
     indicative  of the  amounts  that the  Company  could  realize in a current
     market exchange.  The use of different market assumptions and/or estimation
     methodologies  may have a  material  effect  on the  estimated  fair  value
     amounts.  Such fair  value  estimates  are based on  pertinent  information
     available to management as of December 31, 1996 and 1995, and have not been
     comprehensively  revalued  for  purposes  of these  consolidated  financial
     statements since such dates. A reasonable estimate of the due to affiliates
     is not  practicable  to obtain because of the related party nature of these
     items and the lack of quoted market prices.

     Cash Equivalents and Short-term Investments
     Cash equivalents consist principally of commercial paper, time deposits and
     money market funds with  maturities of three months or less when purchased.
     Short-term   investments   consist  principally  of  commercial  paper  and
     corporate  floating  rate notes with  maturities  greater than three months
     when purchased.  The carrying amounts of the Company's cash equivalents and
     short-term  investments,  classified  as  available  for  sale  securities,
     approximate their fair values.

                                     - 35 -
<PAGE>
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (Continued)

     Investments in Affiliates
     Investments  in  entities  in which the Company has the ability to exercise
     significant  influence  over the operating  and  financial  policies of the
     investee  are  accounted  for  under  the  equity  method.   Equity  method
     investments  are  recorded at original  cost and adjusted  periodically  to
     recognize the Company's proportionate share of the investees' net income or
     losses  after the date of  investment,  additional  contributions  made and
     dividends   received.   The  differences  between  the  Company's  recorded
     investments  and its  proportionate  interests  in the  book  value  of the
     investees'  net  assets  are being  amortized  to  equity in net  losses of
     affiliates over the remaining  original lives of the related  franchises of
     eight years.

     Prematurity Period
     The Company  accounts for costs,  expenses and revenues  applicable  to the
     construction  and  operation  of its cable  telecommunications  systems  in
     Teesside and Cambridge Cable under the provisions of Statement of Financial
     Accounting  Standards  ("SFAS")  No.  51,  "Financial  Reporting  by  Cable
     Television Companies."

     Under SFAS No. 51, during the period while the systems are partially  under
     construction and partially in service (the "Prematurity Period"),  costs of
     cable  telecommunications  plant,  including  materials,  direct  labor and
     construction overhead are capitalized. Subscriber-related costs and general
     and  administrative  costs are  expensed  as  incurred.  Costs  incurred in
     anticipation  of  servicing  a fully  operating  system  that will not vary
     regardless  of  the  number  of  subscribers  are  partially  expensed  and
     partially  capitalized,  based upon the  percentage  of  average  actual or
     estimated  subscribers,  whichever  is  greater,  to the  total  number  of
     subscribers expected at the end of the Prematurity Period (the "Fraction").

     During the  Prematurity  Period,  depreciation  and  amortization of system
     assets is determined by multiplying the  depreciation  and  amortization of
     the total capitalized  system assets expected at the end of the Prematurity
     Period by the Fraction. At the end of the Prematurity Period,  depreciation
     and  amortization of system assets is based on the remaining  undepreciated
     cost at that date.

     As of December 31, 1996, two of the Company's  five  franchise  areas which
     are  under  construction  have  completed  their  Prematurity  Period.  The
     remaining  Prematurity  Periods are expected to terminate at various  dates
     from 1998 to 1999.

     Property and Equipment
     Property and equipment,  which  principally  consists of system assets,  is
     shown at historical cost less accumulated  depreciation.  Improvements that
     extend asset lives are capitalized;  other repairs and maintenance  charges
     are expensed as  incurred.  The cost and related  accumulated  depreciation
     applicable  to assets sold or retired are removed from the accounts and the
     gain or loss on  disposition  is recognized as a component of  depreciation
     expense.

     System assets

     Prior to the  Prematurity  Period,  no  depreciation  is provided on system
     assets.  During  the  Prematurity  Period,   depreciation  is  provided  in
     accordance with SFAS No. 51.

     Depreciation of system assets is provided by the straight-line  method over
     estimated useful lives as follows:

                  Plant                                     15-40 years
                  Network                                      15 years
                  Subscriber equipment                       6-10 years
                  Switch                                       10 years

                                     - 36 -
<PAGE>
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (Continued)

     Non-system assets

     Depreciation of non-system assets is provided by the  straight-line  method
     over estimated useful lives as follows:

                  Buildings                                    40 years
                  Fixtures, fittings and equipment              5 years
                  Vehicles                                      4 years
                  Computers                                     4 years

     Leased Assets
     Assets held under capital  leases are treated as if they had been purchased
     outright and the  corresponding  liability  is included in long-term  debt.
     Capital lease payments  include  principal and interest,  with the interest
     portion  being  expensed.  Payments on  operating  leases are expensed on a
     straight-line basis over the lease term.

     Deferred Charges
     Deferred  charges  consist   primarily  of  franchise   acquisition   costs
     attributable  to  obtaining,   developing  and  maintaining  the  franchise
     licenses of Teesside and Cambridge  Cable,  organization  costs incurred in
     connection  with the  formation  of the  Company,  debt  acquisition  costs
     relating to the sale of  approximately  $517.3 million  principal amount at
     maturity of the Company's  11.20% Senior Discount  Debentures Due 2007 (the
     "2007  Discount  Debentures"  - see Note 7) and  goodwill  arising from the
     Singtel  Transaction  (see Note 4). Franchise  acquisition  costs are being
     amortized on a straight-line basis over the remaining original lives of the
     related  franchises  of  12 to  15  years.  Organization  costs  are  being
     amortized on a straight-line  basis over five years. Debt acquisition costs
     are being  amortized  on a  straight-line  basis  over the term of the 2007
     Discount  Debentures  of  12  years.  Goodwill  is  being  amortized  on  a
     straight-line  basis  over the  remaining  original  lives  of the  related
     franchises of 11 years.

     Valuation of Long-Lived Assets
     The Company  periodically  evaluates the  recoverability  of its long-lived
     assets,  including  property  and  equipment  and deferred  charges,  using
     objective  methodologies.  Such methodologies  include evaluations based on
     the cash flows generated by the underlying assets or other  determinants of
     fair value.

     Revenue Recognition
     Service income is recognized as service is provided. Credit risk is managed
     by disconnecting services to subscribers who are delinquent.

     Stock Based Compensation
     Effective  January 1, 1996, the Company  adopted the provisions of SFAS No.
     123,  "Accounting for Stock- Based  Compensation." SFAS No. 123 encourages,
     but does not require, companies to record compensation cost for stock-based
     compensation  plans at fair  value.  The Company has elected to continue to
     account  for   stock-based   compensation  in  accordance  with  Accounting
     Principles   Board  Opinion  No.  25,   "Accounting  for  Stock  Issued  to
     Employees,"  and related  interpretations,  as  permitted  by SFAS No. 123.
     Compensation  expense for stock options is measured as the excess,  if any,
     of the quoted market price of the Company's stock at the date of grant over
     the amount an employee must pay to acquire the stock.  Compensation expense
     for stock  appreciation  rights is  recorded  annually  based on changes in
     quoted market prices of the Company's  stock or other  determinants of fair
     value at the end of the year (see Note 9).

     Income Taxes
     The Company is exempt from US federal, state and local income taxes. At the
     present time, no income,  profit, capital or capital gains taxes are levied
     in Bermuda and, accordingly,  no provision for such taxes has been recorded
     by the  Company.  In the event that such taxes are levied,  the Company has
     received an undertaking from the Bermuda  Government  exempting it from all
     such taxes until March 2016.

     The Company's wholly owned  subsidiaries  recognize deferred tax assets and
     liabilities for temporary differences between the financial reporting basis
     and the tax basis of their assets and liabilities and expected benefits of

                                     - 37 -
<PAGE>
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (Continued)

     utilizing net operating loss carryforwards. The impact on deferred taxes of
     changes in tax rates and laws,  if any,  applied to the years  during which
     temporary  differences  are  expected to be settled,  are  reflected in the
     financial statements in the period of enactment.

     Pro Forma Net Loss per Share
     Pro  forma  net  loss  per  share  has  been  presented  in  the  Company's
     consolidated  statement of operations as if the Restructuring  (see Note 8)
     and the  conversion  of the  Company's  Redeemable  Convertible  Preference
     Shares issued in connection with the Teesside acquisition (see Note 3) were
     outstanding for all periods presented.

     Derivative Financial Instruments
     The Company uses  derivative  financial  instruments,  principally  foreign
     exchange  option  contracts  ("FX  Options"),  to manage  its  exposure  to
     fluctuations in foreign currency exchange rates.

     The Company does not hold or issue any derivative financial instruments for
     trading  purposes and is not a party to leveraged  instruments (see Notes 6
     and 7). The credit risks associated with the Company's derivative financial
     instruments  are  controlled  through the  evaluation and monitoring of the
     creditworthiness of the counterparties. Although the Company may be exposed
     to losses in the event of nonperformance by the counterparties, the Company
     does not expect such losses, if any, to be significant.

     New Accounting Pronouncement
     In February 1997, the Financial  Accounting Standards Board issued SFAS No.
     128,  "Earnings Per Share." This standard,  which  clarifies and supersedes
     the current  authoritative  accounting literature regarding the computation
     and  disclosure of earnings per share,  is applicable to interim and annual
     periods ending after December 15, 1997 and may not be applied earlier.  The
     Company does not expect  adoption of this standard to result in significant
     changes to the Company's calculation or presentation of loss per share.

     Reclassifications
     Certain  reclassifications  have been made to the prior years' consolidated
     financial statements to conform to those classifications used in 1996.

3.   TEESSIDE ACQUISITION

     In June 1994,  the Company  acquired all of the  outstanding  shares of two
     companies  that  owned   Teesside,   which  comprise  an  area   containing
     approximately  254,000 homes. As  consideration  for Teesside,  the Company
     issued 13.6 million Redeemable Convertible Preference Shares, par value (UK
     Pound)1.00 per share.  In September  1994, in connection  with the IPO (see
     Note 8), the Redeemable  Convertible  Preference Shares were converted into
     1.4 million of the Company's  Class A Common Shares.  The  construction  of
     Teesside's cable telecommunications  network commenced in the third quarter
     of 1994. Teesside added its initial cable and telephony subscribers in June
     1995.

4.   SINGTEL TRANSACTION

     In  March  1996,  the  Company  completed  the  acquisition  (the  "Singtel
     Transaction") of Singapore Telecom International Pte. Limited's ("Singapore
     Telecom") 50% interest in Cambridge  Holding  Company  Limited  ("Cambridge
     Cable"),  pursuant to the terms of a Share Exchange  Agreement  executed by
     the parties in December  1995.  In exchange  for  Singapore  Telecom's  50%
     interest in Cambridge Cable and certain loans made to Cambridge Cable, with
     accrued interest thereon,  the Company issued  approximately 8.9 million of
     its Class A Common Shares and paid  approximately (UK Pound)11.8 million to
     Singapore  Telecom.  The Company has accounted for the Singtel  Transaction
     under the  purchase  method.  As a result of the Singtel  Transaction,  the
     Company owns 100% of Cambridge Cable and Cambridge  Cable was  consolidated
     with the Company effective March 31, 1996.

                                     - 38 -
<PAGE>
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (Continued)

     The following  unaudited pro forma information for the years ended December
     31,  1996 and 1995 has been  presented  as if the Singtel  Transaction  had
     occurred  at the  beginning  of  each  period.  This  unaudited  pro  forma
     information  is based on  historical  results of  operations  adjusted  for
     acquisition  costs and, in the opinion of  management,  is not  necessarily
     indicative  of what results  would have been had the Company  owned 100% of
     Cambridge Cable since such dates (in thousands, except per share data).

                                                     Year Ended December 31,
                                                    1996                1995

        Revenues.......................... (UK Pound)38,651    (UK Pound)22,859

        Net loss..........................          (42,300)            (37,616)

        Net loss per share................             (.84)               (.75)

5.   INVESTMENTS IN AFFILIATES

     The Company has  historically  invested in three  affiliates  (the  "Equity
     Investees," which term excludes  Cambridge Cable as of March 31, 1996 - see
     Note 4):  Birmingham  Cable,  Cable London and Cambridge  Cable. The Equity
     Investees operate integrated cable  communications,  residential  telephony
     and  business   telecommunications   systems  in  their   respective  major
     metropolitan   areas  under   exclusive  cable   television   licenses  and
     non-exclusive  telecommunications  licenses.  As of December 31, 1996,  the
     Company's ownership interest in the Equity Investees is as follows:

                Birmingham Cable................................27.5%
                Cable London (1)................................50.0%
     ---------------
     (1)  Increased  in  September  1996 from 49.0% due to the buyout of certain
     minority shareholders.

     The Company also has a 16.4% interest in Cable Programme Partners-1 Limited
     Partnership  ("CPP-1") which  previously  developed and  distributed  cable
     programming  in the UK.  During  1995,  CPP-1 sold its only channel and has
     wound down its  operations  to a minimal  level of  activity.  The carrying
     value of the Company's investment in CPP-1 has been reduced to zero and the
     Company has no future funding commitments to CPP-1.

     Included in  investments in affiliates as of December 31, 1996 and December
     31,  1995,  are loans to Cable  London of (UK  Pound)22.5  million  and (UK
     Pound)21.0  million and accrued  interest of (UK Pound)3.6  million and (UK
     Pound)1.9 million,  respectively. The loans accrue interest at a rate of 2%
     above the published base lending rate of Barclays Bank plc (8.00% effective
     rate as of  December  31,  1996)  and are  subordinate  to  Cable  London's
     revolving bank credit facility.  Of these loans, (UK Pound)21.0  million as
     of December 31, 1996 and 1995 are convertible into ordinary shares of Cable
     London at a per share conversion price of (UK Pound)2.00.  Also included in
     investments  in  affiliates  as of December 31, 1995 are loans to Cambridge
     Cable of (UK  Pound)47.4  million  and accrued  interest  of (UK  Pound)5.1
     million.  The Cambridge Cable loans and related accrued  interest have been
     eliminated in consolidation subsequent to the Singtel Transaction (see Note
     4).

     Cable  London is  obligated  to repay a (UK  Pound)60.0  million  revolving
     credit facility (the "London  Facility") on June 30, 1997.  Cable London is
     in the  process of  refinancing  the London  Facility  and will  attempt to
     complete  this  refinancing  by June 30,  1997,  although  there  can be no
     assurance that any such  refinancing  will be available on acceptable terms
     and conditions. In the event this refinancing cannot be accomplished, Cable
     London  intends to seek  financing from  alternative  sources.  The Company
     believes that Cable London's  obligation to repay the London  Facility does
     not result in the impairment of the Company's investment in Cable London as
     of December 31, 1996.

                                     - 39 -
<PAGE>
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (Continued)

     Although the Company is not contractually  committed to make any additional
     capital  contributions  or  advances  to any of the  Equity  Investees,  it
     currently  intends to fund its share of the amounts  necessary  for capital
     expenditures  and to  finance  operating  deficits.  Failure to do so could
     dilute the Company's ownership interests in the Equity Investees.

     Summarized  financial  information  for affiliates  accounted for under the
     equity method for 1996, 1995 and 1994, is as follows:
<TABLE>
<CAPTION>
                                           Birmingham            Cable          Cambridge
                                             Cable              London           Cable (2)      CPP-1 (1)           Combined
                                        (UK Pound)000       (UK Pound)000     (UK Pound)000   (UK Pound)000       (UK Pound)000
<S>                                   <C>                 <C>              <C>              <C>                <C>   
YEAR ENDED DECEMBER 31, 1996
Results of operations
     Service income...................(UK Pound)52,472    (UK Pound)40,091  (UK Pound)6,401  (UK Pound)         (UK Pound)98,964
     Operating, selling, general and
       administrative expenses........         (44,476)            (39,135)          (6,366)                             (89,977)
     Depreciation and amortization....         (19,690)            (14,862)          (2,168)                             (36,720)
     Operating loss...................         (11,694)            (13,906)          (2,133)                             (27,733)
     Net loss.........................         (20,378)            (21,241)          (4,419)                             (46,038)
     Company's equity in net loss.....          (5,671)            (10,551)          (2,210)                             (18,432)

AT DECEMBER 31, 1996
Financial position
     Current assets...................          70,531              10,217                                                80,748
     Noncurrent assets................         255,115             160,280                                               415,395
     Current liabilities..............          33,628              85,557                                               119,185
     Noncurrent liabilities...........         188,863              60,831                                               249,694

YEAR ENDED DECEMBER 31, 1995
Results of operations
     Service income...................          39,004              30,277           20,585        1,088                  90,954
     Operating, selling, general and
       administrative expenses........         (35,894)            (33,238)         (26,273)      (5,673)               (101,078)
     Depreciation and amortization....         (14,455)            (10,847)          (7,150)         (34)                (32,486)
     Operating loss...................         (11,345)            (13,808)         (12,838)      (4,619)                (42,610)
     Net loss.........................         (14,279)            (17,675)         (20,398)      (5,388)                (57,740)
     Company's equity in net loss.....          (3,922)             (8,657)         (10,200)        (898)                (23,677)

AT DECEMBER 31, 1995
Financial position
     Current assets...................          78,304               8,869            5,009                               92,182
     Noncurrent assets................         253,285             127,581          113,876                              494,742
     Current liabilities..............          22,192              17,328           18,954                               58,474
     Noncurrent liabilities...........         185,864              73,772          109,662                              369,298

YEAR ENDED DECEMBER 31, 1994
Results of operations
     Service income...................          27,505              21,830           12,064        1,903                  63,302
     Operating, selling, general and
       administrative expenses........         (27,480)            (25,361)         (16,235)     (12,027)                (81,103)
     Depreciation and amortization....          (9,699)             (6,993)          (4,636)         (41)                (21,369)
     Operating loss...................          (9,674)            (10,524)          (8,807)     (10,165)                (39,170)
     Net loss.........................          (9,293)            (11,354)         (12,223)      (9,853)                (42,723)
     Company's equity in net loss.....          (2,657)             (5,550)          (6,112)      (1,970)                (16,289)

<FN>
(1)  1995  results  of  operations  information  for CPP-1 is for the six months
     ended June 30, 1995.
(2)  1996 results of operations information for Cambridge Cable is for the three
     months ended March 31, 1996 (see Note 4).
</FN>
</TABLE>

                                     - 40 -
<PAGE>
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (Continued)


6.   FOREIGN CURRENCY RISK MANAGEMENT

     The Company is exposed to market risk including changes in foreign currency
     exchange rates. To manage the volatility  relating to these exposures,  the
     Company  enters  into  various  derivative  transactions  pursuant  to  the
     Company's  policies  in areas such as  counterparty  exposure  and  hedging
     practices.  Positions are monitored using techniques including market value
     and sensitivity analysis.

     The Company has entered into certain foreign exchange option contracts ("FX
     Options") as a normal part of its foreign currency risk management efforts.
     During 1995, the Company entered into certain  foreign  exchange put option
     contracts ("FX Puts") which may be settled only on November 16, 2000. These
     FX Puts are used to  limit  the  Company's  exposure  to the risk  that the
     eventual cash outflows related to net monetary  liabilities  denominated in
     currencies other than its functional currency (the UK Pound Sterling or "UK
     Pound")  (primarily the $517.3 million  principal amount at maturity of the
     2007 Discount  Debentures)  are  adversely  affected by changes in exchange
     rates.  As of December 31, 1996 and 1995,  the Company has (UK  Pound)250.0
     million  notional  amount of FX Puts to  purchase US dollars at an exchange
     rate of $1.35  per (UK  Pound)1.00  (the  "Ratio").  The FX Puts  provide a
     hedge,  to the extent the exchange rate falls below the Ratio,  against the
     Company's net monetary  liabilities  denominated  in US dollars since gains
     and losses  realized  on the FX Puts are offset  against  foreign  exchange
     gains or losses realized on the underlying net  liabilities.  Premiums paid
     for the FX Puts of (UK Pound)13.9  million are included in foreign exchange
     put options and other in the Company's  consolidated  balance sheet, net of
     related amortization.  These premiums are being amortized over the terms of
     the related contracts.  As of December 31, 1996, the FX Puts had a carrying
     value  of  (UK  Pound)10.7  million  and an  estimated  fair  value  of (UK
     Pound)3.2  million.  The differences  between the carrying  amounts and the
     estimated fair value of the FX Puts were not significant as of December 31,
     1995.

     In the  fourth  quarter  of 1995,  in order to reduce  hedging  costs,  the
     Company  sold  foreign  exchange  call  option  contracts  ("FX  Calls") to
     exchange (UK Pound)250.0  million notional amount. The Company received (UK
     Pound)3.4  million from the sale of these  contracts.  These  contracts may
     only be  settled  on  their  expiration  dates.  Of  these  contracts,  (UK
     Pound)200.0  million notional  amount,  with an exchange ratio of $1.70 per
     (UK  Pound)1.00,  expired  unexercised in November 1996 while the remaining
     contract,  with a (UK Pound)50.0  million  notional  amount and an exchange
     ratio of $1.62 per (UK Pound)1.00,  has a settlement date in November 2000.
     In the  fourth  quarter of 1996,  in order to  continue  to reduce  hedging
     costs,  the Company sold additional FX Calls, for proceeds of approximately
     (UK Pound)2.1 million,  to exchange (UK Pound)200.0 million notional amount
     at an average  exchange ratio of $1.75 per (UK Pound)1.00.  These contracts
     may only be settled on their  expiration dates during the fourth quarter of
     1997. The FX Calls are marked-to-market on a current basis in the Company's
     consolidated statement of operations.

     As of  December  31,  1996  and  1995,  the  estimated  fair  value  of the
     liabilities  related  to  the  FX  Calls,  as  recorded  in  the  Company's
     consolidated  balance  sheet,  was (UK Pound)7.2  million and (UK Pound)3.7
     million,  respectively.  Changes in fair  value  between  measurement  date
     relating  to the FX Calls  resulted  in  exchange  losses of (UK  Pound)1.3
     million   during  the  year  ended  December  31,  1996  in  the  Company's
     consolidated  statement of operations.  There were no significant  exchange
     gains or losses relating to these contracts for the year ended December 31,
     1995.

7.   LONG-TERM DEBT

     In November 1995, the Company received net proceeds of approximately $291.1
     million  ((UK  Pound)186.9  million)  from the  sale of its  2007  Discount
     Debentures in a public  offering  ($517.3  million  principal at maturity).
     Interest  accretes  on the 2007  Discount  Debentures  at 11.20%  per annum
     compounded semi-annually from November 15, 1995 to November 15, 2000, after
     which date  interest  will be paid in cash on each May 15 and  November  15
     through  November  15,  2007.  The  accreted  value  of the  2007  Discount
     Debentures was (UK Pound)198.1  million and (UK  Pound)195.9  million as of
     December 31, 1996 and 1995, respectively.

     As of December 31, 1996,  Cambridge Cable has outstanding bank loans of (UK
     Pound)533,000  which are included in long-term  debt.  These bank loans are
     secured by Cambridge Cable's land and buildings in Cambridge and Bishop

                                     - 41 -
<PAGE>
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (Continued)

     Stortford  and are  payable  over 17 years at (UK  Pound)39,000  per  year.
     Interest  is  charged at a  variable  rate of 1% over the London  Interbank
     Offered Rate  ("LIBOR")  (7.25% as of December 31, 1996).  Also included in
     long-term  debt as of December 31, 1996 are capital  lease  obligations  of
     Cambridge Cable and Teesside (see Note 13).

     The difference between the carrying amounts and the estimated fair value of
     the Company's  long-term debt was not  significant as of December 31, 1996.
     The estimated fair value of the Company's  publicly traded debt is based on
     quoted market prices for that debt.

     The 2007 Discount Debentures contain restrictive  covenants which limit the
     Company's  ability  to enter  into  arrangements  for the  sale of  assets,
     mergers,  the  incurrence of additional  debt and the payment of dividends.
     The  Company  was in  compliance  with  such  restrictive  covenants  as of
     December 31, 1996.

8.   SHAREHOLDERS' EQUITY

     In September 1994, the Company  consummated an initial public offering (the
     "IPO") of 15.0  million of its Class A Common  Shares for net  proceeds  of
     $209.4 million ((UK Pound)132.6 million).

     Contemporaneously  with the IPO,  Holdings  and UK Cable  Partners  Limited
     ("UKCPL"),  which was owned by Warburg, Pincus Investors,  L.P. and Bankers
     Trust Investments PLC,  restructured their arrangements with respect to the
     Company (the "Restructuring").  Pursuant to the Restructuring, Holdings and
     UKCPL exchanged  their ordinary shares and preferred  shares in the Company
     and a portion of their loans,  with accrued  interest  thereon  through the
     date of the Restructuring,  to the Company for an aggregate of 12.9 million
     Class B Common Shares and 11.9 million Class A Common Shares, respectively.
     As a result of the IPO, the Restructuring and the Singtel  Transaction (see
     Note  4),  Holdings  owns  25.7% of the  total  outstanding  shares  of the
     Company.  Because  the Class A Common  Shares are  entitled to one vote per
     share and the Class B Common  Shares are  entitled  to ten votes per share,
     Holdings,  through its  ownership  of the Class B Common  Shares,  controls
     approximately  77.6% of the total voting power of all outstanding shares of
     the Company.  The Class A Common  Shares which UKCPL would  otherwise  have
     been  entitled  to receive in the  Restructuring  were  distributed  to its
     shareholders.


9.   STOCK OPTION/SAR PLANS

     The Company  implemented a Stock  Appreciation  Rights  ("SAR") plan during
     1995 for  certain  outside  directors  under  which  the  terms of the SARs
     granted  are  determined  by the  Compensation  Committee  of the  Board of
     Directors (the "SAR Plan").  Under the SAR Plan, eligible  participants are
     entitled to receive a cash  payment  from the Company  equal to 100% of the
     excess,  if any, of the fair market value of a share of the Company's Class
     A Common Stock at the time of exercise over the fair market value of such a
     share at the grant  date.  Under the  plan,  a total of 50,000  SARs may be
     granted.  The SARs have a term of ten years  from the date of grant and are
     immediately  exercisable.  A total of 6,000 and 15,000 SARs were awarded in
     1996 and 1995,  respectively,  and 21,000 SARs were outstanding at December
     31, 1996,  all  exercisable.  The fair value of the Company's  stock at the
     grant date of the SARs was  $12.63  and  $16.25  for 1996 and 1995  grants,
     respectively.  Compensation expense recorded during the year ended December
     31, 1996 was not significant. No compensation expense was recognized during
     the year ended  December 31, 1995 as the exercise price of the SARs was not
     less then the fair value of a share of the  Company's  Class A Common Stock
     at December 31, 1995.

     The  Company  implemented  a  qualified  stock  option plan during 1995 for
     certain employees,  officers, and directors,  under which the option prices
     and other terms are determined by the  Compensation  Committee of the Board
     of Directors  (the  "Option  Plan").  Under the Option Plan,  not more than
     250,000 of the Company's Class

                                     - 42 -
<PAGE>
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (Continued)

     A Common  Shares  may be  issued  pursuant  to the plan  upon  exercise  of
     qualified stock options.  All options must be granted within ten years from
     the date of adoption of the plan, with options  becoming  exercisable  over
     four  years  from the date of  grant.  A total of 20,250  options,  with an
     exercise price of $12.63,  were granted in 1996 and are  outstanding  (none
     exercisable)  at December  31, 1996.  No options  were granted in 1995.  No
     compensation expense has been recognized during the year ended December 31,
     1996 under this plan as the exercise price of the grants were not less than
     the fair  market  value of the shares at the grant  date.  The fair  market
     value of the options granted in 1996 was not significant.

10.  RELATED PARTY TRANSACTIONS

     Comcast U.K. Consulting, Inc. ("UK Consulting"),  a wholly owned subsidiary
     of the Company,  earns  consulting fee income under  consulting  agreements
     with the Equity Investees.  The consulting fee income is generally based on
     a percentage  of gross  revenues or a fixed amount per dwelling unit in the
     Equity Investees' franchise areas.

     The Company's  right to receive  consulting  fee payments  from  Birmingham
     Cable and Cable  London  has been  subordinated  to the banks  under  their
     credit  facilities.   Accordingly,  a  portion  of  these  fees  have  been
     classified  as long-term  receivables  and are included in  investments  in
     affiliates in the Company's  consolidated  balance sheet. In addition,  the
     Company's  shares in Cable  London  have  been  pledged  to secure  amounts
     outstanding under the London Facility.

     Management fee expense is incurred under agreements  between the Company on
     the one hand,  and Comcast,  the  Company's  controlling  shareholder,  and
     Comcast UK Cable  Partners  Consulting,  Inc.  ("Comcast  Consulting"),  an
     indirect wholly owned subsidiary of Comcast, on the other,  whereby Comcast
     and Comcast Consulting provide consulting  services to the Equity Investees
     on behalf of the  Company and  management  services  to the  Company.  Such
     management  fees are based on Comcast's  and Comcast  Consulting's  cost of
     providing  such  services.  As of  December  31,  1996  and  1995,  due  to
     affiliates consists primarily of this management fee and operating expenses
     paid by Comcast and its affiliates on behalf of the Company.

     Investment income includes (UK Pound)2.9 million, (UK Pound)5.0 million and
     (UK  Pound)1.9   million  of  interest  income  in  1996,  1995  and  1994,
     respectively,  relating to the loans to Cable  London and  Cambridge  Cable
     described in Note 5.

     Long-term debt due to shareholder consists of 9% Subordinated Notes payable
     to Holdings  (the  "Notes")  which are due in 1999.  During the years ended
     December 31,  1996,  1995 and 1994,  interest  expense on the Notes was (UK
     Pound)870,000,  (UK  Pound)800,000  and  (UK  Pound)200,000,  respectively.
     Interest  expense for the year ended  December  31, 1994 also  includes (UK
     Pound)831,000  relating to 1994 loans from shareholders that were converted
     or repaid in connection with the Restructuring (see Note 8).

     In management's  opinion,  the foregoing  transactions were entered into on
     terms no more or less favorable than those with non-affiliated parties.

11.  INCOME TAXES

     The Company's wholly owned  subsidiaries  have a deferred tax asset arising
     from the carryforward of net operating  losses and the differences  between
     the book and tax basis of property. However, a valuation allowance has been
     recorded to fully  reserve the  deferred  tax asset as its  realization  is
     uncertain.

                                     - 43 -
<PAGE>
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (Continued)

     Significant components of deferred income taxes are as follows:
<TABLE>
<CAPTION>
                                                                                 December 31,
                                                                           1996                1995
                                                                      (UK Pound)000       (UK Pound)000
<S>                                                                  <C>                  <C>  
         Net operating loss carryforwards
           (carried forward indefinitely)............................(UK Pound)13,485     (UK Pound)2,361
         Differences between book and tax
           basis of property.........................................           1,024                 284
         Other.......................................................             170                  19
         Less: Valuation allowance...................................         (14,679)             (2,664)
                                                                     ----------------     ---------------
                                                                     (UK Pound)           (UK Pound)
                                                                     ================     ===============
</TABLE>

12.  STATEMENT OF CASH FLOWS - SUPPLEMENTAL INFORMATION

     The  Company  made  cash  payments  for  interest  of   approximately   (UK
     Pound)418,000  and (UK  Pound)313,000  during the years ended  December 31,
     1996 and 1994, respectively.

13.  COMMITMENTS AND CONTINGENCIES

     Certain of the Company's  facilities and equipment are held under operating
     or capital leases which expire through 2001.

     A summary of assets held under capital lease are as follows:
<TABLE>
<CAPTION>
                                                                                   December 31,
                                                                           1996                  1995
                                                                      (UK Pound)000         (UK Pound)000
<S>                                                                 <C>                    <C>
         Land, buildings and equipment...............................(UK Pound)8,605        (UK Pound)490
         Less: Accumulated depreciation..............................           (834)                 (90)
                                                                     ---------------      ---------------
                                                                     (UK Pound)7,771        (UK Pound)400
                                                                     ===============      ===============
</TABLE>

     Future minimum rental payments under lease  commitments  with an initial or
     remaining  term of more  than  one  year as of  December  31,  1996  are as
     follows:
<TABLE>
<CAPTION>
                                                                         Capital            Operating
                                                                         leases               leases
                                                                      (UK Pound)000       (UK Pound)000
<S>                                                                  <C>                <C> 
         1997........................................................(UK Pound)1,861     (UK Pound)1,369
         1998........................................................          1,610               1,030
         1999........................................................          1,249                 410
         2000........................................................            627                  59
         2001........................................................            395                  27
         Thereafter..................................................          1,137
                                                                      --------------     ---------------
         Total minimum rental commitments............................          6,879     (UK Pound)2,895
                                                                                         ===============
         Less: Amount representing interest..........................         (1,410)
                                                                      --------------
         Present value of minimum rental commitments.................          5,469
         Less: Current portion of capital lease obligations..........         (1,424)
                                                                      --------------
         Long-term portion of capital lease obligations..............(UK Pound)4,045
                                                                      ==============
</TABLE>

                                     - 44 -
<PAGE>
COMCAST UK CABLE PARTNERS LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (Concluded)

     Capital lease  obligations of (UK Pound)1.5  million and (UK  Pound)490,000
     were  incurred   during  the  years  ended  December  31,  1996  and  1995,
     respectively.

     Operating  lease  expense for the years ended  December 31, 1996,  1995 and
     1994 was (UK Pound)1.5  million,  (UK  Pound)328,000  and (UK Pound)41,000,
     respectively.

     The Company is subject to claims which arise in the  ordinary  cause of its
     business and other legal  proceedings.  In the opinion of  management,  the
     amount  of  ultimate  liability  with  respect  to these  actions  will not
     materially  affect  the  financial  position,   results  of  operations  or
     liquidity of the Company.

14.  QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

<TABLE>
<CAPTION>
                                          First            Second             Third          Fourth                Total
                                         Quarter         Quarter (1)         Quarter       Quarter (2)             Year
                                                           ((UK Pound)000, except per share data)
1996

<S>                                 <C>               <C>              <C>               <C>               <C>   
Revenues .........................  (UK Pound)2,334   (UK Pound)9,452  (UK Pound)10,090  (UK Pound)10,552  (UK Pound)32,428
Operating loss ...................           (3,765)           (6,128)           (7,398)           (7,262)          (24,553)
Equity in net losses of affiliates           (5,698)           (3,942)           (4,166)           (4,626)          (18,432)
Net loss .........................          (11,987)          (11,292)          (14,571)           (2,725)          (40,575)
Net loss per share ...............             (.28)             (.22)             (.30)             (.04)             (.84)

1995

Revenues .........................    (UK Pound)335     (UK Pound)318     (UK Pound)667   (UK Pound)1,523   (UK Pound)2,843
Operating loss ...................           (1,833)           (2,887)           (3,578)           (3,511)          (11,809)
Equity in net losses of affiliates           (4,738)           (5,937)           (6,571)           (6,431)          (23,677)
Net loss .........................           (4,208)           (6,995)           (7,742)          (10,017)          (28,962)
Net loss per share ...............             (.10)             (.17)             (.19)             (.24)             (.70)
<FN>
(1) The Company began consolidating Cambridge Cable effective March 31, 1996.

(2)  The fourth quarter of 1996 net loss includes (UK Pound)12.9 million of foreign
     currency  exchange rate gains  resulting from  fluctuations  in the foreign
     currency exchange rate.
</FN>
</TABLE>

                                     - 45 -
<PAGE>

INDEPENDENT AUDITORS' REPORT

Board of Directors and Shareholders
Birmingham Cable Corporation Limited

We have audited the accompanying  consolidated balance sheet of Birmingham Cable
Corporation  Limited  (a  company   incorporated  in  the  United  Kingdom)  and
subsidiaries  as of  December  31, 1996 and 1995,  and the related  consolidated
statements of operations,  shareholders'  equity and of cash flows for the years
then ended.  These financial  statements are the responsibility of the Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

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

In our opinion,  such consolidated  financial  statements present fairly, in all
material  respects,  the  financial  position of  Birmingham  Cable  Corporation
Limited and  subsidiaries  as of December 31, 1996 and 1995,  and the results of
their  operations  and their cash  flows for the years then ended in  conformity
with accounting principles generally accepted in the United States of America.




/s/ Deloitte & Touche

Birmingham, England
February 28, 1997 (March 12, 1997, as to Note 3)

                                     - 46 -
<PAGE>






                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

Board of Directors and Shareholders
Birmingham Cable Corporation Limited

We  have  audited  the  accompanying   consolidated  statements  of  operations,
shareholders'  equity and cash flows of Birmingham Cable Corporation  Limited (a
United Kingdom  corporation in the prematurity  stage) and  subsidiaries for the
year ended December 31, 1994. These financial  statements are the responsibility
of the  Company's  management.  Our  responsibility  is to express an opinion on
these financial statements based on our audit.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the results of operations  and cash flows of Birmingham
Cable Corporation  Limited and subsidiaries for the year ended December 31, 1994
in conformity with the accounting  principles  generally  accepted in the United
States.




                                   /s/ Arthur Andersen

1 Victoria Square
Birmingham
Bl 1BD
England

February 3, 1995

                                     - 47 -
<PAGE>
BIRMINGHAM CABLE CORPORATION LIMITED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET
(in (UK Pound)000's, except share data)
<TABLE>
<CAPTION>
                                                                                                    December 31,
                                                                                             1996                 1995
<S>                                                                                      <C>               <C>   
ASSETS

CURRENT ASSETS
    Cash and cash equivalents ........................................................   (UK Pound)7,689   (UK Pound)12,523
    Restricted cash ..................................................................            53,000             51,000
    Accounts receivable, less allowance for
       doubtful accounts of(UK Pound)2,360 and(UK Pound)3,357 ........................             4,809              4,304
    Interest receivable ..............................................................             2,016              4,541
    Other current assets .............................................................             3,017              5,936
                                                                                        ----------------   ----------------

          Total current assets .......................................................            70,531             78,304
                                                                                        ----------------   ----------------

RESTRICTED CASH ......................................................................            22,000             63,000
                                                                                        ----------------   ----------------

PROPERTY AND EQUIPMENT ...............................................................           268,833            207,281
    Accumulated depreciation .........................................................           (49,129)           (30,908)
                                                                                        ----------------   ----------------
    Property and equipment, net ......................................................           219,704            176,373
                                                                                        ----------------   ----------------

DEFERRED CHARGES .....................................................................            16,890             15,899
    Accumulated amortization .........................................................            (3,479)            (1,987)
                                                                                        ----------------   ----------------
    Deferred charges, net ............................................................            13,411             13,912
                                                                                        ----------------   ----------------

                                                                                       (UK Pound)325,646  (UK Pound)331,589
                                                                                        ================   =================

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
    Accounts payable and accrued expenses ............................................  (UK Pound)24,381   (UK Pound)14,374
    Accrued interest .................................................................             7,398              7,004
    Current portion of capital lease obligations .....................................             1,849                814
                                                                                        ----------------   ----------------

          Total current liabilities ..................................................            33,628             22,192
                                                                                        ----------------   ----------------

CAPITAL LEASE OBLIGATIONS, less current portion ......................................            11,625              8,784
                                                                                        ----------------   ----------------

OTHER LIABILITIES ....................................................................             2,238              2,080
                                                                                        ----------------   ----------------

COMMITMENTS AND CONTINGENCIES

PREFERENCE SHARES ....................................................................           175,000            175,000
                                                                                        ----------------   ----------------

SHAREHOLDERS' EQUITY
    Ordinary shares, (UK Pound)1.00 par value -
       authorized, 60,000,000 shares; issued, 51,073,486 .............................            51,073             51,073
    Additional capital ...............................................................           112,399            112,399
    Accumulated deficit ..............................................................           (60,317)           (39,939)
                                                                                        ----------------   ----------------

          Total shareholders' equity .................................................           103,155            123,533
                                                                                        ----------------   ----------------

                                                                                       (UK Pound)325,646  (UK Pound)331,589
                                                                                        ================   =================
</TABLE>

See notes to consolidated financial statements.

                                                     - 48 -
<PAGE>
BIRMINGHAM CABLE CORPORATION LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS
(in (UK Pound)000's)
<TABLE>
<CAPTION>
                                                           Year Ended December 31,
                                               1996                1995                1994
<S>                                    <C>                 <C>                 <C>   
SERVICE INCOME ....................... (UK Pound)52,472    (UK Pound)39,004    (UK Pound)27,505
                                       ----------------    ----------------    ----------------

COSTS AND EXPENSES
   Operating .........................           20,912              16,358              10,814
   Selling, general and administrative           23,564              19,536              16,666
   Depreciation and amortization .....           19,690              14,455               9,699
                                       ----------------    ----------------    ----------------

                                                 64,166              50,349              37,179
                                       ----------------    ----------------    ----------------

OPERATING LOSS .......................          (11,694)            (11,345)             (9,674)

INTEREST EXPENSE .....................           17,202              13,993                 443

INVESTMENT INCOME ....................           (8,518)            (11,059)               (824)
                                       ----------------    ----------------    ----------------

NET LOSS .............................((UK Pound)20,378)  ((UK Pound)14,279)   ((UK Pound)9,293)
                                       ================    ================     ===============
</TABLE>



See notes to consolidated financial statements.

                                     - 49 -
<PAGE>
BIRMINGHAM CABLE CORPORATION LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS
(in (UK Pound)000's)

<TABLE>
<CAPTION>
                                                                                Year Ended December 31,
                                                                      1996               1995                1994
<S>                                                          <C>                <C>                 <C> 
OPERATING ACTIVITIES
   Net loss ................................................ ((UK Pound)20,378) ((UK Pound)14,279)  ((UK Pound)9,293)
   Adjustments to reconcile net loss to net cash
    provided by (used in) operating activities:
     Depreciation and amortization .........................            19,690             14,455              9,699
                                                               ---------------   ----------------    ---------------
                                                                          (688)               176                406
     Decrease (increase) in accounts receivable,
       interest receivable and other current assets ........             4,939             (7,438)            (1,637)
     Increase in accounts payable and accrued expenses,
       accrued interest and other liabilities ..............            10,559              6,469              3,683
                                                               ---------------   ----------------    ---------------

         Net cash provided by (used in) operating activities            14,810               (793)             2,452
                                                               ---------------   ----------------    ---------------

FINANCING ACTIVITIES
   Proceeds from borrowings ................................                              175,000              7,800
   Debt acquisition costs ..................................                               (2,977)
   Repayments of debt ......................................                                                  (8,300)
   Issuances of shares, net ................................                                                  47,251
                                                               ---------------   ----------------    ---------------

         Net cash provided by financing activities .........                              172,023             46,751
                                                               ---------------   ----------------    ---------------

INVESTING ACTIVITIES
   Restricted cash .........................................            39,000           (114,000)
   Capital expenditures ....................................           (57,653)           (48,219)           (46,673)
   Deferred charges and other ..............................              (991)              (601)            (1,070)
                                                               ---------------   ----------------    ---------------

         Net cash used in investing activities .............           (19,644)          (162,820)           (47,743)
                                                               ---------------   ----------------    ---------------

(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ...........            (4,834)             8,410              1,460

CASH AND CASH EQUIVALENTS, beginning of year ...............            12,523              4,113              2,653
                                                               ---------------   ----------------    ---------------

CASH AND CASH EQUIVALENTS, end of year .....................   (UK Pound)7,689   (UK Pound)12,523    (UK Pound)4,113
                                                               ===============   ================    ===============
</TABLE>

See notes to consolidated financial statements.

                                     - 50 -
<PAGE>
BIRMINGHAM CABLE CORPORATION LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(in (UK Pound)000's)

<TABLE>
<CAPTION>
                                                       Ordinary          Additional           Accumulated
                                                        Shares             Capital              Deficit              Total
<S>                                                <C>                <C>                 <C>                 <C>   
BALANCE, JANUARY 1, 1994........................   (UK Pound)38,754    (UK Pound)77,467    ((UK Pound)16,367)   (UK Pound)99,854
     Net loss ..................................                                                      (9,293)             (9,293)
     Shares issued .............................             12,319              34,932                                   47,251
                                                   ----------------   -----------------    -----------------   -----------------

BALANCE, DECEMBER 31, 1994 .....................             51,073             112,399              (25,660)            137,812
     Net loss ..................................                                                     (14,279)            (14,279)
                                                   ----------------   -----------------    -----------------   -----------------

BALANCE, DECEMBER 31, 1995 .....................             51,073             112,399              (39,939)            123,533
     Net loss ..................................                                                     (20,378)            (20,378)
                                                   ----------------   -----------------    -----------------   -----------------

BALANCE, DECEMBER 31, 1996 .....................   (UK Pound)51,073   (UK Pound)112,399    ((UK Pound)60,317)  (UK Pound)103,155
                                                   ================   =================    =================   =================
</TABLE>


See notes to consolidated financial statements.

                                     - 51 -
<PAGE>
BIRMINGHAM CABLE CORPORATION LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

1.   BUSINESS

     Birmingham Cable Corporation  Limited, a company incorporated in the United
     Kingdom  ("UK"),  and  subsidiaries  (the  "Company") is in the prematurity
     stage. The Company is principally engaged in the development, construction,
     management and operation of cable  telecommunications  systems. The Company
     holds two franchises in Birmingham/Solihull and Wythall, England.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Basis of Accounting
     The Company  maintains its books and records in accordance  with accounting
     principles  generally  accepted  in  the  UK.  The  consolidated  financial
     statements  have  been  prepared  in  accordance  with  generally  accepted
     accounting  principles  as  practiced in the United  States  ("US") and are
     stated  in UK pounds  sterling  ("UK  Pound").  There  were no  significant
     differences  between  accounting  principles  followed  for UK purposes and
     generally accepted accounting  principles practiced in the US. The UK Pound
     exchange  rate as of December  31, 1996 and 1995 was US $1.71 and US $1.55,
     respectively.

     Basis of Consolidation
     The consolidated  financial  statements include the accounts of the Company
     and all wholly owned subsidiaries.  All significant  intercompany  accounts
     and transactions among the consolidated entities have been eliminated.

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

     Fair Values
     The estimated fair value amounts  presented in these notes to  consolidated
     financial  statements  have been  determined by the Company using available
     market  information and appropriate  methodologies.  However,  considerable
     judgment is required in  interpreting  market data to develop the estimates
     of  fair  value.  The  estimates   presented  herein  are  not  necessarily
     indicative  of the  amounts  that the  Company  could  realize in a current
     market exchange.  The use of different market assumptions and/or estimation
     methodologies  may have a  material  effect  on the  estimated  fair  value
     amounts.  Such fair  value  estimates  are based on  pertinent  information
     available to management as of December 31, 1996 and 1995, and have not been
     comprehensively  revalued  for  purposes  of these  consolidated  financial
     statements  since such dates.  A reasonable  estimate of the amounts due to
     shareholders  is not  practicable  to obtain  because of the related  party
     nature of these items and lack of quoted market prices.

     Cash, Cash Equivalents and Restricted Cash
     Cash, cash equivalents and restricted cash includes cash held on deposit as
     part of a (UK Pound)175.0 million financing arrangement entered into by the
     Company  in  1995  (see  Note  3).  Under  the  terms  of  this   financing
     arrangement, there are restrictions imposed on the Company as to the amount
     of cash held on deposit  that is  available  to be drawn  down.  The amount
     which can be drawn down as of December 31, 1995, (UK Pound)6.0 million,  is
     classified  as cash and cash  equivalents.  Current  restricted  cash as of
     December 31, 1996 and 1995 represents cash that is expected to be available
     during  1997  and  1996,  respectively.  Long-term  restricted  cash  as of
     December 31, 1996 and 1995  represents the balance of the cash which is not
     expected to be available prior to December 31, 1997 and 1996, respectively.

     Prematurity Period
     The Company  accounts for costs,  expenses and revenues  applicable  to the
     construction  and operation of its cable  telecommunications  systems under
     the provisions of Statement of Financial Accounting Standards ("SFAS") No.
     51, "Financial Reporting by Cable Television Companies."

                                     - 52 -
<PAGE>
BIRMINGHAM CABLE CORPORATION LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (Continued)

     Under SFAS No. 51, during the period while the systems are partially  under
     construction and partially in service (the "Prematurity Period"),  costs of
     cable  telecommunications  plant,  including  materials,  direct  labor and
     construction overhead are capitalized. Subscriber-related costs and general
     and  administrative  costs are  expensed  as  incurred.  Costs  incurred in
     anticipation  of  servicing  a fully  operating  system  that will not vary
     regardless  of  the  number  of  subscribers  are  partially  expensed  and
     partially  capitalized,  based upon the  percentage  of  average  actual or
     estimated  subscribers,  whichever  is  greater,  to the  total  number  of
     subscribers expected at the end of the Prematurity Period (the "Fraction").

     During the  Prematurity  Period,  depreciation  and  amortization of system
     assets is determined by multiplying the  depreciation  and  amortization of
     the total capitalized  system assets expected at the end of the Prematurity
     Period by the Fraction. At the end of the Prematurity Period,  depreciation
     and  amortization of system assets is based on the remaining  undepreciated
     cost at that date.

     As of December 31, 1996,  six of the Company's  seven  discrete build areas
     have  completed  their  Prematurity  Period and one of the Company's  seven
     discrete  build  areas  is  in  the  Prematurity   Period.   The  remaining
     Prematurity Period is expected to terminate in December 1997.

     Property and Equipment
     Property and  equipment,  which consists  principally of system assets,  is
     shown at historical cost less accumulated  depreciation.  Improvements that
     extend asset lives are capitalized;  other repairs and maintenance  charges
     are expensed as  incurred.  The cost and related  accumulated  depreciation
     applicable  to assets sold or retired are removed from the accounts and the
     gain or loss on  disposition  is recognized as a component of  depreciation
     expense.

     System assets

     Prior to the  Prematurity  Period,  no  depreciation  is provided on system
     assets.  During  the  Prematurity  Period,   depreciation  is  provided  in
     accordance with SFAS No. 51.

     Depreciation of system assets is provided by the straight-line  method over
     estimated useful lives as follows:

                  Plant                                     15-40 years
                  Network                                      15 years
                  Subscriber equipment                       6-10 years
                  Switch                                       10 years

     Non-system assets

     Depreciation of non-system assets is provided by the  straight-line  method
     over estimated useful lives as follows:

                  Buildings                                    40 years
                  Leasehold buildings                     term of lease
                  Fixtures, fittings and equipment              5 years
                  Computers                                     4 years
                  Vehicles                                      4 years

     Leased Assets
     Assets held under capital  leases are treated as if they had been purchased
     outright  and the  corresponding  liability  is included  in capital  lease
     obligations.  Capital lease payments include  principal and interest,  with
     the interest  portion  being  expensed.  Payments on  operating  leases are
     expensed on a straight-line basis over the lease term.

     Deferred Charges
     Deferred charges consist primarily of franchise acquisition and development
     costs directly  attributable  to obtaining,  developing and maintaining the
     franchise licenses and debt acquisition costs incurred by the Company

                                     - 53 -
<PAGE>
BIRMINGHAM CABLE CORPORATION LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (Continued)

     in  entering  into  the  Birmingham   Facility  (see  Note  3).   Franchise
     acquisition and development  costs have been allocated  evenly between each
     build area and are amortized, by build area, on a straight-line basis, over
     the lives of the franchises of 15 to 23 years.  Debt acquisition  costs are
     being amortized on a straight-line  basis over the term of the related debt
     of five to ten years.

     Valuation of Long-Lived Assets
     The Company  periodically  evaluates the  recoverability  of its long-lived
     assets,  including  property  and  equipment  and deferred  charges,  using
     objective  methodologies.  Such methodologies  include evaluations based on
     the cash flows generated by the underlying assets or other  determinants of
     fair value.

     Revenue Recognition
     Service income is recognized as service is provided. Credit risk is managed
     by disconnecting services to subscribers who are delinquent.

     Income Taxes
     The Company  recognizes  deferred tax assets and  liabilities for temporary
     differences  between the financial reporting basis and the tax basis of the
     Company's  assets and  liabilities  and expected  benefits of utilizing net
     operating  loss  carryforwards.  The impact on deferred taxes of changes in
     tax rates and laws,  if any,  applied to the years during  which  temporary
     differences  are expected to be settled,  are  reflected  in the  financial
     statements in the period of enactment.

     Derivative Financial Instruments
     The Company uses interest rate exchange agreements ("Swaps"), to manage its
     exposure to fluctuations  in interest rates.  Swaps are matched with either
     fixed or variable  rate debt and  periodic  cash  payments are accrued on a
     settlement basis as an adjustment to interest expense.

     The Company does not hold or issue any derivative financial instruments for
     trading purposes and is not a party to any leveraged  instruments (see Note
     3). The credit risks  associated  with the Company's  derivative  financial
     instruments  are  controlled  through the  evaluation and monitoring of the
     creditworthiness of the counterparties. Although the Company may be exposed
     to losses in the event of nonperformance by the counterparties, the Company
     does not expect such losses, if any, to be significant.

     Reclassifications
     Certain  reclassifications  have been made to the prior years' consolidated
     financial statements to conform to those classifications used in 1996.

3.   PREFERENCE SHARES

     In February 1995, a subsidiary of the Company issued 175,000 cumulative (UK
     Pound)1.00  redeemable five year term preference shares for a paid up value
     of (UK Pound)175.0  million.  The cash received from the preference  shares
     will be used by the Company,  subject to certain restrictions  contained in
     the Birmingham  Facility (as defined below),  for capital  expenditures and
     working capital requirements  relating to the build-out of its systems (see
     Note 2). The preference shareholder has an option to require the Company to
     purchase  its  shareholding.  This option is  guaranteed  by a syndicate of
     fifteen banks which granted the  Birmingham  Facility and is exercisable on
     or before  February  14,  2000.  The  preference  shares have an  effective
     dividend rate, including Advanced Corporation Tax ("ACT"), of 8.00%.

     In February 1995, the Company entered into a (UK  Pound)175.0  million five
     year revolving credit facility (the  "Birmingham  Facility") which provided
     for conversion into a five year term loan on March 31, 2000. In March 1997,
     the terms of the Birmingham Facility were amended to extend the maturity of
     the term loan to  December  31,  2005 and to amend the  required  cash flow
     levels and certain other terms. The Birmingham Facility will be used by the
     Company,  subject to certain  restrictions,  to fund the  redemption of the
     preference  shares.  The Company's three principal  shareholders'  right to
     receive consulting fee payments from the Company has been

                                     - 54 -
<PAGE>
BIRMINGHAM CABLE CORPORATION LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (Continued)

     subordinated  to the banks under the  Birmingham  Facility.  The payment of
     consulting  fees is restricted  until the Company  meets certain  financial
     ratio  tests  under the  Birmingham  Facility.  The Company has pledged the
     shares of its material subsidiaries to secure the Birmingham Facility. Upon
     a change of control,  all amounts due under the Birmingham  Facility become
     immediately due and payable.

     A  reasonable  estimate of the fair value of the  preference  shares is not
     practicable  to obtain due to the nature of the  instrument and the lack of
     quoted market prices.

     The Birmingham  Facility  contains  restrictive  covenants  which limit the
     Company's  ability to enter into  arrangements for the acquisition and sale
     of property  and  equipment,  investments,  mergers and the  incurrence  of
     additional  debt.  Certain of these covenants  require that certain minimum
     build requirements, financial ratios and cash flow levels be maintained and
     contain restrictions on dividend payments.

     The  Company  enters  into  Swaps as a normal  part of its risk  management
     efforts to limit its exposure to adverse  fluctuations  in interest  rates.
     The  differentials  to be  received  or  paid  under  the  Company's  Swaps
     designated as hedges are  recognized in income over the life of the related
     contract  as  adjustments  to interest  expense.  In  conjunction  with the
     Birmingham  Facility,  a subsidiary  of the Company and  Barclays  Bank PLC
     entered  into a  five  year  (UK  Pound)175.0  million  Swap,  whereby  the
     subsidiary  receives  fixed  interest at a rate of 8.83% and pays  floating
     rate interest at the six month London Interbank Offered Rate ("LIBOR").  In
     addition,  a subsidiary of the Company entered into a second series of five
     year Swaps with three banks.  Under the  agreements,  the  subsidiary  pays
     fixed rate  interest at 9.20% and receives  floating  rate  interest at six
     month LIBOR, based upon the outstanding notional amount of the Swaps. As of
     December 31, 1996 and 1995, the notional  amount  outstanding on the second
     series of Swaps was (UK  Pound)106.0  million and (UK  Pound)47.0  million,
     respectively  and will  increase to (UK  Pound)160.0  million by January 2,
     1998.  The estimated  amount that would be received upon  settlement of the
     Company's  Swaps was (UK  Pound)168,000  and (UK  Pound)2.6  million  as of
     December 31, 1996 and 1995, respectively.

4.   SHAREHOLDERS' EQUITY

     In March 1994,  the  Company's  shareholders  executed an agreement  which,
     among other things, provided for the sale by the Company of 12.3 million of
     newly issued  Ordinary  Shares to General  Cable PLC ("General  Cable"),  a
     wholly owned subsidiary of Compagnie  Generale des Eaux, for (UK Pound)46.6
     million.

5.   RELATED PARTY TRANSACTIONS

     The Company has consulting  agreements with Comcast U.K.  Consulting,  Inc.
     ("Comcast Consulting") and TeleWest Communications Group Ltd., subsidiaries
     of two of the Company's principal  shareholders,  Comcast UK Cable Partners
     Limited and TeleWest Communications plc ("TeleWest").  The Company also has
     a consulting  agreement with General Cable,  the Company's  other principal
     shareholder. The Company pays a fee to TeleWest each year as a contribution
     to the operating  expenses and capital  expenditures of TeleWest's  Network
     Service Center, which provides telephony support to the Company.

     A summary of related party charges  included in the Company's  consolidated
     financial statements is as follows:

<TABLE>
<CAPTION>
                                                                Year Ended December 31,
                                                       1996              1995                 1994
                                                 (UK Pound)000        (UK Pound)000        (UK Pound)000
<S>                                             <C>                 <C>                    <C>
           Consulting fees                      (UK Pound)1,326     (UK Pound)1,070        (UK Pound)854
           Network Service Center fees                      814                 680                  919
                                                ---------------     ---------------      ---------------
                                                (UK Pound)2,140     (UK Pound)1,750      (UK Pound)1,773
                                                ===============     ===============      ===============
</TABLE>

     As of December  31, 1996 and 1995,  accounts  payable and accrued  expenses
     include (UK Pound)2.3 million and (UK Pound)726,000,  respectively, payable
     to the Company's three principal  shareholders,  principally for consulting
     fees and normal

                                     - 55 -
<PAGE>
BIRMINGHAM CABLE CORPORATION LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (Continued)

     operating  expenses paid by the shareholders and their affiliates on behalf
     of  the  Company.  As of  December  31,  1996  and  1995,  other  long-term
     liabilities  includes  (UK  Pound)1.3  million and (UK  Pound)1.1  million,
     respectively,  of consulting  fees payable to the Company's three principal
     shareholders as payment is restricted under the Birmingham Facility.

     In management's  opinion,  the foregoing  transactions were entered into on
     terms  no more or less  favorable  than  those  with  non-affiliated  third
     parties.

6.   INCOME TAXES

     The Company has a deferred tax asset arising from the  carryforward  of net
     operating  losses  and the  differences  between  the book and tax basis of
     property. However, a valuation allowance has been recorded to fully reserve
     the deferred tax asset as its realization is uncertain.

     Significant  components  of the  Company's  deferred  income  taxes  are as
     follows:
<TABLE>
<CAPTION>
                                                                                             December 31,
                                                                                        1996                1995
                                                                                   (UK Pound)000       (UK Pound)000
<S>                                                                               <C>               <C>  
         Net operating loss carryforwards (carried forward indefinitely)..........(UK Pound)3,218   (UK Pound)   2,939
         Differences between book and tax basis of property.......................         10,134                6,261
         Less: Valuation allowance................................................        (13,352)              (9,200)
                                                                                  ---------------   ------------------
                                                                                  (UK Pound)        (UK Pound)
                                                                                  ===============   ==================
</TABLE>

     In connection with the Birmingham Facility and the related preference share
     arrangement  (see  Note 3),  the  Company  is  obligated  to pay ACT on all
     preference share dividends. Related ACT for 1996 and 1995 was (UK Pound)2.8
     million and (UK Pound)2.5 million, respectively, and has been classified as
     a component of interest expense in the Company's  consolidated statement of
     operations.  ACT may be carried forward  indefinitely  to offset  potential
     future tax liabilities of the Company.


7.   STATEMENT OF CASH FLOWS - SUPPLEMENTAL INFORMATION

     The Company made cash payments for interest and preferred  stock  dividends
     of approximately  (UK Pound)31.2  million,  (UK Pound)11.3  million and (UK
     Pound)443,000  during the years ended  December  31,  1996,  1995 and 1994,
     respectively.

8.   COMMITMENTS AND CONTINGENCIES

     Certain of the Company's  facilities and equipment are held under operating
     or capital leases which expire through 2003.

     A summary of assets held under capital leases are as follows:
<TABLE>
<CAPTION>
                                                                                  December 31,
                                                                           1996                 1995
                                                                      (UK Pound)000        (UK Pound)000
<S>                                                                  <C>                  <C>  
         System, fixtures, fittings, equipment and vehicles..........(UK Pound)14,925     (UK Pound)9,888
         Less: Accumulated depreciation..............................          (3,556)             (1,816)
                                                                     ----------------     ---------------
                                                                     (UK Pound)11,369     (UK Pound)8,072
                                                                     ================     ===============
</TABLE>

                                     - 56 -
<PAGE>
BIRMINGHAM CABLE CORPORATION LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (Concluded)

     Future minimum rental payments under lease  commitments  with an initial or
     remaining  term of more  than  one  year as of  December  31,  1996  are as
     follows:
<TABLE>
<CAPTION>
                                                                          Capital            Operating
                                                                          leases               leases
                                                                       (UK Pound)000       (UK Pound)000
     <S>                                                              <C>                <C>
         1997........................................................ (UK Pound)2,618       (UK Pound)221
         1998........................................................           2,380                 221
         1999........................................................           2,238                 221
         2000........................................................           2,250                 141
         2001........................................................           1,838                 141
         Thereafter..................................................           6,086               1,531
                                                                      ---------------     ---------------
         Total minimum rental commitments............................          17,410     (UK Pound)2,476
                                                                                          ===============
         Less: Amount representing interest..........................          (3,936)
                                                                      ---------------
         Present value of minimum rental commitments.................          13,474
         Less: Current portion of capital lease obligations..........          (1,849)
                                                                      ---------------
         Long-term portion of capital lease obligations..............(UK Pound)11,625
                                                                     ================
</TABLE>


     Capital lease obligations of (UK Pound)5.0  million,  (UK Pound)4.6 million
     and (UK Pound)1.5 million were incurred during the years ended December 31,
     1996, 1995 and 1994, respectively.

     Operating  lease  expense for the years ended  December 31, 1996,  1995 and
     1994 was (UK  Pound)428,000,  (UK Pound)947,000 and (UK Pound)1.1  million,
     respectively.

     Included  within  deferred  charges and other  long-term  liabilities as of
     December  31,  1996 and 1995 is (UK  Pound)665,000  and (UK  Pound)760,000,
     respectively,  which  represents the obligation  incurred by the Company in
     connection  with  the  termination  of a  contractual  obligation  under an
     agreement  with the Local  Authority to service and maintain the  Company's
     satellite  master antenna  television  installations in the franchise area.
     This liability is noninterest bearing and will be discharged by the payment
     of (UK  Pound)95,000  annually  through 2003. The effect of discounting the
     liability is not significant to the Company's financial position or results
     of operations.

                                     - 57 -
<PAGE>

INDEPENDENT AUDITORS' REPORT

Board of Directors and Shareholders
Cable London PLC

We have audited the accompanying  consolidated balance sheet of Cable London PLC
(a company  incorporated in the United Kingdom) and  subsidiaries as of December
31,  1996 and 1995,  and the  related  consolidated  statements  of  operations,
shareholders' equity and of cash flows for the years then ended. These financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

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

In our opinion,  such consolidated  financial  statements present fairly, in all
material  respects,  the financial position of Cable London PLC and subsidiaries
as of December 31, 1996 and 1995, and the results of their  operations and their
cash flows for the years then ended in  conformity  with  accounting  principles
generally accepted in the United States of America.

The accompanying  consolidated  financial statements have been prepared assuming
that Cable London PLC will continue as a going concern.  As discussed in Notes 1
and 3 to the  consolidated  financial  statements,  Cable London PLC's 1997 debt
maturities and recurring  losses from operations raise  substantial  doubt about
its ability to continue as a going concern.  Management's plans concerning these
matters are also  described in Note 1. The  financial  statements do not include
any adjustments that might result from the outcome of this uncertainty.


/s/ Deloitte & Touche

London, England
February 28, 1997

                                     - 58 -
<PAGE>


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

Board of Directors and Shareholders
Cable London PLC

We  have  audited  the  accompanying   consolidated  statements  of  operations,
shareholders'  equity  and cash  flows of Cable  London  PLC (a  United  Kingdom
corporation  in the  prematurity  stage)  and  subsidiaries  for the year  ended
December 31, 1994.  These  financial  statements are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audit.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the results of operations and cash flows of Cable London
PLC and subsidiaries for the year ended December 31, 1994 in conformity with the
accounting principles generally accepted in the United States.




                              /s/ Arthur Andersen

1 Surrey Street
London
WC2R 2PS
England

February 3, 1995




                                     - 59 -
<PAGE>
CABLE LONDON PLC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET
(in (UK Pound)000's, except share data)
<TABLE>
<CAPTION>
                                                                                                         December 31,
                                                                                                  1996                1995
<S>                                                                                        <C>                 <C>  
ASSETS

CURRENT ASSETS
    Cash ................................................................................    (UK Pound)3,213     (UK Pound)4,293
    Accounts receivable, less allowance for doubtful accounts of
       (UK Pound)1,465 and(UK Pound)585 .................................................              3,670               2,389
    Other current assets ................................................................              3,334               2,187
                                                                                           -----------------   -----------------

          Total current assets ..........................................................             10,217               8,869
                                                                                           -----------------   -----------------

PROPERTY AND EQUIPMENT ..................................................................            192,630             145,069
    Accumulated depreciation ............................................................            (36,106)            (22,131)
                                                                                           -----------------   -----------------
    Property and equipment, net .........................................................            156,524             122,938
                                                                                           -----------------   -----------------

DEFERRED CHARGES ........................................................................              6,986               6,986
    Accumulated amortization ............................................................             (3,230)             (2,343)
                                                                                           -----------------   -----------------
    Deferred charges, net ...............................................................              3,756               4,643
                                                                                           -----------------   -----------------

                                                                                           (UK Pound)170,497   (UK Pound)136,450
                                                                                           =================   =================

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
    Accounts payable and accrued expenses ...............................................   (UK Pound)22,079    (UK Pound)15,555
    Other current liabilities ...........................................................              3,117               1,740
    Current portion of long-term debt and capital lease obligations .....................             60,361                  33
                                                                                           -----------------   -----------------

          Total current liabilities .....................................................             85,557              17,328
                                                                                           -----------------   -----------------

LONG-TERM DEBT, less current portion ....................................................                718              20,755
                                                                                           -----------------   -----------------

CAPITAL LEASE OBLIGATIONS, less current portion .........................................              7,869               6,735
                                                                                           -----------------   -----------------

CONVERTIBLE DEBT AND OTHER ..............................................................             52,244              46,282
                                                                                           -----------------   -----------------

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY
    Ordinary shares, (UK Pound).10 par value -
       authorized, 100,000,000 shares; issued, 55,125,690 ...............................              5,513               5,513
    Additional capital ..................................................................             96,486              96,486
    Accumulated deficit .................................................................            (77,890)            (56,649)
                                                                                           -----------------   -----------------

          Total shareholders' equity ....................................................             24,109              45,350
                                                                                           -----------------   -----------------

                                                                                           (UK Pound)170,497   (UK Pound)136,450
                                                                                           =================   =================
</TABLE>

See notes to consolidated financial statements.

                                     - 60 -
<PAGE>
CABLE LONDON PLC AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS
(in (UK Pound)000's)
<TABLE>
<CAPTION>
                                                        Year Ended December 31,
                                               1996               1995               1994
<S>                                    <C>                <C>                <C>   
SERVICE INCOME .......................  (UK Pound)40,091   (UK Pound)30,277   (UK Pound)21,830
                                       -----------------  -----------------  -----------------

COSTS AND EXPENSES
   Operating .........................            17,978             14,622             10,666
   Selling, general and administrative            21,157             18,616             14,695
   Depreciation and amortization .....            14,862             10,847              6,993
                                       -----------------  -----------------  -----------------
                                                  53,997             44,085             32,354
                                       -----------------  -----------------  -----------------

OPERATING LOSS .......................           (13,906)           (13,808)           (10,524)

INTEREST EXPENSE .....................             7,556              4,133              1,111

INVESTMENT INCOME ....................              (221)              (266)              (281)
                                       -----------------  -----------------  -----------------

NET LOSS ............................. ((UK Pound)21,241) ((UK Pound)17,675) ((UK Pound)11,354)
                                       =================  =================  =================
</TABLE>


See notes to consolidated financial statements.

                                     - 61 -

<PAGE>
CABLE LONDON PLC AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS
(in (UK Pound)000's)
<TABLE>
<CAPTION>
                                                                               Year Ended December 31,
                                                                     1996               1995               1994
<S>                                                        <C>                <C>                <C>  
OPERATING ACTIVITIES
   Net loss .............................................. ((UK Pound)21,241) ((UK Pound)17,675) ((UK Pound)11,354)
   Adjustments to reconcile net loss to net cash
    provided by operating activities:
     Depreciation and amortization .......................            14,862             10,847              6,993
     Non-cash interest expense ...........................             3,355              3,311                497
                                                           -----------------  -----------------  -----------------
                                                                      (3,024)            (3,517)            (3,864)

     (Increase) decrease in accounts receivable and
       other current assets ..............................            (2,428)              (214)               606
     Increase in accounts payable and accrued expenses 
      and other current liabilities ......................             7,508              3,992              3,554
                                                           -----------------  -----------------  -----------------

         Net cash provided by operating activities .......             2,056                261                296
                                                           -----------------  -----------------  -----------------

FINANCING ACTIVITIES
   Proceeds from borrowings ..............................            40,000             38,000             27,000
   Debt acquisition costs ................................                                 (493)
   Loans from shareholders ...............................             3,000
   Repayments of debt ....................................               (33)               (30)               (29)
   Issuances of shares, net ..............................                                                     703
                                                           -----------------  -----------------  -----------------

         Net cash provided by financing activities .......            42,967             37,477             27,674
                                                           -----------------  -----------------  -----------------

INVESTING ACTIVITIES
   Capital expenditures ..................................           (46,103)           (36,780)           (27,369)
   Deferred charges and other ............................                                 (834)              (957)
                                                           -----------------  -----------------  -----------------

         Net cash used in investing activities ...........           (46,103)           (37,614)           (28,326)
                                                           -----------------  -----------------  -----------------

(DECREASE) INCREASE IN CASH ..............................            (1,080)               124               (356)

CASH, beginning of year ..................................             4,293              4,169              4,525
                                                           -----------------  -----------------  -----------------

CASH, end of year ........................................   (UK Pound)3,213    (UK Pound)4,293    (UK Pound)4,169
                                                           =================  =================  =================
</TABLE>

See notes to consolidated financial statements.

                                     - 62 -
<PAGE>
CABLE LONDON PLC AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(in (UK Pound)000's)

<TABLE>
<CAPTION>
                                 Ordinary         Additional        Accumulated
                                  Shares            Capital           Deficit             Total

<S>                          <C>               <C>               <C>                <C>   
BALANCE, JANUARY 1, 1994 .   (UK Pound)4,433   (UK Pound)75,966  ((UK Pound)27,620)  (UK Pound)52,779
     Net loss ............                                                 (11,354)           (11,354)
     Shares issued .......             1,080             20,520                                21,600
                             ---------------   ----------------  -----------------   ----------------

BALANCE, DECEMBER 31, 1994             5,513             96,486            (38,974)            63,025
     Net loss ............                                                 (17,675)           (17,675)
                             ---------------   ----------------  -----------------   ----------------

BALANCE, DECEMBER 31, 1995             5,513             96,486            (56,649)            45,350
     Net loss ............                                                 (21,241)           (21,241)
                             ---------------   ----------------  -----------------   ----------------

BALANCE, DECEMBER 31, 1996   (UK Pound)5,513   (UK Pound)96,486  ((UK Pound)77,890)  (UK Pound)24,109
                             ===============   ================  =================   ================
</TABLE>

See notes to consolidated financial statements.

                                     - 63 -
<PAGE>
CABLE LONDON PLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

1.   BUSINESS

     Cable London PLC, a company  incorporated in the United Kingdom ("UK"), and
     subsidiaries  (the "Company") is in the prematurity  stage.  The Company is
     principally  engaged  in  the  development,  construction,  management  and
     operation  of cable  telecommunications  systems.  The  Company  holds four
     franchises  covering  Camden,  Haringey,   Hackney/Islington  and  Enfield,
     England.

     The Company's  financial  statements  have been prepared on a going concern
     basis, which contemplates the realization of assets and the satisfaction of
     liabilities  in the normal course of business.  The Company is obligated to
     repay its (UK Pound)60.0  million  revolving  credit  facility (the "London
     Facility" - see Note 3) on June 30,  1997 and the  Company  does not expect
     that cash flows  generated from  operations  will satisfy this  obligation.
     This factor, along with the Company's recurring losses from operations, may
     indicate that the Company will be unable to continue as a going concern for
     a reasonable period of time.

     The  financial  statements do not include any  adjustments  relating to the
     recoverability  and  classification of recorded asset amounts or the amount
     and  classification  of  liabilities  that  might be  necessary  should the
     Company be unable to  continue  as a going  concern.  The Company is in the
     process of  refinancing  the London  Facility and the Company's  management
     believes  that it will be able to  complete  this  refinancing  by June 30,
     1997,  although there can be no assurance that any such refinancing will be
     available on acceptable terms and conditions. In the event this refinancing
     cannot be  completed,  the  Company  intends to seek  financing  from other
     sources.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Basis of Accounting
     The Company  maintains its books and records in accordance  with accounting
     principles  generally  accepted  in  the  UK.  The  consolidated  financial
     statements  have  been  prepared  in  accordance  with  generally  accepted
     accounting  principles  as  practiced in the United  States  ("US") and are
     stated  in UK pounds  sterling  ("UK  Pound").  There  were no  significant
     differences  between  accounting  principles  followed  for UK purposes and
     generally accepted accounting  principles practiced in the US. The UK Pound
     exchange  rate as of December  31, 1996 and 1995 was US $1.71 and US $1.55,
     respectively.

     Basis of Consolidation
     The consolidated  financial  statements include the accounts of the Company
     and all wholly owned subsidiaries.  All significant  intercompany  accounts
     and transactions among the consolidated entities have been eliminated.

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

     Fair Values
     The estimated fair value amounts  presented in these notes to  consolidated
     financial  statements  have been  determined by the Company using available
     market  information and appropriate  methodologies.  However,  considerable
     judgment is required in  interpreting  market data to develop the estimates
     of  fair  value.  The  estimates   presented  herein  are  not  necessarily
     indicative  of the  amounts  that the  Company  could  realize in a current
     market exchange.  The use of different market assumptions and/or estimation
     methodologies  may have a  material  effect  on the  estimated  fair  value
     amounts.  Such fair  value  estimates  are based on  pertinent  information
     available to management as of December 31, 1996 and 1995, and have not been
     comprehensively  revalued  for  purposes  of these  consolidated  financial
     statements since such dates.

                                     - 64 -
<PAGE>
CABLE LONDON PLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (Continued)


     Prematurity Period
     The Company  accounts for costs,  expenses and revenues  applicable  to the
     construction  and operation of its cable  telecommunications  systems under
     the provisions of Statement of Financial Accounting Standards ("SFAS") No.
     51, "Financial Reporting by Cable Television Companies."

     Under SFAS No. 51, during the period while the systems are partially  under
     construction and partially in service (the "Prematurity Period"),  costs of
     cable  telecommunications  plant,  including  materials,  direct  labor and
     construction overhead are capitalized. Subscriber-related costs and general
     and  administrative  costs are  expensed  as  incurred.  Costs  incurred in
     anticipation  of  servicing  a fully  operating  system  that will not vary
     regardless  of  the  number  of  subscribers  are  partially  expensed  and
     partially  capitalized,  based  on the  percentage  of  average  actual  or
     estimated  subscribers,  whichever  is  greater,  to the  total  number  of
     subscribers expected at the end of the Prematurity Period (the "Fraction").

     During the  Prematurity  Period,  depreciation  and  amortization of system
     assets is determined by multiplying the  depreciation  and  amortization of
     the total capitalized  system assets expected at the end of the Prematurity
     Period by the Fraction. At the end of the Prematurity Period,  depreciation
     and  amortization of system assets is based on the remaining  undepreciated
     cost at that date.

     As of December 31, 1996,  one of the  Company's  four  franchise  areas has
     completed its Prematurity  Period.  The remaining  Prematurity  Periods are
     expected to terminate at various dates from 1997 to 1998.

     Property and Equipment
     Property and  equipment,  which consists  principally of system assets,  is
     shown at historical cost less accumulated  depreciation.  Improvements that
     extend asset lives are capitalized;  other repairs and maintenance  charges
     are expensed as  incurred.  The cost and related  accumulated  depreciation
     applicable  to assets sold or retired are removed from the accounts and the
     gain or loss on  disposition  is recognized as a component of  depreciation
     expense.

     System assets

     Prior to the  Prematurity  Period,  no  depreciation  is provided on system
     assets.  During  the  Prematurity  Period,   depreciation  is  provided  in
     accordance with SFAS No. 51.

     Depreciation of system assets is provided by the straight-line  method over
     estimated useful lives as follows:

                  Plant                                        40 years
                  Network                                      15 years
                  Subscriber equipment                        6-8 years
                  Switch                                       10 years

     Non-system assets

     Depreciation of non-system assets is provided by the  straight-line  method
     over estimated useful lives as follows:

                  Leased buildings                             40 years
                  Fixtures, fittings and equipment              5 years
                  Computers                                     4 years
                  Vehicles                                      3 years

                                     - 65 -
<PAGE>
CABLE LONDON PLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (Continued)

     Leased Assets
     Assets held under capital  leases are treated as if they had been purchased
     outright  and the  corresponding  liability  is included  in capital  lease
     obligations.  Capital lease payments include  principal and interest,  with
     the interest  portion  being  expensed.  Payments on  operating  leases are
     expensed on a straight-line basis over the lease term.

     Deferred Charges
     Deferred charges consist primarily of franchise acquisition and development
     costs directly  attributable  to obtaining,  developing and maintaining the
     franchise  licenses and debt  acquisition  costs incurred by the Company in
     entering into the London Facility (see Note 3).  Franchise  acquisition and
     development  costs are being  amortized,  on a  straight-line  basis,  over
     periods  from two to  fifteen  years.  Debt  acquisition  costs  are  being
     amortized on a straight-line basis over the term of the related debt.

     Valuation of Long-Lived Assets
     The Company  periodically  evaluates the  recoverability  of its long-lived
     assets,  including  property  and  equipment  and deferred  charges,  using
     objective  methodologies.  Such methodologies  include evaluations based on
     the cash flows generated by the underlying assets or other  determinants of
     fair value.

     Revenue Recognition
     Service income is recognized as service is provided. Credit risk is managed
     by disconnecting services to subscribers who are delinquent.

     Income Taxes
     The Company  recognizes  deferred tax assets and  liabilities for temporary
     differences  between the financial reporting basis and the tax basis of the
     Company's  assets and  liabilities  and expected  benefits of utilizing net
     operating  loss  carryforwards.  The impact on deferred taxes of changes in
     tax rates and laws,  if any,  applied to the years during  which  temporary
     differences  are expected to be settled,  are  reflected  in the  financial
     statements in the period of enactment.

     Reclassifications
     Certain  reclassifications  have been made to the prior years' consolidated
     financial statements to conform to those classifications used in 1996.

3.   LONG-TERM DEBT

     In June 1995,  the Company  entered into the London  Facility  with various
     banks.  The London Facility has a two year term and an interest rate at the
     London Interbank Offered Rate ("LIBOR") plus 2.5% (8.75% as of December 31,
     1996). The Company has fully drawn under the London Facility as of December
     31,  1996.  The  Company's  two  principal  shareholders'  right to receive
     consulting fee payments from the Company has been subordinated to the banks
     under the London  Facility.  Included in convertible  debt and other in the
     Company's  consolidated  balance  sheet  as of  December  31,  1995  is (UK
     Pound)393,000 of subordinated shareholder consulting fees. Upon a change of
     control,  all amounts due under the London Facility become  immediately due
     and payable. In addition, the Company's two principal  shareholders' shares
     in Cable  London  have been  pledged  to secure the  London  Facility.  The
     Company is in the process of refinancing the London Facility.

     Also included in long-term debt is a mortgage  note,  payable over a period
     of 18 years at (UK  Pound)37,000  per year, which is secured by property of
     the Company. The mortgage note bears interest at a fixed rate of 10.5%.

     The  differences  between the carrying  amounts and estimated fair value of
     the Company's  long-term  debt was not  significant as of December 31, 1996
     and 1995.  Interest  rates that are currently  available to the Company for
     debt with similar terms and remaining  maturities are used to estimate fair
     value for debt issues for which quoted market prices are not available.

                                     - 66 -
<PAGE>
CABLE LONDON PLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (Continued)


     The  London  Facility  contains  restrictive   covenants  which  limit  the
     Company's  ability  to  enter  into  arrangements  for the  acquisition  of
     property  and  equipment,   investments,  mergers  and  the  incurrence  of
     additional  debt.  Certain of these covenants  require that certain minimum
     build  requirements  and cash flow levels be maintained and contain certain
     restrictions on dividend payments.  The Company was in compliance with such
     restrictive covenants as of December 31, 1996.

4.   CONVERTIBLE DEBT AND OTHER

     As of December 31, 1996 and 1995, the Company had  outstanding  convertible
     debt due to  affiliates  of (UK  Pound)42.0.  In addition,  the Company had
     outstanding loans from shareholders of (UK Pound)3.0 million as of December
     31, 1996. The convertible  debt outstanding as of December 31, 1993 and (UK
     Pound)3.0 million of additional convertible debt issued in January 1994, as
     well as all interest  accrued  thereon,  was converted by the Company's two
     principal  shareholders  into Ordinary Shares of the Company at a per share
     conversion  price of (UK Pound)2.00 in January 1994. The  convertible  debt
     and loans  from  shareholders  outstanding  as of  December  31,  1996 bear
     interest  at 2% above  the base  lending  rate of  Barclays  Bank plc (8.0%
     effective  rate as of  December  31,  1996).  Under  the  London  Facility,
     principal and interest  cannot be paid until the London Facility is repaid.
     Accrued interest on the convertible debt and loans from shareholders of (UK
     Pound)7.2  million and (UK  Pound)3.9  million as of December  31, 1996 and
     1995, respectively,  has therefore been classified as long-term convertible
     debt and  other  in the  Company's  consolidated  balance  sheet.  Interest
     expense  on the  loans  and  convertible  debt  due to  affiliates  was (UK
     Pound)3.3 million,  (UK Pound)3.2 million and (UK Pound)851,000  during the
     years ended December 31, 1996,  1995 and 1994,  respectively.  A reasonable
     estimate of the amounts due to shareholders and the convertible debt is not
     practicable  to obtain  because of the related  party nature of these items
     and the lack of quoted market prices.

5.   RELATED PARTY TRANSACTIONS

     The Company has  consulting  agreements  with Comcast UK  Consulting,  Inc.
     ("Comcast   Consulting"),   and   TeleWest   Communications   Group   Ltd.,
     subsidiaries of the Company's two principal shareholders,  Comcast UK Cable
     Partners   Limited   and   TeleWest    Communications   plc   ("TeleWest"),
     respectively.   The  Company  pays  a  fee  to  Telewest  each  year  as  a
     contribution  to  the  operating  expenses  and  capital   expenditures  of
     TeleWest's Network Service Center,  which provides telephony support to the
     Company.

     A summary of related party charges  included in the Company's  consolidated
     financial statements is as follows:

<TABLE>
<CAPTION>
                                                                          Year Ended December 31,
                                                                 1996                1995                 1994
                                                            (UK Pound)000        (UK Pound)000        (UK Pound)000
<S>                                                        <C>                 <C>                  <C>
           Consulting fees                                   (UK Pound)790       (UK Pound)962        (UK Pound)847
           Network Service Center fees                                 639                 503                  766
           Other                                                       125                  33                   58
                                                           ---------------     ---------------      ---------------
                                                           (UK Pound)1,554     (UK Pound)1,498      (UK Pound)1,671
                                                           ===============     ===============      ===============
</TABLE>

     As of December  31, 1996 and 1995,  accounts  payable and accrued  expenses
     include (UK Pound)1.6 million and (UK Pound)86,000,  respectively,  payable
     to the Company's two principal  shareholders,  principally  for  consulting
     fees and  normal  operating  expenses  paid by the  shareholders  and their
     affiliates on behalf of the Company.

     In management's  opinion,  the foregoing  transactions were entered into on
     terms  no more or less  favorable  than  those  with  non-affiliated  third
     parties.

                                     - 67 -
<PAGE>
CABLE LONDON PLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (Continued)

6.   INCOME TAXES

     The Company has a deferred tax asset arising from the  carryforward  of net
     operating  losses  and the  differences  between  the book and tax basis of
     property. However, a valuation allowance has been recorded to fully reserve
     the deferred tax asset as its realization is uncertain.

     Significant  components  of the  Company's  deferred  income  taxes  are as
     follows:
<TABLE>
<CAPTION>
                                                                                                  December 31,
                                                                                            1996                1995
                                                                                        (UK Pound)000       (UK Pound)000
<S>                                                                                   <C>                 <C>   
         Net operating loss carryforwards (carried forward indefinitely)..............(UK Pound)15,852    (UK Pound)14,940
         Differences between book and tax basis of property...........................           7,329               3,525
         Other........................................................................            (756)             (1,338)
         Less: Valuation allowance....................................................         (22,425)            (17,127)
                                                                                      ----------------    ----------------
                                                                                      (UK Pound)          (UK Pound)
                                                                                      ================    ================
</TABLE>

7.   STATEMENT OF CASH FLOWS - SUPPLEMENTAL INFORMATION

     The Company made cash payments for interest of approximately  (UK Pound)3.7
     million,  (UK Pound)691,000  and (UK  Pound)369,000  during the years ended
     December 31, 1996, 1995 and 1994, respectively.

8.   COMMITMENTS AND CONTINGENCIES

     Certain of the Company's  facilities and equipment are held under operating
     or capital leases which expire through 2013.

     A summary of assets held under capital leases are as follows:
<TABLE>
<CAPTION>
                                                                                 December 31,
                                                                           1996                1995
                                                                      (UK Pound)000        (UK Pound)000
<S>                                                                  <C>                 <C>  
         System, fixtures, fittings, equipment and vehicles..........(UK Pound)8,219     (UK Pound)6,739
         Less: Accumulated depreciation..............................         (1,523)               (813)
                                                                     ---------------     ---------------
                                                                     (UK Pound)6,696     (UK Pound)5,926
                                                                     ===============     ===============
</TABLE>

                                     - 68 -
<PAGE>
CABLE LONDON PLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (Concluded)

     Future minimum rental payments under lease  commitments  with an initial or
     remaining  term of more  than  one  year as of  December  31,  1996  are as
     follows:
<TABLE>
<CAPTION>
                                                                          Capital            Operating
                                                                           leases              leases
                                                                       (UK Pound)000       (UK Pound)000
<S>                                                                  <C>                <C> 
         1997........................................................   (UK Pound)969       (UK Pound)991
         1998........................................................           1,090                 882
         1999........................................................           1,499                 471
         2000........................................................           1,466                 172
         2001........................................................           1,652                 146
         Thereafter..................................................           4,634               1,101
                                                                      ---------------     ---------------
         Total minimum rental commitments............................(UK Pound)11,310     (UK Pound)3,763
                                                                                          ===============
         Less: Amount representing interest..........................          (3,117)
                                                                      ---------------
         Present value of minimum rental commitments.................           8,193
         Less: Current portion of capital lease obligations..........            (324)
                                                                      ---------------
         Long-term portion of capital lease obligations.............. (UK Pound)7,869
                                                                      ===============
</TABLE>

     Capital  lease  obligations  of (UK  Pound)1.5  million  and (UK  Pound)3.9
     million were  incurred  during the years ended  December 31, 1996 and 1995,
     respectively.

     Operating  lease  expense for the years ended  December 31, 1996,  1995 and
     1994  was  (UK   Pound)1.2   million,   (UK   Pound)1.1   million  and  (UK
     Pound)721,000, respectively.


                                     - 69 -

<PAGE>
ITEM 9   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

         Not applicable.


                                    PART III

The information  called for by Item 10, Directors and Executive  Officers of the
Registrant (except for the information  regarding  executive officers called for
by Item 401 or  Regulation  S-K which is included in Part I hereof as Item 4A in
accordance with General Instruction G(3)), Item 11, Executive Compensation, Item
12, Security Ownership of Certain Beneficial Owners and Management, and Item 13,
Certain  Relationships  and  Related  Transactions,  is hereby  incorporated  by
reference to the Registrant's  definitive Proxy Statement for its Annual Meeting
of  Shareholders  presently  scheduled  to be held in June 1997,  which shall be
filed with the Securities and Exchange  Commission within 120 days of the end of
the Registrant's last fiscal year.


                                     - 70 -

<PAGE>

                                     PART IV

ITEM 14  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

     (a)  The following financial statements are included in Part II, Item 8:

<TABLE>
<S>                                                                                  <C>
              Comcast UK Cable Partners Limited and Subsidiaries
              Independent Auditors' Report............................................29
              Report of Independent Public Accountants ...............................30
              Consolidated Balance Sheet--December 31, 1996 and 1995..................31
              Consolidated Statement of Operations--Years
                Ended December 31, 1996, 1995 and 1994................................32
              Consolidated Statement of Cash Flows--Years
                Ended December 31, 1996, 1995 and 1994................................33
              Consolidated Statement of Shareholders'
                Equity--Years Ended December 31, 1996, 1995 and 1994..................34
              Notes to Consolidated Financial Statements..............................35

              Birmingham Cable Corporation Limited and Subsidiaries
              Independent Auditors' Report............................................46
              Report of Independent Public Accountants................................47
              Consolidated Balance Sheet--December 31, 1996 and 1995..................48
              Consolidated Statement of Operations--Years
                Ended December 31, 1996, 1995 and 1994................................49
              Consolidated Statement of Cash Flows--Years
                Ended December 31, 1996, 1995 and 1994................................50
              Consolidated Statement of Shareholders'
                Equity--Years Ended December 31, 1996, 1995 and 1994..................51
              Notes to Consolidated Financial Statements..............................52

              Cable London PLC and Subsidiaries
              Independent Auditors' Report............................................58
              Report of Independent Public Accountants ...............................59
              Consolidated Balance Sheet--December 31, 1996 and 1995..................60
              Consolidated Statement of Operations--Years
                Ended December 31, 1996, 1995 and 1994................................61
              Consolidated Statement of Cash Flows--Years
                Ended December 31, 1996, 1995 and 1994................................62
              Consolidated Statement of Shareholders'
                Equity--Years Ended December 31, 1996, 1995 and 1994..................63
              Notes to Consolidated Financial Statements..............................64
</TABLE>

     (b)  All financial  statement  schedules  are omitted  because they are not
          applicable,  not required or the required  information  is included in
          the financial statements or notes thereto.

     (c)  Exhibits required to be filed by Item 601 of Regulation S-K:

         2.l*       Reorganization  Agreement,  dated 19 September  1994,  among
                    Warburg,  Pincus Investors,  L.P., Bankers Trust Investments
                    PLC  ("Bankers  Trust"),  Comcast  Corporation  ("Comcast"),
                    Comcast UK Holdings, Inc., ("Holdings"),  the Company and UK
                    Cable Partners Limited ("UKCPL")
         3(i)+      Memorandum of Association of the Company
         3(ii)+     Bye-laws of the Company
         4.l+       Form of Certificate for Class A Common Shares, par value (UK
                    Pound)0.01 per share

                                     - 71 -
<PAGE>
          4.2*      Indenture dated as of November 15, 1995, between the Company
                    and Bank of Montreal Trust Company,  as Trustee,  in respect
                    of the Company's 11.20% Senior Discount  Debentures Due 2007
                    (the "Debentures")
          4.2a      Form of certificate  of the Debentures  (included in Exhibit
                    4.2)
          10.1+     Subscription  and Contribution  Agreement,  dated 26 October
                    1992, among Comcast, UKCPL, the Company,  Holdings,  Comcast
                    Cablevision of Birmingham,  Inc. ("Comcast  Birmingham") and
                    Comcast Cablevision of London, Inc.
          10.2+     Shareholders   Agreement,   dated  11  December   1992  (the
                    "Shareholders   Agreement"),   among  Holdings,  UKCPL,  the
                    Company and Comcast
          10.3+     Delegation   Agreement,   dated  11   December   1992   (the
                    "Delegation Agreement"),  among LTK Consulting,  Comcast and
                    Comcast UK Consulting, Inc. ("Comcast Consulting")
          10.4+     NewCo Services Agreement, dated 11 December 1992 (the "NewCo
                    Services  Agreement"),  between  the  Company and Comcast UK
                    Cable Partners Consulting, Inc. ("UK Consulting")
         10.5++     Supplemental Agreement, dated as of June 21, 1995, among the
                    Company,  Comcast  Consulting,  Comcast,  Holdings,  Warburg
                    Pincus and UK  Consulting to the NewCo  Services  Agreement,
                    the Delegation Agreement and the Shareholders Agreement
          10.6+     Memorandum of  Association  and Articles of  Association  of
                    Birmingham Cable Corporation Limited ("Birmingham Cable")
          10.7+     Co-ownership Agreement, dated 12 March 1990, between US West
                    International   Holdings,   Inc.  ("US  West")  and  Comcast
                    Birmingham
          10.7a+    Letter,  dated  29  April  1992,  from US  West  to  Comcast
                    Birmingham relating to the Co-ownership Agreement
          10.7b+    Letter, dated 6 May 1992, from US West to Comcast Birmingham
                    relating to the Co-ownership Agreement
          10.8+     Subscription Agreement, dated 4 May 1989, between Birmingham
                    Cable and US West 
          10.8a+    Subscription Agreement,  dated 31 May 1989, among Birmingham
                    Cable,  US West,  Compagnie  Generale des Eaux ("CGE"),  The
                    Cable  Corporation  Limited  ("TCC") and the  Standard  Life
                    Insurance Company ("Standard Life")
          10.8b+    Supplemental  Subscription  Agreement,  dated 16 March 1990,
                    among  Birmingham  Cable, US West, CGE, TCC,  Standard Life,
                    Comcast Birmingham and General Cable PLC ("General Cable")
          10.8c+    Second Supplemental  Subscription Agreement,  dated 16 March
                    1990,  among Birmingham  Cable, US West, CGE, TCC,  Standard
                    Life, Comcast Birmingham and General Cable
          10.8d+    Third  Supplemental  Subscription  Agreement,  dated  12 May
                    1992,  among Birmingham  Cable, US West, CGE, TCC,  Standard
                    Life,  Comcast  Birmingham,  General Cable and US West Cable
                    Programming Corporation
          10.8e*    Agreement relating to Birmingham Cable, dated 30 March 1994,
                    among  General  Cable,  CGE,  TeleWest   Communications  plc
                    ("TeleWest"),  US  West,  United  Artists  Cable  Television
                    International  Holdings,  Inc., the Company,  Comcast,  TCC,
                    Birmingham Cable, Birmingham Cable Limited and Standard Life
          10.9+     Management  Agreement,  dated 25 April 1990 (the "Management
                    Agreement"),   among  Birmingham  Cable,   Birmingham  Cable
                    Limited, US West and Comcast Birmingham
          10.9a+    Assignment Agreement,  dated 27 August 1990, relating to the
                    Management   Agreement   
          10.9b+    Assignment  and  Amendment  Agreement,  dated 5 August 1992,
                    relating to the Management Agreement
          10.10+    Consultant  Agreement,  dated 17 July 1992, among Birmingham
                    Cable,  Birmingham Cable Limited and TeleWest Communications
                    Group Limited
          10.12+    Memorandum of  Association  and Articles of  Association  of
                    Cable London PLC ("Cable London")
          10.13+    Consultant  Agreement,  dated 16 August 1989,  between Cable
                    London and US West Cable Communications Limited
          10.14+    Consultant  Agreement,  dated 17 August  1989  (the  "London
                    Consultant Agreement"), between Cable London and Comcast
          10.14a+   Assignment  Agreement,  dated 14 September 1990, relating to
                    the London Consultant Agreement

                                     - 72 -
<PAGE>
          10.15+    Subscription  Agreement,  dated 10 July  1989,  among  Cable
                    London,  US West,  Comcast,  Jerrold Samuel Nathan,  Malcolm
                    John Gee, Sally Margaret Davis and Steven Michael Kirk
          10.16x    Share  Exchange  Agreement,  dated 4  December  1995,  among
                    SingTel, Cambridge Cable, the Company and Holdings
          10.17+    Share Exchange  Agreement,  dated 5 May 1994, between Avalon
                    Telecommunications L.L.C. and the Company
          10.18ss.  1995 Stock Appreciation Rights Plan (1)
          10.19y    1995 Stock Option Plan (1)
          21.1+     List of subsidiaries of the Company
          23.1      Consents of Arthur Andersen LLP
          23.2      Consent of Arthur Andersen--Birmingham
          23.3      Consent of Arthur Andersen--London
          23.4      Consents of Deloitte & Touche LLP
          23.5      Consent of Deloitte & Touche--Birmingham
          23.6      Consent of Deloitte & Touche--London
          27.1      Financial Data Schedule
          99.1y     Consolidated   financial  statements  of  Cambridge  Holding
                    Company  Limited  (a  United  Kingdom   corporation  in  the
                    prematurity  stage) and subsidiaries as of and for the years
                    ended December 31, 1995 and 1994

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

(1)  Constitutes a management contract or compensatory plan or arrangement.
*    Incorporated by reference to the Company's  registration  statement on Form
     S-1 (file number 33-96932) declared effective November 9, 1995.
+    Incorporated by reference to the Company's  registration  statement on Form
     S-1 (file number 33-76160) declared effective September 20, 1994.
++   Incorporated  by reference to the Company's  Quarterly  Report on Form 10-Q
     for the quarter ended June 30, 1995 (file number 0-24792).
ss.  Incorporated  by reference to the Company's  Quarterly  Report on Form 10-Q
     for the quarter ended March 31, 1995 (file number 0-24792).
x    Incorporated by reference to the Company's Current Report on Form 8-K dated
     January 22, 1996.
y    Incorporated  by reference to the Company's  Annual Report on Form 10-K for
     the year ended December 31, 1995 (file number 0-24792).

(d)  Reports of Form 8-K - none.

                                     - 73 -
<PAGE>

                                   SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this Report to be signed on its
behalf by the undersigned, thereunto duly authorized on March 28, 1997.

                                        COMCAST UK CABLE PARTNERS LIMITED

                                        By:  /s/ JOHN R. ALCHIN
                                             ----------------------------
                                             JOHN R. ALCHIN
                                             Senior Vice President and Treasurer
                                             (Principal Financial Officer); 
                                             Director

Pursuant to the requirement of the Securities  Exchange Act of 1934, this Report
has been signed  below by the  following  persons in the  capacities  and on the
dates indicated.
<TABLE>
<CAPTION>
Signature                                   Title                                   Date
<S>                                        <C>                                   <C>    

/s/ RALPH J. ROBERTS
------------------------------------
RALPH J. ROBERTS                            Chairman of the Board of                March 28, 1997
                                            Directors; Director

/s/ BRIAN L. ROBERTS
------------------------------------
BRIAN L. ROBERTS                            President (Principal                    March 28, 1997
                                            Executive Officer); Director

/s/ JULIAN A. BRODSKY
------------------------------------
JULIAN A. BRODSKY                           Vice Chairman of the Board              March 28, 1997
                                            of Directors; Director

/s/ LAWRENCE S. SMITH
------------------------------------
LAWRENCE S. SMITH                           Executive Vice President                March 28, 1997
                                            (Principal Accounting Officer);
                                            Director

/s/ JOHN R. ALCHIN
------------------------------------
JOHN R. ALCHIN                              Senior Vice President and               March 28, 1997
                                            Treasurer (Principal Financial
                                            Officer); Director


------------------------------------
ROBERT B. CLASEN                            Director    


------------------------------------
JONATHAN PERRY                              Director 


                                     - 74 -

<PAGE>

Signature                                   Title                                   Date

/s/ HOWARD H. NEWMAN
------------------------------------
HOWARD H. NEWMAN                            Director                                March 28, 1997

/s/ JEFFREY A. HARRIS
------------------------------------
JEFFREY A. HARRIS                           Director                                March 28, 1997

/s/ H. BRIAN THOMPSON
------------------------------------
H. BRIAN THOMPSON                           Director                                March 28, 1997

/s/ JOHN R. ALCHIN
------------------------------------
JOHN R. ALCHIN                              Authorized Representative               March 28, 1997
                                            in the United States
</TABLE>

                                     - 75 -
<PAGE>
                                INDEX TO EXHIBITS

Exhibit
 Number                      Exhibit

  23.1         Consents of Arthur Andersen LLP

  23.2         Consent of Arthur Andersen -- Birmingham

  23.3         Consent of Arthur Andersen -- London

  23.4         Consents of Deloitte & Touche LLP

  23.5         Consent of Deloitte & Touche -- Birmingham

  23.6         Consent of Deloitte & Touche -- London

  27.1         Financial Data Schedule