##### Table of Contents



As filed with the Securities and Exchange Commission on
September 30, 2005








UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





Form 20-F


|           |  |                                                                                                                                                                                                                                                                                                                                         
|---------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                                                                                                                                                                                                                                                                         
|o          |  | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g)
    OF THE SECURITIES EXCHANGE ACT OF 1934
    OR                                                                                                                                                                                                                               
|þ          |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934
    For the fiscal year ended March 31, 2005
    OR                                                                                                                                                                                            
|o          |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934
    OR                                                                                                                                                                                                                                     
|o          |  | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
    THE SECURITIES EXCHANGE ACT OF 1934
    Date of event requiring this shell company
    report 
    If this is an annual report, indicate by check mark whether the
    registrant is a shell company (as defined in Rule 12b-2 of
    the Exchange
    Act).  Yes o     No o








M (2003) plc




(Exact name of Registrant as specified in its charter)





ENGLAND AND WALES


(Jurisdiction of incorporation or organization)


8 Salisbury Square


London EC4Y 8BB


United Kingdom


(Address of principal executive office)
































þ o




o þ






þ o










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TABLE OF CONTENTS


|             |  |                                                                                  |    |      |    | 
|------------ |  | -------------------------------------------------------------------------------- | -- | ---- | -- | 
|             |  |                                                                                  |    | Page |   
|             |  |                                                                                  |    |      |   
|PART I       |  |                                                                                  | 2  |     
|Item 1:      |  | Identity of Directors, Senior Management
    and Advisers                        |    |      | 2  | 
|Item 2:      |  | Offer Statistics and Expected Timetable                                          |    |      | 2  | 
|Item 3:      |  | Key Information                                                                  |    |      | 2  | 
|Item 4:      |  | Information on the Company                                                       |    |      | 5  | 
|Item 5:      |  | Operating and Financial Review and
    Prospects                                 |    |      | 7  | 
|Item 6:      |  | Directors, Senior Management and
    Employees                                   |    |      | 8  | 
|Item 7:      |  | Major Shareholders and Related Party
    Transactions                            |    |      | 9  | 
|Item 8:      |  | Financial Information                                                            |    |      | 10 | 
|Item 9:      |  | The Offer and Listing                                                            |    |      | 12 | 
|Item 10:     |  | Additional Information                                                           |    |      | 13 | 
|Item 11:     |  | Quantitative and Qualitative Disclosures
    about Market Risk                   |    |      | 18 | 
|Item 12:     |  | Description of Securities other than Equity
    Securities                       |    |      | 18 | 
|PART II      |  |                                                                                  | 19 |     
|Item 13:     |  | Defaults, Dividend Arrearages and
    Delinquencies                              |    |      | 19 | 
|Item 14:     |  | Material Modifications to the Rights of
    Security Holders and Use of Proceeds |    |      | 19 | 
|Item 15:     |  | Controls and Procedures                                                          |    |      | 19 | 
|Item 16A:    |  | Audit Committee Financial Expert                                                 |    |      | 19 | 
|Item 16B:    |  | Code of Ethics                                                                   |    |      | 19 | 
|Item 16C:    |  | Principal Accountant Fees and Services                                           |    |      | 19 | 
|Item 16E:    |  | Purchases of Equity Securities by the
    Issuer and Affiliated Purchasers       |    |      | 19 | 
|PART III     |  |                                                                                  | 20 |     
|Item 17:*    |  | Financial Statements                                                             |    |      | 20 | 
|Item 18:     |  | Financial Statements                                                             |    |      | 20 | 
|Item 19:     |  | Exhibits                                                                         |    |      | 20 | 
|EXHIBIT 12.1 |  |                                                                                  |    |     
|EXHIBIT 12.2 |  |                                                                                  |    |     
|EXHIBIT 13.1 |  |                                                                                  |    |     
|Exhibit 12.1
|Exhibit 12.2
|Exhibit 13.1





| |   |                                                                     
| | - | --------------------------------------------------------------------
| | * | We have responded to Item 18 in lieu of responding to this
    Item.

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PRESENTATION OF FINANCIAL AND OTHER INFORMATION




Under the terms of the M (2003) plc scheme of
arrangement, all of our assets, other than those necessary to
fund the administration of the scheme and the company will be
distributed to scheme creditors in accordance with the scheme of
arrangement. The Directors expect to dissolve
M (2003) plc at approximately the same time as the
completion of these distributions to scheme creditors. While
M (2003) plc shares, and ADRs representing
M (2003) plc shares, remain outstanding following the
effectiveness of the financial restructuring, the Directors
believe that there will be no circumstances under which any
additional value will be returned to shareholders of
M (2003) plc. As that is the case, the Directors
believe M (2003) plc shares and ADRs are worthless.











1



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##### Table of Contents






PART I





Item 1: Identity of Directors, Senior Management
and Advisers







Item 2: Offer Statistics and Expected
Timetable







Item 3: Key Information


SELECTED CONSOLIDATED FINANCIAL DATA






2



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SELECTED CONSOLIDATED FINANCIAL DATA 
(continued)


|                                                                                                                                                  |                        |       |           |   |      |  |           |         |         |  |           |           |           |      |           |           |           |  |           |           |           | 
|------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------- | ----- | --------- | - | ---- |  | --------- | ------- | ------- |  | --------- | --------- | --------- | ---- | --------- | --------- | --------- |  | --------- | --------- | --------- | 
|                                                                                                                                                  |                        | 2005  |           |   | 2004 |  |           | 2003    |         |  | 2002      |           |           | 2001 |          
|                                                                                                                                                  |                        | £000  |           |   | £000 |  |           | £000    |         |  | £000      |           |           | £000 |          
|                                                                                                                                                  |                        |       |          
|STATEMENT OF OPERATIONS DATA:                                                                                                                     |                        |       |           |   |      |  |           |         |         |  |           |           |           |      |           |           |           |  |           |          
|Revenues                                                                                                                                          |                        |       |           |   |      |  |           |         |         |  |           |           |           |      |           |           |           |  |           |          
|                                                                                                                                                  | Network Equipment      |       |           |  |      |  |           | 100,000 |         |  |           | 1,131,000 |           |      |           | 1,812,000 |           |  |           | 3,268,000 |          
|                                                                                                                                                  | Network Services       |       |           |  |      |  |           | 68,000  |         |  |           | 743,000   |           |      |           | 969,000   |           |  |           | 1,016,000 |          
|                                                                                                                                                  | Other                  |       |           |  |      |  |           |        |         |  |           | 22,000    |           |      |           | 465,000   |           |  |           | 637,000   |          
|                                                                                                                                                  |                        |       |           |   |      |  |           |         |         |  |           |           |           |      |          
|                                                                                                                                                  |                        | Total |           |   |     |  |           |         | 168,000 |  |           |           | 1,896,000 |      |           |           | 3,246,000 |  |           |           | 4,921,000 | 
|                                                                                                                                                  |                        |       |           |   |      |  |           |         |         |  |           |           |           |      |          
|Operating
    loss(1)                                                                                                                             |                        |       | (1,284    | ) |      |  | (58,000   | )       |         |  | (608      | )         |           |      | (6,392    | )         |           |  | (52       | )        
|Other income/(expense),
    net(2)                                                                                                                |                        |       | 361       |   |      |  | 2,335,000 |         |         |  | (295      | )         |           |      | 23        |           |           |  | 310       |          
|Income/(loss) from continuing operations before income taxes,
    minority interest and cumulative effect of changes in accounting
    principles |                        |       | (923      | ) |      |  | 2,277,000 |         |         |  | (903      | )         |           |      | (6,369    | )         |           |  | 258       |          
|Income/(loss) from continuing operations before cumulative
    effects of changes in accounting principles                                        |                        |       | (1,108    | ) |      |  | 2,276,000 |         |         |  | (756      | )         |           |      | (6,094    | )         |           |  | 101       |          
|Cumulative effects of changes in accounting
    principles(3)                                                                                     |                        |       |           |   |      |  |          |         |         |  |          |           |           |      | (240      | )         |           |  |          |          
|Net income/(loss)                                                                                                                                 |                        |       | (1,108    | ) |      |  | 2,276,000 |         |         |  | (807      | )         |           |      | (6,150    | )         |           |  | 180       |          
|Cash dividends declared per common share
    (4)                                                                                                  |                        |       |           |   |      |  |           |         |         |  |           |           |           |      |           |           |           |  |           |          
|                                                                                                                                                  | £ per share            |       |           |  |      |  |           |        |         |  |           |          |           |      |           |          |           |  |           | £0.05     |          
|                                                                                                                                                  | $ equivalent per share |       |           |  |      |  |           |        |         |  |           |          |           |      |           |          |           |  |           | $0.08     |          
|BALANCE SHEET DATA:                                                                                                                               |                        |       |           |   |      |  |           |         |         |  |           |           |           |      |           |           |           |  |           |          
|Total assets                                                                                                                                      |                        |       | 8,266     |   |      |  | 8,961     |         |         |  | 3,111     |           |           |      | 4,925     |           |           |  | 11,683    |          
|Net assets/(liabilities)                                                                                                                          |                        |       | 8,266     |   |      |  | 8,961     |         |         |  | (2,500    | )         |           |      | (1,493    | )         |           |  | 4,805     |          
|Capital stock                                                                                                                                     |                        |       | 799,000   |   |      |  | 799,000   |         |         |  | 1,220     |           |           |      | 1,203     |           |           |  | 946       |          
|Shares issued and outstanding (millions)                                                                                                          |                        |       | 2,793,011 |   |      |  | 2,793,011 |         |         |  | 2,793,011 |           |           |      | 2,793,011 |           |           |  | 2,785,000 |          





| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | For fiscal 2002, operating loss is reflected after business
    restructuring and asset impairment charges of
    £5,319 million.                                                                                                                                                                                                                                                                                                                                                                  
|
| | (2) | For fiscal 2004, other income/(expense), net includes a gain on
    financial restructuring of £2,183 million and a gain
    on settlement of equity forward contracts of
    £123 million. For fiscal 2002, other income/expense,
    net includes a gain on early retirement of debt of
    £166 million. This reclassification has been made on
    adoption of SFAS 145, Recission of FASB Statements
    No. 4, 44, and 64, Amendment of FASB Statement No. 13,
    and Technical Corrections.
|
| | (3) | We adopted EITF 00-19, Accounting for Derivative
    Instruments Indexed to, and Potentially Settled in, the
    Companys Own Stock, in fiscal 2002. The value of such
    instruments, as of the implementation date, was recorded as a
    cumulative effect of a change in accounting principles of
    £240 million in fiscal 2002.                                                                                                                                                           
|
| | (4) | Dividend payments were made out of net income, which included
    income from discontinued operations.                                                                                                                                                                                                                                                                                                                                                                                             

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EXCHANGE RATE INFORMATION






|                       |  |      |        |  |     |  |        | 
|---------------------- |  | ---- | ------ |  | --- |  | ------ | 
|2005                   |  | High |        |  | Low | 
|                       |  |      |       
|April                  |  |      | 1.9197 |  |     |  | 1.8733 | 
|May                    |  |      | 1.9048 |  |     |  | 1.8205 | 
|June                   |  |      | 1.8368 |  |     |  | 1.7930 | 
|July                   |  |      | 1.7753 |  |     |  | 1.7303 | 
|August                 |  |      | 1.8148 |  |     |  | 1.7695 | 
|September (through 27) |  |      | 1.8420 |  |     |  | 1.7677 | 



|                            |  |         |        | 
|--------------------------- |  | ------- | ------ | 
|Fiscal Year Ended March 31, |  | Average |       
|                            |  |         |       
|2001                        |  |         | 1.4737 | 
|2002                        |  |         | 1.4320 | 
|2003                        |  |         | 1.5541 | 
|2004                        |  |         | 1.8400 | 
|2005                        |  |         | 1.8506 | 

RISK FACTORS


As a result of our financial restructuring, we have ceased
business operations and intend to distribute our remaining
assets to our creditors.






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Item 4: Information on the Company


HISTORY AND DEVELOPMENT OF THE COMPANY








Financial Restructuring








| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Cash: £340 million in cash;                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  | Senior Notes: U.S.$717,139,584 (approximately
    £437 million) in aggregate principal amount of new
    guaranteed senior secured notes due April 2008 issued by Marconi
    Corporation plc, with interest payable quarterly in cash at a
    rate of 8% per annum. Since the implementation of the schemes,
    Marconi Corporation plc has fully redeemed for U.S. dollars
    these Notes;                                                                                                          
|
| |  | Junior Notes: U.S.$486,881,472 (approximately
    £297 million) in aggregate principal amount of new
    guaranteed junior secured notes due October 2008 issued by
    Marconi Corporation plc, with interest payable quarterly in cash
    at a rate of 10% per annum or, at our option, in kind, by
    issuing additional junior notes, at a rate of 12% per
    annum. Since the implementation of the schemes, Marconi
    Corporation plc has fully redeemed for U.S. dollars these
    Notes; and
|
| |  | Marconi Corporation plc Shares: 995 million ordinary
    shares, representing 99.5% of Marconi Corporation plcs
    issued ordinary share capital on May 19, 2003.                                                                                                                                                                                                                                                                                                                                      



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BUSINESS OVERVIEW








PROPERTY, PLANT AND EQUIPMENT




6



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Item 5: Operating and Financial Review and
Prospects










Pursuant to the M (2003) plc scheme of arrangement,
the remaining assets of M (2003) plc will be
distributed to scheme creditors, and it is intended that
M (2003) plc will be dissolved. There will be no
circumstances under which any value will be returned to
shareholders under the terms of the scheme.










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Item 6: Directors, Senior Management and
Employees


DIRECTORS AND SENIOR MANAGEMENT


Directors




|                         |  |     |    |  |       |         
|------------------------ |  | --- | -- |  | ----- | --------
|Name                     |  | Age |    |  | Title
|                         |  |     |    |  |      
|John Jameson White       |  |     | 67 |  |       | Chairman
|Christopher James Shaw   |  |     | 52 |  |       | Director
|Richard Anthony Robinson |  |     | 57 |  |       | Director



John Jameson White


Christopher James Shaw


Richard Anthony Robinson


Executive Officers


Kevin David Smith


COMPENSATION




|                                                                    |  |       |    |  |       |  |     | 
|------------------------------------------------------------------- |  | ----- | -- |  | ----- |  | --- | 
|                                                                    |  | 2005  |    |  | 2004  | 
|                                                                    |  | £000 |    |  | £000 | 
|                                                                    |  |       |   
|Directors emoluments                                               |  |       | 48 |  |       |  | 338 | 
|Amounts receivable under long-term incentive schemes                |  |       |   |  |       |  |    | 
|Company contributions to money purchase pension schemes             |  |       |   |  |       |  | 61  | 
|Amounts paid to third parties in respect of directors
    services |  |       |   |  |       |  | 7   | 



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BOARD PRACTICES


General








EMPLOYEES




SHARE OWNERSHIP




|             |  |             |        |  |          |  |     |          |              |  |      |  |  |  |        | 
|------------ |  | ----------- | ------ |  | -------- |  | --- | -------- | ------------ |  | ---- |  |  |  | ------ | 
|             |  | On          |        |  |          |  |     |          | At March 31, | 
|             |  | Appointment |        |  | Acquired |  |     | Disposed |              |  | 2005 | 
|             |  |             |       
|R A Robinson |  |             | 11,442 |  |          |  | nil |          |              |  | nil  |  |  |  | 11,442 | 
|C J Shaw     |  |             | nil    |  |          |  | nil |          |              |  | nil  |  |  |  | nil    | 
|J J White    |  |             | nil    |  |          |  | nil |          |              |  | nil  |  |  |  | nil    | 
|             |  |             |        |  |          |  |     |          |              |  |      | 



|                                     |  |             |        |  |         |  |     |           |  |  |              |  |  |      |     |  |  |  |        | 
|------------------------------------ |  | ----------- | ------ |  | ------- |  | --- | --------- |  |  | ------------ |  |  | ---- | --- |  |  |  | ------ | 
|                                     |  | On          |        |  |         |  |     |           |  |  | At March 31, | 
|Plan                                 |  | Appointment |        |  | Granted |  |     | Exercised |  |  | Lapsed       |  |  | 2005 |    
|                                     |  |             |       
|The Marconi Launch Plan              |  |             | 1,000  |  |         |  | nil |           |  |  | nil          |  |  |      | nil |  |  |  | 1,000  | 
|The Marconi Long Term Incentive Plan |  |             | 15,164 |  |         |  | nil |           |  |  | nil          |  |  |      | nil |  |  |  | 15,164 | 
|Total                                |  |             | 16,164 |  |         |  | nil |           |  |  | nil          |  |  |      | nil |  |  |  | 16,164 | 
|                                     |  |             |        |  |         |  |     |           |  |  |              |  |  |      |    




Item 7: Major Shareholders and Related Party
Transactions


MAJOR SHAREHOLDERS






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RELATED PARTY TRANSACTIONS







Item 8: Financial Information


LEGAL PROCEEDINGS








| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Systems Management Specialists, Inc., or SMS, is a defendant in
    a demand for arbitration brought by Esprit de Corp, or Esprit,
    in April 2002. This action relates to two outsourcing agreements
    entered into by Esprit and SMS in 1995 and 1999; Esprit alleges
    that SMS breached its obligations under the agreements and is
    seeking damages in range of U.S.$8.8-U.S.$18.2 million.
    M (2003) plc was originally a party to the arbitration
    demand under a legal theory alleging that SMS and M (2003)
    plc are alter egos of one another. In April 2002,
    M (2003) plc filed a complaint for declaratory and
    injunctive relief in the U.S. District Court for the
    Central District of California, to enjoin Esprits attempt
    to proceed in arbitration against M (2003) plc. In
    June, 2002, Esprit and M (2003) plc filed a joint
    stipulation to stay and enjoin the arbitration preceding as to
    M (2003) plc. In July 2002, M (2003) plc filed a
    motion to dismiss Esprits claims and a motion to stay the
    federal court proceeding until after the arbitration between SMS
    and Esprit concluded. The Court denied
    M (2003) plcs motion to dismiss, but granted
    M (2003) plcs motion to stay, and, therefore,
    Esprit will be permitted to proceed on its claims against
    M (2003) plc only after the arbitration between SMS
    and Esprit is completed, and only to the extent Esprit prevails
    on any of its claims in the arbitration against SMS. The parties
    had agreed to conduct the arbitration hearing between
    October 13-24, 2003, and significant discovery had taken
    place. Beginning in September 2003, the parties reached a
    settlement in principle in the U.S.$710,000-U.S.$725,000 range,
    payable to Esprit in exchange for a full release and settlement
    of the actions. Effective September 29, 2004, the parties
    executed a Settlement Agreement, settling the case for
    U.S.$725,000 and such amount was paid by SMS to Esprit.

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Marconi Corporation plc and Marconi Commerce Systems Inc., or
    MCSI, are defendants in an action brought by a former employee,
    Larry Anthony Gillus, or Gillus. The complaint alleges that
    Gillus suffered racial discrimination and subsequent retaliatory
    action whilst employed by Gilbarco, subsequently known as MCSI,
    which has now been sold to subsidiaries of Danaher Corporation
    plc. A second claim has been brought against
    M (2003) plc and MCSI for retaliation and intentional
    infliction of emotional distress alleged to have occurred after
    he brought the original action. Additionally, on
    September 10, 2003, the Court granted plaintiffs
    motion to add a breach of employment contract claim and
    injunctive relief. Gillus counsel has in the past stated
    that he is seeking a total of U.S.$19 million in respect of
    both claims. Potential liabilities in respect of the claim
    against Marconi Corporation plc and M (2003) plc were
    compromised pursuant to its restructuring. As a result, on
    November 5, 2003, Gillus voluntarily dismissed without
    prejudice Marconi Corporation plc and M (2003) plc
    from the cases. Discovery was commenced and completed with
    respect to the remaining defendants. The case was settled for
    U.S.$400,000 at mediation on December 7, 2004. A Settlement
    Agreement and Release was executed on January 18, 2005.                                                                                                                                                                                                                                                                                                                                                                          
|
| |  | Marconi Corporation plc, M (2003) plc, Marconi Inc.
    and Marconi Data Systems Inc. are defendants in an action
    brought by a former employee, Thomas Edeus, or Edeus. The
    complaint asserts three causes of action; firstly that Edeus was
    unlawfully deprived of benefits to which he was entitled under
    Marconi Data Systems Incs United States severance plan;
    secondly for failure to provide Edeus with a summary plan
    description relating to the severance plan; and thirdly for age
    discrimination in employment. The plaintiff has purported to
    have made out claims in various specified amounts totaling over
    U.S.$901,000, some of which may be in the alternative, and also
    unspecified punitive damages, liquidated damages and front and
    back pay, making the impact of this claim on us and the former
    group difficult to assess. An answer and affirmative defenses
    have been filed on behalf of all defendants. On June 5,
    2003, the court entered an order providing as follows:
    Plaintiff having advised the court that one or more
    defendants [sic] are in Bankruptcy, this action is placed
    on the courts [suspense] calendar pending disposition of
    the bankruptcy case. Plaintiff is directed to file a notice for
    hearing a motion to reinstate upon disposition of the bankruptcy
    proceedings. Potential liabilities in respect of the claim
    against Marconi Corporation plc and M (2003) plc were
    compromised pursuant to our restructuring. The M (2003) plc
    and Marconi Corporation plc bankruptcy case in the New York
    courts resulted in a permanent injunction. The bankruptcy case
    was closed on February 14, 2005 and this does not affect
    the permanent injunction that applies to Edeus claim.
|
| |  | In April 2002, 11 former employees of Ten Square Inc.
    brought a claim against directors of their company for fraud in
    reducing their compensation package before liquidating the
    company and restarting it under a different name. The claim was
    for a total of $2,160,050.91. The plaintiffs alleged that
    M (2003) plc was a director of Ten Square Inc.
    although in fact M (2003) plc only had a right to
    appoint a director, a right M (2003) plc had not
    recently exercised. Marconi Ventures was also named as a
    plaintiff on September 9, 2002. The plaintiffs did not
    serve proceedings upon M (2003) plc and on
    October 24, 2002 an order for the dismissal of the claim
    against M (2003) plc and Marconi Ventures was entered.
    However, M (2003) plc was named in the second amended
    complaint which was filed on December 24, 2002.
    M (2003) plc is aware of the action but has not been
    served and is not yet a party to it. Potential liabilities in
    respect of the claim against M (2003) plc have been
    compromised pursuant to the M (2003) plc scheme of
    arrangement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  



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DIVIDEND POLICY




SIGNIFICANT CHANGES







Item 9: The Offer and Listing


STOCK PRICE HISTORY/ MARKETS




|                                      |  |                  |         |     |              |  |        |      |  |  |       |  |  |  |      | 
|------------------------------------- |  | ---------------- | ------- | --- | ------------ |  | ------ | ---- |  |  | ----- |  |  |  | ---- | 
|                                      |  | London Stock     |         |     |             
|                                      |  | Exchange         |         |     | ADRs         | 
|                                      |  | (Sterling pence) |         |     | (US dollars) | 
|                                      |  | High             |         |     | Low          |  |        | High |  |  | Low   | 
|                                      |  |                  |        
|Fiscal Year                           |  |                  |         |     |              |  |        |      |  |  |       |  |  |  |      | 
|April 1, 2000 to March 31, 2001       |  |                  | 1250.00 |     |              |  | 340.00 |      |  |  |      |  |  |  |     | 
|April 1, 2001 to March 31, 2002       |  |                  | 424.00  |     |              |  | 6.25   |      |  |  | 12.85 |  |  |  | 0.18 | 
|April 1, 2002 to March 31, 2003       |  |                  | 12.55   |     |              |  | 1.27   |      |  |  | 0.44  |  |  |  | 0.04 | 
|April 1, 2003 to March 31, 2004       |  |                  | 1.80    | (*) |              |  | 0.60   | (*)  |  |  | 0.18  |  |  |  | 0.03 | 
|April 1, 2004 to March 31, 2005       |  |                  |        |     |              |  |       |      |  |  | 0.08  |  |  |  | 0.00 | 
|Fiscal Quarter                        |  |                  |         |     |              |  |        |      |  |  |       |  |  |  |      | 
|April 1, 2003 to June 30, 2003        |  |                  | 1.80    | (*) |              |  | 0.60   | (*)  |  |  | 0.09  |  |  |  | 0.03 | 
|July 1, 2003 to September 30, 2003    |  |                  |        |     |              |  |       |      |  |  | 0.18  |  |  |  | 0.07 | 
|October 1, 2003 to December 31, 2003  |  |                  |        |     |              |  |       |      |  |  | 0.12  |  |  |  | 0.04 | 
|January 1, 2004 to March 31, 2004     |  |                  |        |     |              |  |       |      |  |  | 0.08  |  |  |  | 0.03 | 
|April 1, 2004 to June 30, 2004        |  |                  |        |     |              |  |       |      |  |  | 0.08  |  |  |  | 0.01 | 
|July 1, 2004 to September 30, 2004    |  |                  |        |     |              |  |       |      |  |  | 0.02  |  |  |  | 0.01 | 
|October 1, 2004 to December 31, 2004  |  |                  |        |     |              |  |       |      |  |  | 0.05  |  |  |  | 0.00 | 
|January 1, 2005 to March 31, 2005     |  |                  |        |     |              |  |       |      |  |  | 0.01  |  |  |  | 0.00 | 
|Month                                 |  |                  |         |     |              |  |        |      |  |  |       |  |  |  |      | 
|April 2005                            |  |                  |        |     |              |  |       |      |  |  | 0.00  |  |  |  | 0.00 | 
|May 2005                              |  |                  |        |     |              |  |       |      |  |  | 0.00  |  |  |  | 0.00 | 
|June 2005                             |  |                  |        |     |              |  |       |      |  |  | 0.00  |  |  |  | 0.00 | 
|July 2005                             |  |                  |        |     |              |  |       |      |  |  | 0.00  |  |  |  | 0.00 | 
|August 2005                           |  |                  |        |     |              |  |       |      |  |  | 0.00  |  |  |  | 0.00 | 
|September 2005 (through September 16) |  |                  |        |     |              |  |       |      |  |  | 0.00  |  |  |  | 0.00 | 



| |   |                                                                               
| | - | ------------------------------------------------------------------------------
| | * | To May 16, 2003, which was the last day of dealings in
    M (2003) plc shares

12



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##### Table of Contents






Item 10: Additional Information


MEMORANDUM AND ARTICLES OF ASSOCIATION




MATERIAL CONTRACTS




EXCHANGE CONTROLS




TAXATION


United States Federal Income Taxation


Prospective and existing holders should be aware that the
Directors opinion is that under no circumstances will any
Shareholders or ADR holders ever receive any payments out of
M (2003) plcs assets.






Prospective holders should consult their own tax adviser with
respect to the U.S. federal, estate, state, local, gift and
other tax consequences of acquiring, owning and disposing of our
ordinary shares and/or ADRs.


U.S. Holders should also review the discussion below
under  United Kingdom Taxation for the
U.K. tax consequences to a U.S. holder of our ordinary
shares and/or ADRs.


13



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##### Table of Contents







| |              
| | -------------
| | Distributions











| |                                                                
| | ---------------------------------------------------------------
| | Sale or Other Disposition of Marconi plc Shares and/or
    ADRs





14



---



##### Table of Contents









| |                                                  
| | -------------------------------------------------
| | Passive Foreign Investment Company Considerations







Prospective
holders should consult their own tax advisers as to whether our
ordinary shares and/or ADRs would qualify for the mark-to-market
election and whether such election is advisable.




15



---



##### Table of Contents







Holders are urged to consult their own tax advisers regarding
whether an investment in our ordinary shares or ADRs will be
treated as an investment in PFIC stock and the consequences of
an investment in a PFIC.


Backup Withholding and Information Reporting






| |                                                                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Prospective holders should consult their own tax advisers
    as to their qualification for exemption from backup withholding
    and the procedure for obtaining this exemption.

United Kingdom Taxation




HMRC Treaty






| |                      
| | ---------------------
| | Taxation of dividends



16



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##### Table of Contents





| |                          
| | -------------------------
| | Taxation of capital gains





| |   |                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the U.S. shareholder carries on a trade, profession or
    vocation in the U.K. through a permanent establishment; and                            
|
| |  | the shares or ADRs are or have been used, held or acquired for
    the purposes of the trade, profession, vocation or permanent
    establishment.

Treaty Non-Resident




| |                                                  
| | -------------------------------------------------
| | U.K. stamp duty and stamp duty reserve tax (SDRT)







DOCUMENTS ON DISPLAY




17



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##### Table of Contents






Item 11: Quantitative and Qualitative
Disclosures about Market Risk







Item 12: Description of Securities other than
Equity Securities




18



---



##### Table of Contents






PART II





Item 13: Defaults, Dividend Arrearages and
Delinquencies







Item 14: Material Modifications to the Rights of
Security Holders and Use of Proceeds







Item 15: Controls and Procedures







Item 16A: Audit Committee Financial
Expert







Item 16B: Code of Ethics







Item 16C: Principal Accountant Fees and
Services


Audit and audit-related fees




Tax fees




Other




Pre approval procedures for Services







Item 16E: Purchases of Equity Securities by the
Issuer and Affiliated Purchasers




19



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##### Table of Contents






PART III





Item 17: Financial Statements







Item 18: Financial Statements







Item 19: Exhibits


| |       |  |  |                                                                                                                                                                                                                                                                    
| | ----- |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1.1** |  |  | Memorandum and Articles of Association of M (2003) plc                                                                                                                                                                                                             
| | 2.1  |  |  | Specimen ordinary share certificate of M (2003) plc                                                                                                                                                                                                                
| | 2.2  |  |  | Deposit Agreement dated as of September 6, 2000 Between
    M (2003) plc and The Bank of New York, as depositary,
    and Owners and beneficial holders of American Depositary Receipts                                                                            
| | 2.3  |  |  | American Depositary Receipt of M (2003) plc (included
    in Exhibit 2.2)                                                                                                                                                                                          
| | 2.4 |  |  | Marconi Corporation plc and M (2003) plcs
    Proposals in Relation to Schemes of Arrangement under
    Section 425 of the UK Companies Act 1985, dated
    March 31, 2003 between Marconi Corporation plc,
    M (2003) plc and their respective scheme creditors
| | 12.1* |  |  | Certification required by Rule 13a-14(a) or
    Rule 15d-14(a), as adopted Pursuant to Section 302 of
    the Sarbanes-Oxley Act of 2002                                                                                                                           
| | 12.2* |  |  | Certification required by Rule 13a-14(a) or
    Rule 15d-14(a), as adopted Pursuant to Section 302 of
    the Sarbanes-Oxley Act of 2002                                                                                                                           
| | 13.1* |  |  | Certification pursuant to 18 U.S.C. Section 1350, as
    adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002                                                                                                                                     



| |    |                                                                                                                                         
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------
| | *  | Filed with this annual report.                                                                                                          
|
| | ** | Incorporated by reference to the Annual Report on Form 20-F
    (File No. 0-30294) filed with the SEC on September 28,
    2001.        
|
| |   | Incorporated by reference to the Registration Statement on
    Form 20-F (File No. 0-30924) filed with the SEC on
    September 5, 2000.
|
| |  | Incorporated by reference to the Report under cover of
    Form 6-K (File No. 0-30924) furnished to the SEC on
    March 31, 2003.      

20



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##### Table of Contents



SIGNATURES






| |             
| | ------------
| | M (2003) plc



| |     |                  
| | --- | -----------------
| | By: | /s/
    K D SMITH

| |                          
| | -------------------------
| |                          
| | Name: Kevin David Smith  
| | Title:  Company Secretary
| | Date:  September 30, 2005

21



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##### Table of Contents



INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


M (2003) plc and subsidiaries


Consolidated financial statements as of March 31, 2005
and 2004 and


for the three years ended March 31, 2005


|                                                                 |  |      |     | 
|---------------------------------------------------------------- |  | ---- | --- | 
|                                                                 |  | Page |    
|                                                                 |  |      |    
|Report of independent registered public
    accounting firm      |  |      | F-2 | 
|Consolidated balance sheets                                      |  |      | F-3 | 
|Consolidated statements of operations                            |  |      | F-4 | 
|Consolidated statements of cash flows                            |  |      | F-5 | 
|Consolidated statements of other
    comprehensive income/(loss) |  |      | F-7 | 
|Consolidated statements of
    shareholders equity/(deficit)    |  |      | F-8 | 
|Notes to consolidated financial
    statements                   |  |      | F-9 | 

F-1



---



##### Table of Contents






REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


















F-2



---



##### Table of Contents



M (2003) plc and subsidiaries





CONSOLIDATED BALANCE SHEETS


|                                           |                                                                   |           |        |            |       |  |       |          |   |  |       |          |  
|------------------------------------------ | ----------------------------------------------------------------- | --------- | ------ | ---------- | ----- |  | ----- | -------- | - |  | ----- | -------- | -
|                                           |                                                                   | March 31, |       
|                                           |                                                                   | 2005      |        |            | 2005  |  |       | 2004     |  
|                                           |                                                                   | U.S.$000 |        |            | £000 |  |       | £000    |  
|                                           |                                                                   |           |       
|ASSETS                                     |                                                                   |           |        |            |       |  |       |          |   |  |       |         
|                                           | Current assets                                                    |           |        |            |       |  |       |          |   |  |       |          |  
|                                           | Cash and cash equivalents                                         |           |        | 15,366     |       |  |       | 8,130    |   |  |       | 8,871    |  
|                                           | Prepaid expenses and other current assets                         |           |        | 257        |       |  |       | 136      |   |  |       | 90       |  
|                                           |                                                                   |           |        |            |       |  |       |          |  
|Total current assets                       |                                                                   |           | 15,623 |            |       |  | 8,266 |          |   |  | 8,961 |         
|                                           |                                                                   |           |        |            |       |  |       |          |  
|TOTAL ASSETS                               |                                                                   |           | 15,623 |            |       |  | 8,266 |          |   |  | 8,961 |         
|                                           |                                                                   |           |        |            |       |  |       |          |  
|LIABILITIES AND SHAREHOLDERS EQUITY       |                                                                   |           |        |            |       |  |       |          |   |  |       |         
|Current liabilities                        |                                                                   |           |        |            |       |  |       |          |   |  |       |         
|                                           | Accrued expenses and other current liabilities                    |           |        | 783        |       |  |       | 414      |   |  |       | 1        |  
|                                           |                                                                   |           |        |            |       |  |       |          |  
|Total current liabilities                  |                                                                   |           | 783    |            |       |  | 414   |          |   |  | 1     |         
|                                           |                                                                   |           |        |            |       |  |       |          |  
|Shareholders equity/(deficit)             |                                                                   |           |        |            |       |  |       |          |   |  |       |         
|                                           | Ordinary shares, £0.05 par value;                                 |           |        |            |       |  |       |          |   |  |       |          |  
|                                           | Authorized: 6,000,000,000 shares in 2005 and 2004;                |           |        |            |       |  |       |          |   |  |       |          |  
|                                           | Issued and outstanding: 2,793,011,951 shares in 2005 and
    2004 |           |        | 264,600    |       |  |       | 139,651  |   |  |       | 139,651  |  
|                                           | Additional paid-in capital                                        |           |        | 1,245,510  |       |  |       | 659,349  |   |  |       | 659,349  |  
|                                           | Accumulated deficit                                               |           |        | (1,495,270 | )     |  |       | (791,148 | ) |  |       | (790,040 | )
|                                           |                                                                   |           |        |            |       |  |       |          |  
|Total shareholders equity                 |                                                                   |           | 14,840 |            |       |  | 7,852 |          |   |  | 8,960 |         
|                                           |                                                                   |           |        |            |       |  |       |          |  
|TOTAL LIABILITIES AND SHAREHOLDERS EQUITY |                                                                   |           | 15,623 |            |       |  | 8,266 |          |   |  | 8,961 |         
|                                           |                                                                   |           |        |            |       |  |       |          |  



F-3



---



##### Table of Contents



M (2003) plc and subsidiaries





CONSOLIDATED STATEMENTS OF OPERATIONS


|                                                                                     |                                                                                      |                             |        |       |       |  |        |       |   |  |           |           |   |  |           |           |  
|------------------------------------------------------------------------------------ | ------------------------------------------------------------------------------------ | --------------------------- | ------ | ----- | ----- |  | ------ | ----- | - |  | --------- | --------- | - |  | --------- | --------- | -
|                                                                                     |                                                                                      | Fiscal Year Ended March 31, |       
|                                                                                     |                                                                                      | 2005                        |        |       | 2005  |  |        | 2004  |   |  | 2003      |          
|                                                                                     |                                                                                      | U.S.$000                   |        |       | £000 |  |        | £000 |   |  | £000     |          
|                                                                                     |                                                                                      |                             |       
|Revenue:                                                                             |                                                                                      |                             |        |       |       |  |        |       |   |  |           |           |   |  |           |          
|                                                                                     | Network equipment                                                                    |                             |        |      |       |  |        |      |   |  |           | 100,000   |   |  |           | 1,131,000 |  
|                                                                                     | Network services                                                                     |                             |        |      |       |  |        |      |   |  |           | 68,000    |   |  |           | 743,000   |  
|                                                                                     | Other                                                                                |                             |        |      |       |  |        |      |   |  |           |          |   |  |           | 22,000    |  
|                                                                                     |                                                                                      |                             |        |       |       |  |        |       |   |  |           |          
|Total Revenue                                                                        |                                                                                      |                             |       |       |       |  |       |       |   |  | 168,000   |           |   |  | 1,896,000 |          
|Direct costs                                                                         |                                                                                      |                             |       |       |       |  |       |       |   |  | 138,000   |           |   |  | 1,522,000 |          
|                                                                                     |                                                                                      |                             |        |       |       |  |        |       |   |  |           |          
|                                                                                     | Gross margin                                                                         |                             |        |      |       |  |        |      |   |  |           | 30,000    |   |  |           | 374,000   |  
|Operating expenses:                                                                  |                                                                                      |                             |        |       |       |  |        |       |   |  |           |           |   |  |           |          
|                                                                                     | Selling, general and administrative                                                  |                             |        | 2,363 |       |  |        | 1,284 |   |  |           | 49,000    |   |  |           | 356,000   |  
|                                                                                     | Research and development                                                             |                             |        |      |       |  |        |      |   |  |           | 31,000    |   |  |           | 290,000   |  
|                                                                                     | Amortization of goodwill and intangibles                                             |                             |        |      |       |  |        |      |   |  |           | 6,000     |   |  |           | 44,000    |  
|                                                                                     | Business restructuring charges                                                       |                             |        |      |       |  |        |      |   |  |           | 2,000     |   |  |           | 230,000   |  
|                                                                                     | Impairment of long-lived assets                                                      |                             |        |      |       |  |        |      |   |  |           |          |   |  |           | 69,000    |  
|                                                                                     | Gain on disposal of businesses, net                                                  |                             |        |      |       |  |        |      |   |  |           |          |   |  |           | (5,000    | )
|                                                                                     | Other income                                                                         |                             |        |      |       |  |        |      |   |  |           |          |   |  |           | (2,000    | )
|                                                                                     |                                                                                      |                             |        |       |       |  |        |       |   |  |           |          
|Total operating (income)/expenses                                                    |                                                                                      |                             | 2,363  |       |       |  | 1,284  |       |   |  | 88,000    |           |   |  | 982,000   |          
|Operating income/(loss)                                                              |                                                                                      |                             | (2,363 | )     |       |  | (1,284 | )     |   |  | (58,000   | )         |   |  | (608,000  | )        
|Other income/(expense):                                                              |                                                                                      |                             |        |       |       |  |        |       |   |  |           |           |   |  |           |          
|                                                                                     | Loss on sale of investments, net                                                     |                             |        |      |       |  |        |      |   |  |           |          |   |  |           | (5,000    | )
|                                                                                     | Impairment of investments                                                            |                             |        |      |       |  |        |      |   |  |           |          |   |  |           | (40,000   | )
|                                                                                     | Gain on financial restructuring                                                      |                             |        |      |       |  |        |      |   |  |           | 2,183,000 |   |  |           |          |  
|                                                                                     | Gain on settlement of equity forward contracts                                       |                             |        |      |       |  |        |      |   |  |           | 123,000   |   |  |           |          |  
|                                                                                     | Other Income                                                                         |                             |        |      |       |  |        |       |   |  |           |          |   |  |           | 34,000    |  
|                                                                                     | Interest income                                                                      |                             |        | 664   |       |  |        | 361   |   |  |           | 29,000    |   |  |           | 45,000    |  
|                                                                                     | Interest expense                                                                     |                             |        |      |       |  |        |      |   |  |           |          |   |  |           | (329,000  | )
|                                                                                     |                                                                                      |                             |        |       |       |  |        |       |   |  |           |          
|Income/(loss) from continuing operations before income taxes,
    minority interests |                                                                                      |                             | (1,699 | )     |       |  | (923   | )     |   |  | 2,277,000 |           |   |  | (903,000  | )        
|                                                                                     |                                                                                      |                             |        |       |       |  |        |       |   |  |           |          
|                                                                                     | Income tax charge                                                                    |                             |        | (340  | )     |  |        | (185  | ) |  |           | (1,000    | ) |  |           | 209,000   |  
|                                                                                     | Equity in net loss of affiliates                                                     |                             |        |      |       |  |        |      |   |  |           |          |   |  |           | (62,000   | )
|                                                                                     |                                                                                      |                             |        |       |       |  |        |       |   |  |           |          
|(Loss) from continuing operations                                                    |                                                                                      |                             | (2,039 | )     |       |  | (1,108 | )     |   |  | 2,276,000 |           |   |  | (756,000  | )        
|                                                                                     |                                                                                      |                             |        |       |       |  |        |       |   |  |           |          
|Discontinued operations:                                                             |                                                                                      |                             |        |       |       |  |        |       |   |  |           |           |   |  |           |          
|                                                                                     | Loss from discontinued operations, net of tax of £nil
    (2004, £nil, and 2003, £2) |                             |        |      |       |  |        |      |   |  |           |          |   |  |           | (74,000   | )
|                                                                                     | Gain on sale of discontinued operations, net of tax of £nil                          |                             |        |      |       |  |        |      |   |  |           |          |   |  |           | 23,000    |  
|                                                                                     |                                                                                      |                             |        |       |       |  |        |       |   |  |           |          
|Net (loss)/income                                                                    |                                                                                      |                             | (2,039 | )     |       |  | (1,108 | )     |   |  | 2,276,000 |           |   |  | (807,000  | )        
|                                                                                     |                                                                                      |                             |        |       |       |  |        |       |   |  |           |          
|Earnings per share  basic                                                           |                                                                                      |                             |        |       |       |  |        |       |   |  |           |           |   |  |           |          
|                                                                                     | Income/(loss) from continuing operations                                             |                             |        |      |       |  |        |      |   |  |           | 0.92      |   |  |           | (0.27     | )
|                                                                                     | Loss from discontinued operations                                                    |                             |        |      |       |  |        |      |   |  |           |          |   |  |           | (0.3      | )
|                                                                                     | Gain on sale of discontinued operations                                              |                             |        |      |       |  |        |      |   |  |           |          |   |  |           | 0.1       |  
|Net income/(loss)                                                                    |                                                                                      |                             |       |       |       |  |       |       |   |  | 0.92      |           |   |  | (0.29     | )        
|Earnings per share  diluted                                                         |                                                                                      |                             |        |       |       |  |        |       |   |  |           |           |   |  |           |          
|                                                                                     | (Income/loss) from continuing operations                                             |                             |        |      |       |  |        |      |   |  |           | 0.92      |   |  |           | (0.27     | )
|                                                                                     | Loss from discontinued operations                                                    |                             |        |      |       |  |        |      |   |  |           |          |   |  |           | (.03      | )
|                                                                                     | Gain on sale of discontinued operations                                              |                             |        |      |       |  |        |      |   |  |           |          |   |  |           | 0.01      |  
|Net income/(loss)                                                                    |                                                                                      |                             |       |       |       |  |       |       |   |  | 0.92      |           |   |  | (0.29     | )        



F-4



---



##### Table of Contents



M (2003) plc and subsidiaries





CONSOLIDATED STATEMENTS OF CASH FLOWS


|                                                                                                                  |                                        |                             |        |     |       |  |        |       |   |  |            |         |   |  |          |          |  
|----------------------------------------------------------------------------------------------------------------- | -------------------------------------- | --------------------------- | ------ | --- | ----- |  | ------ | ----- | - |  | ---------- | ------- | - |  | -------- | -------- | -
|                                                                                                                  |                                        | Fiscal year ended March 31, |       
|                                                                                                                  |                                        | 2005                        |        |     | 2005  |  |        | 2004  |   |  | 2003       |        
|                                                                                                                  |                                        | U.S.$000                   |        |     | £000 |  |        | £000 |   |  | £000      |        
|                                                                                                                  |                                        |                             |       
|Cash flows from operating activities:                                                                             |                                        |                             |        |     |       |  |        |       |   |  |            |         |   |  |          |         
|Net income/(loss)                                                                                                 |                                        |                             | (2,039 | )   |       |  | (1,108 | )     |   |  | 2,276,000  |         |   |  | (807,000 | )       
|Adjustments to reconcile net income/(loss) to net cash used in
    operating activities of continuing operations: |                                        |                             |        |     |       |  |        |       |   |  |            |         |   |  |          |         
|Loss from discontinued operations                                                                                 |                                        |                             |       |     |       |  |       |       |   |  |           |         |   |  | 74,000   |         
|Gain on sale of discontinued operations                                                                           |                                        |                             |       |     |       |  |       |       |   |  |           |         |   |  | (23,000  | )       
|Cash paid on settlement of equity forward contracts                                                               |                                        |                             |       |     |       |  |       |       |   |  | (35,000    | )       |   |  |         |         
|Loss on disposal of businesses and properties                                                                     |                                        |                             |       |     |       |  |       |       |   |  |           |         |   |  | 3,000    |         
|Gain on financial restructuring                                                                                   |                                        |                             |       |     |       |  |       |       |   |  | (2,183,000 | )       |   |  |         |         
|Gain I settlement of equity forward contracts                                                                     |                                        |                             |       |     |       |  |       |       |   |  | (123,000   | )       |   |  |         |         
|Loss on sale of investments in affiliates                                                                         |                                        |                             |       |     |       |  |       |       |   |  |           |         |   |  | 5,000    |         
|Stock compensation                                                                                                |                                        |                             |       |     |       |  |       |       |   |  | 9,000      |         |   |  | 14,000   |         
|Impairment of long-lived assets                                                                                   |                                        |                             |       |     |       |  |       |       |   |  |           |         |   |  | 69,000   |         
|Impairment of investments                                                                                         |                                        |                             |       |     |       |  |       |       |   |  |           |         |   |  | 40,000   |         
|Depreciation and amortization                                                                                     |                                        |                             |       |     |       |  |       |       |   |  | 16,000     |         |   |  | 169,000  |         
|Provision for doubtful accounts                                                                                   |                                        |                             |       |     |       |  |       |       |   |  |           |         |   |  | (10,000  | )       
|Provision for allowance for inventory write off                                                                   |                                        |                             |       |     |       |  |       |       |   |  |           |         |   |  | 25,000   |         
|Other income                                                                                                      |                                        |                             |       |     |       |  |       |       |   |  |           |         |   |  | (34,000  | )       
|Profit on disposal of property, plant and equipment                                                               |                                        |                             |       |     |       |  |       |       |   |  |           |         |   |  | (9,000   | )       
|Change in current and deferred taxes                                                                              |                                        |                             |       |     |       |  |       |       |   |  |           |         |   |  | (177,000 | )       
|Equity in net loss of affiliates                                                                                  |                                        |                             |       |     |       |  |       |       |   |  |           |         |   |  | 62,000   |         
|Cash paid for restructuring                                                                                       |                                        |                             |       |     |       |  |       |       |   |  | (20,000    | )       |   |  |          |         
|Net cash provided by/(used) in discontinued operations                                                            |                                        |                             |       |     |       |  |       |       |   |  | 2,000      |         |   |  | (80,000  | )       
|Changes in operating assets and liabilities, net of the effect
    of acquisitions:                               |                                        |                             |        |     |       |  |        |       |   |  |            |         |   |  |          |         
|                                                                                                                  | Accounts receivable                    |                             |        | (85 | )     |  |        | (46   | ) |  |            | 100,000 |   |  |          | 137,000  |  
|                                                                                                                  | Inventories                            |                             |        |    |       |  |        |      |   |  |            | 1,000   |   |  |          | 228,000  |  
|                                                                                                                  | Prepaid expenses and other assets      |                             |        |    |       |  |        |      |   |  |            |        |   |  |          | (21,000  | )
|                                                                                                                  | Accounts payable                       |                             |        |    |       |  |        |       |   |  |            | (26,000 | ) |  |          | (175,000 | )
|                                                                                                                  | Accrued expenses and other liabilities |                             |        | 760 |       |  |        | 413   |   |  |            | (29,000 | ) |  |          | (154,000 | )
|                                                                                                                  |                                        |                             |        |     |       |  |        |       |   |  |            |        
|Net cash used in operating activities                                                                             |                                        |                             | (1,364 | )   |       |  | (741   | )     |   |  | (12,000    | )       |   |  | (664,000 | )       
|                                                                                                                  |                                        |                             |        |     |       |  |        |       |   |  |            |        



F-5



---



##### Table of Contents



|                                               |                                                               |                             |   |   |       |  |   |       |  |  |         |            |   |  |           |            |  
|---------------------------------------------- | ------------------------------------------------------------- | --------------------------- | - | - | ----- |  | - | ----- |  |  | ------- | ---------- | - |  | --------- | ---------- | -
|                                               |                                                               | Fiscal year ended March 31, |  
|                                               |                                                               | 2005                        |   |   | 2005  |  |   | 2004  |  |  | 2003    |           
|                                               |                                                               | U.S.$000                   |   |   | £000 |  |   | £000 |  |  | £000   |           
|                                               |                                                               |                             |  
|Cash flows from investing activities:          |                                                               |                             |   |   |       |  |   |       |  |  |         |            |   |  |           |           
|                                               | Maturities and sales of debt and marketable equity securities |                             |   |  |       |  |   |      |  |  |         | (209,000   | ) |  |           |           |  
|                                               | Purchases of debt and marketable equity securities            |                             |   |  |       |  |   |      |  |  |         |           |   |  |           | (20,000    | )
|                                               | Purchases of property, plant and equipment                    |                             |   |  |       |  |   |      |  |  |         | (5,000     | ) |  |           | (35,000    | )
|                                               | Proceeds from the sale of property, plant and equipment       |                             |   |  |       |  |   |      |  |  |         |           |   |  |           | 30,000     |  
|                                               | Cash (outflow)/received from disposals                        |                             |   |  |       |  |   |      |  |  |         | (568,000   | ) |  |           | 436,000    |  
|                                               | Cash element of scheme consideration                          |                             |   |  |       |  |   |      |  |  |         | (333,000   | ) |  |           |           |  
|                                               | Collaterised cash                                             |                             |   |  |       |  |   |      |  |  |         |           |   |  |           |           |  
|                                               |                                                               |                             |   |   |       |  |   |       |  |  |         |           
|                                               | Net cash provided used in investing activities                |                             |   |  |       |  |   |      |  |  |         | (1,115,000 | ) |  |           | 411,000    |  
|                                               |                                                               |                             |   |   |       |  |   |       |  |  |         |           
|Cash flows from financing activities:          |                                                               |                             |  |   |       |  |   |       |  |  |         |            |   |  |           |           
|                                               | Short-term debt repayments, net                               |                             |   |  |       |  |   |      |  |  |         | (22,000    | ) |  |           | (30,000    | )
|                                               | Term loan repayments, net                                     |                             |   |  |       |  |   |      |  |  |         | (1,000     | ) |  |           | (45,000    | )
|                                               | Restricted cash transferred to secured accounts               |                             |   |  |       |  |   |      |  |  |         | 964,000    |   |  |           | (692,000   | )
|                                               |                                                               |                             |   |   |       |  |   |       |  |  |         |           
|                                               | Net cash used in financing activities                         |                             |   |  |       |  |   |      |  |  |         | 941,000    |   |  |           | (767,000   | )
|                                               |                                                               |                             |   |   |       |  |   |       |  |  |         |           
|                                               | Effects of exchange rate changes on cash and cash equivalents |                             |   |  |       |  |   |      |  |  |         |           |   |  |           | (28,000    | )
|                                               | Net decrease in cash and cash equivalents                     |                             |   |  |       |  |   |      |  |  |         | (186,000   | ) |  |           | (1,048,000 | )
|Cash and cash equivalents, beginning of year   |                                                               |                             |  |   |       |  |  |       |  |  | 195,000 |            |   |  | 1,243,000 |           
|                                               |                                                               |                             |   |   |       |  |   |       |  |  |         |           
|Cash and cash equivalents, end of year         |                                                               |                             |  |   |       |  |  |       |  |  | 9,000   |            |   |  | 195,000   |           
|                                               |                                                               |                             |   |   |       |  |   |       |  |  |         |           
|Supplemental disclosure of cash flow activity: |                                                               |                             |   |   |       |  |   |       |  |  |         |            |   |  |           |           
|Cash payments for interest                     |                                                               |                             |  |   |       |  |  |       |  |  | (1,000  | )          |   |  | 134,000   |           
|Cash repayment for income taxes                |                                                               |                             |  |   |       |  |  |       |  |  | (1,000  | )          |   |  | (31,000   | )         



F-6



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##### Table of Contents



M (2003) plc and subsidiaries





CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE
INCOME/(LOSS)


|                                                                 |                                                                                                   |                             |        |   |       |  |        |       |  |  |           |         |   |  |            |          |  
|---------------------------------------------------------------- | ------------------------------------------------------------------------------------------------- | --------------------------- | ------ | - | ----- |  | ------ | ----- |  |  | --------- | ------- | - |  | ---------- | -------- | -
|                                                                 |                                                                                                   | Fiscal year ended March 31, |       
|                                                                 |                                                                                                   | 2005                        |        |   | 2005  |  |        | 2004  |  |  | 2003      |        
|                                                                 |                                                                                                   | U.S.$000                   |        |   | £000 |  |        | £000 |  |  | £000     |        
|                                                                 |                                                                                                   |                             |       
|Other comprehensive income:                                      |                                                                                                   |                             |        |   |       |  |        |       |  |  |           |         |   |  |            |         
|Net loss                                                         |                                                                                                   |                             | (2,039 | ) |       |  | (1,108 | )     |  |  | 2,276,000 |         |   |  | (807,000   | )       
|Other comprehensive income/(loss):                               |                                                                                                   |                             |        |   |       |  |        |       |  |  |           |         |   |  |            |         
|                                                                 | Unrealized gains on derivative Instruments                                                        |                             |        |  |       |  |        |      |  |  |           |        |   |  |            | 22,000   |  
|                                                                 | Accumulated translation adjustments, (net of income tax and
    reclassification adjustments)     |                             |        |  |       |  |        |      |  |  |           |        |   |  |            | 62,000   |  
|                                                                 | Minimum pension liability, (net of income tax of £nil)                                            |                             |        |  |       |  |        |      |  |  |           | 295,000 |   |  |            | (295,000 | )
|                                                                 |                                                                                                   |                             |        |   |       |  |        |       |  |  |           |        
|Other comprehensive income/(loss)                                |                                                                                                   |                             | (2,039 | ) |       |  | (1,108 | )     |  |  | 2,571,000 |         |   |  | (1,018,000 | )       
|                                                                 |                                                                                                   |                             |        |   |       |  |        |       |  |  |           |        
|Disclosure of tax and reclassification amounts:                  |                                                                                                   |                             |        |   |       |  |        |       |  |  |           |         |   |  |            |         
|Unrealized gains on derivative instruments,
    net of tax of £1 |                                                                                                   |                             |       |   |       |  |       |       |  |  | 1,000     |         |   |  | 22,000     |         
|                                                                 | Less: reclassification adjustment for loss included in net loss,
    net of tax of £nil           |                             |        |   |       |  |        |       |  |  |           | (1,000  | ) |  |            |          |  
|                                                                 |                                                                                                   |                             |        |   |       |  |        |       |  |  |           |        
|                                                                 | Unrealized gains on derivative Instruments                                                        |                             |        |  |       |  |        |      |  |  |           |        |   |  |            | 22,000   |  
|                                                                 |                                                                                                   |                             |        |   |       |  |        |       |  |  |           |        
|                                                                 | Accumulated translation adjustments, net of tax of £nil                                           |                             |        |  |       |  |        |      |  |  |           | (14,000 | ) |  |            | 62,000   |  
|                                                                 | Less: reclassification adjustment for gains included in net
    income/(loss), net of tax of £nil |                             |        |   |       |  |        |       |  |  |           | 14,000  |   |  |            |          |  
|                                                                 |                                                                                                   |                             |        |   |       |  |        |       |  |  |           |        
|                                                                 | Net translation adjustments                                                                       |                             |        |  |       |  |        |      |  |  |           |        |   |  |            | 62,000   |  
|                                                                 |                                                                                                   |                             |        |   |       |  |        |       |  |  |           |        



F-7



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##### Table of Contents



M (2003) plc and subsidiaries





CONSOLIDATED STATEMENTS OF SHAREHOLDERS
EQUITY/(DEFICIT)


|                                                  |                                                     |                 |               |            |         |  |          |           |  |             |               |        |               |          |            |          |      |  |          |          |   |  |  |  |  |  |            |          |  
|------------------------------------------------- | --------------------------------------------------- | --------------- | ------------- | ---------- | ------- |  | -------- | --------- |  | ----------- | ------------- | ------ | ------------- | -------- | ---------- | -------- | ---- |  | -------- | -------- | - |  |  |  |  |  | ---------- | -------- | -
|                                                  |                                                     |                 |               |            |         |  |          |           |  | Accumulated |               |        |               |          |           
|                                                  |                                                     |                 |               | Additional |         |  | Retained |           |  | other       |               |        |               |          |           
|                                                  |                                                     | Ordinary shares |               |            | paid-in |  |          | earnings/ |  |             | comprehensive |        |               | Treasury |            |          |     
|                                                  |                                                     |                 |               | Amount     |         |  | capital  |           |  | (deficit)   |               |        | income/(loss) |          |            | shares   |      |  | Total    |         
|                                                  |                                                     | Shares          |               |            | £000    |  |          | £000      |  |             | £000          |        |               | £000     |            |          | £000 |  |          | £000     |  
|                                                  |                                                     |                 |              
|As of March 31, 2002                              |                                                     |                 | 2,792,638,820 |            |         |  | 139,651  |           |  |             | 1,063,349     |        |               |          | (2,634,000 | )        |      |  | (71,000  | )        |   |  |  |  |  |  | (1,502,000 | )       
|                                                  | Net loss                                            |                 |               |            |         |  |          |           |  |             |               |        |               |          |            | (807,000 | )    |  |          |          |   |  |  |  |  |  |            | (807,000 | )
|                                                  | Issuance of ordinary shares under share option plan |                 |               | 461,777    |         |  |          |           |  |             |               |        |               |          |            |          |      |  |          |          |   |  |  |  |  |  |            |          |  
|                                                  | Acquisition and retirement of ordinary shares       |                 |               | (88,646    | )       |  |          |           |  |             |               |        |               |          |            |          |      |  |          |          |   |  |  |  |  |  |            |          |  
|                                                  | Fair value movements on derivative instruments      |                 |               |            |         |  |          |           |  |             |               |        |               |          |            |          |      |  |          | 22,000   |   |  |  |  |  |  |            | 22,000   |  
|                                                  | Stock-based compensation                            |                 |               |            |         |  |          |           |  |             |               | 14,000 |               |          |            |          |      |  |          |          |   |  |  |  |  |  |            | 14,000   |  
|                                                  | Shares issued by equity method investee             |                 |               |            |         |  |          |           |  |             |               | 3,000  |               |          |            |          |      |  |          |          |   |  |  |  |  |  |            | 3,000    |  
|                                                  | Translation adjustments                             |                 |               |            |         |  |          |           |  |             |               |        |               |          |            |          |      |  |          | 62,000   |   |  |  |  |  |  |            | 62,000   |  
|                                                  | Minimum pension liability                           |                 |               |            |         |  |          |           |  |             |               |        |               |          |            |          |      |  |          | (295,000 | ) |  |  |  |  |  |            | (295,000 | )
|                                                  |                                                     |                 |               |            |         |  |          |           |  |             |               |        |               |          |            |          |      |  |          |          |  
|As of March 31, 2003                              |                                                     |                 | 2,793,011,951 |            |         |  | 139,651  |           |  |             | 1,080,349     |        |               |          | (3,441,000 | )        |      |  | (282,000 | )        |   |  |  |  |  |  | (2,503,000 | )       
|Net income                                        |                                                     |                 |               |            |         |  |          |           |  |             |               |        |               |          | 2,275,960  |          |      |  |          |          |   |  |  |  |  |  | 2,275,960  |         
|Capital contribution for stock based compensation |                                                     |                 |               |            |         |  |          |           |  |             | (46,000       | )      |               |          |            |          |      |  |          |          |   |  |  |  |  |  | (46,000    | )       
|Transfer on Financial Restructuring               |                                                     |                 |               |            |         |  |          |           |  |             | (375,000      | )      |               |          | 375,000    |          |      |  |          |          |   |  |  |  |  |  |            |         
|Translation adjustments                           |                                                     |                 |               |            |         |  |          |           |  |             |               |        |               |          |            |          |      |  | (12,000  | )        |   |  |  |  |  |  | (12,000    | )       
|Elimination upon financial restructuring          |                                                     |                 |               |            |         |  |          |           |  |             |               |        |               |          |            |          |      |  | 294,000  |          |   |  |  |  |  |  | 294,000    |         
|                                                  |                                                     |                 |               |            |         |  |          |           |  |             |               |        |               |          |            |          |      |  |          |          |  
|As of March 31, 2004                              |                                                     |                 | 2,793,011,951 |            |         |  | 140,000  |           |  |             | 659,000       |        |               |          | (790,040   | )        |      |  |         |          |   |  |  |  |  |  | 8,960      |         
|Net loss                                          |                                                     |                 |               |            |         |  |          |           |  |             |               |        |               |          | (1,108     | )        |      |  |          |          |   |  |  |  |  |  | (1,108     | )       
|                                                  |                                                     |                 |               |            |         |  |          |           |  |             |               |        |               |          |            |          |      |  |          |          |  
|As of March 31, 2005                              |                                                     |                 | 2,793,011,951 |            |         |  | 139,651  |           |  |             | 659,349       |        |               |          | (791,148   | )        |      |  |         |          |   |  |  |  |  |  | 7,852      |         
|                                                  |                                                     |                 |               |            |         |  |          |           |  |             |               |        |               |          |            |          |      |  |          |          |  



F-8



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##### Table of Contents



M (2003) plc and subsidiaries





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




|   |                                             
|-- | --------------------------------------------
|1. | Nature of Business and basis of preparation:

Nature of business










Basis of preparation






|   |                                           
|-- | ------------------------------------------
|2. | Summary of significant accounting policies

Basis of consolidation




Use of estimates




F-9



---



##### Table of Contents





Income taxes




Foreign currency






|            |  |                             |      |                 |  |      |      |      |  |      |      |  |  |  |      |  |  |  |      | 
|----------- |  | --------------------------- | ---- | --------------- |  | ---- | ---- | ---- |  | ---- | ---- |  |  |  | ---- |  |  |  | ---- | 
|            |  | Average rates               |      | Year-end rates 
|            |  | Fiscal year ended March 31, |      | As of March 31,
|            |  | 2005                        |      | 2004            |  | 2003 |      | 2005 |  | 2004
|            |  |                            
|U.S. Dollar |  |                             | 1.84 |                 |  |      | 1.70 |      |  |      | 1.55 |  |  |  | 1.89 |  |  |  | 1.84 | 
|Euro        |  |                             | 1.47 |                 |  |      | 1.44 |      |  |      | 1.55 |  |  |  | 1.45 |  |  |  | 1.50 | 

Revenue


Accounting for Performance of
Construction-Type and certain Production-Type Contracts Software Revenue Recognition Revenue Recognition in
Financial Statements












F-10



---



##### Table of Contents





| |                                            
| | -------------------------------------------
| | Impairment or disposal of long-lived assets











| |                         
| | ------------------------
| | Equity forward contracts













| |                  
| | -----------------
| | Fair value hedges



F-11



---



##### Table of Contents









| |                      
| | ---------------------
| | Net investment hedges







| |                 
| | ----------------
| | Cash flow hedges













| |                                           
| | ------------------------------------------
| | Pension and other post-retirement benefits

Employers Accounting
for Pensions


F-12



---



##### Table of Contents



Employers Accounting for Post-retirement Benefits Other
Than Pensions












| |                 
| | ----------------
| | Product warranty





| |                         
| | ------------------------
| | Stock based compensation

Accounting for Stock Issued to Employees


F-13



---



##### Table of Contents





Accounting for Stock-Based Compensation




|                        |  |           |     |  |      |  |     |      |  |  |     | 
|----------------------- |  | --------- | --- |  | ---- |  | --- | ---- |  |  | --- | 
|                        |  | March 31, |    
|                        |  | 2005      |     |  | 2004 |  |     | 2003 | 
|                        |  |           |    
|Risk-free interest rate |  |           | n/a |  |      |  | n/a |      |  |  | n/a | 
|Expected life (years)   |  |           | n/a |  |      |  | n/a |      |  |  | n/a | 
|Assumed volatility      |  |           | n/a |  |      |  | n/a |      |  |  | n/a | 
|Expected dividends      |  |           |    |  |      |  |    |      |  |  |    | 





| |                                  
| | ---------------------------------
| | Other comprehensive income/(loss)





|                                        |  |                |   |  |             |                |         |                |         |  |            |             |  |               |          |   |  |  |          |  
|--------------------------------------- |  | -------------- | - |  | ----------- | -------------- | ------- | -------------- | ------- |  | ---------- | ----------- |  | ------------- | -------- | - |  |  | -------- | -
|                                        |  |                |   |  |             | Net unrealized |         |                | Minimum |  |            | Accumulated | 
|                                        |  | Net unrealized |   |  | Accumulated |                |         | gains/(losses) |         |  | pension    |             |  | other         |         
|                                        |  | gains/(losses) |   |  | translation |                |         | on derivative  |         |  | liability  |             |  | comprehensive |         
|                                        |  | on investments |   |  | adjustments |                |         | instruments    |         |  | adjustment |             |  | income/(loss) |         
|                                        |  | £000          |   |  | £000       |                |         | £000          |         |  | £000      |             |  | £000         |         
|                                        |  |                |  
|As of March 31, 2003                    |  |                |  |  |             |                | 14,000  |                |         |  | (1,000     | )           |  |               | (295,000 | ) |  |  | (282,000 | )
|Movement for the year                   |  |                |  |  |             |                | (12,000 | )              |         |  |           |             |  |               |         |   |  |  | (12,000  | )
|Eliminated on financial restructuring   |  |                |   |  |             |                | (2,000  | )              |         |  | 1,000      |             |  |               | 295,000  |   |  |  | 294,000  |  
|As of March 31, 2004 and March 31, 2005 |  |                |  |  |             |                |        |                |         |  |           |             |  |               |         |   |  |  |         |  



| |                   
| | ------------------
| | Earnings per share



F-14



---



##### Table of Contents





| |                                                              
| | -------------------------------------------------------------
| | Recently issued accounting pronouncements not yet
    adopted





| |                       
| | ----------------------
| | Non-statutory accounts





3.   Financial restructuring










F-15



---



##### Table of Contents





|                                                                |                                                |       |            |         |  
|--------------------------------------------------------------- | ---------------------------------------------- | ----- | ---------- | ------- | -
|                                                                |                                                | £000
|                                                                |                                                |      
|Net (liabilities)/ assets sold                                  |                                                |       |            |        
|Tangible fixed assets                                           |                                                |       | 251,000    |        
|Investments in joint ventures, affiliates and other investments |                                                |       | 35,000     |        
|Goodwill                                                        |                                                |       | 645,000    |        
|Intangibles, net                                                |                                                |       | 95,000     |        
|Inventory                                                       |                                                |       | 237,000    |        
|Debtors                                                         |                                                |       | 526,000    |        
|Net cash/ (overdrafts)                                          |                                                |       | 1,117,000  |        
|Borrowings (excluding overdrafts)                               |                                                |       | (4,770,000 | )      
|Accounts payable and other liabilities                          |                                                |       | (1,081,000 | )      
|Capital lease obligations                                       |                                                |       | (5,000     | )      
|Finance lease creditors                                         |                                                |       | (3,000     | )      
|Minority Interests                                              |                                                |       | (3,000     | )      
|Retirement benefit deficit                                      |                                                |       | (334,000   | )      
|                                                                |                                                |       |            |        
|                                                                |                                                |       | (3,281,000 | )      
|Accounted for by:                                               |                                                |       |            |        
|Amounts waived on Scheme of Arrangement                         |                                                |       | 804,000    |        
|Elimination of amounts included in shareholders equity         |                                                |       |            |        
|                                                                | Minimum pension liability                      |       |            | 295,000 |  
|                                                                | Accumulated translation adjustments            |       |            | (2,000  | )
|                                                                | Net unrealised gains on derivative instruments |       |            | 1,000   |  
|                                                                |                                                |       |            |        
|Gain on Financial Restructuring                                 |                                                |       | 2,183,000  |        
|                                                                |                                                |       |            |        









F-16



---



##### Table of Contents



4.   Balance sheet information


|                                                |                                 |           |  |     |       |  |  |    |    | 
|----------------------------------------------- | ------------------------------- | --------- |  | --- | ----- |  |  | -- | -- | 
|                                                |                                 | March 31, | 
|                                                |                                 | 2005      |  |     | 2004  | 
|                                                |                                 | £000     |  |     | £000 | 
|                                                |                                 |           | 
|Accounts receivable, net:                       |                                 |           |  |     |       |  |  |   
|                                                | Accounts receivable             |           |  | 136 |       |  |  | 90 |   
|                                                | Allowance for doubtful accounts |           |  |    |       |  |  |   |   
|                                                |                                 |           |  |     |       | 
|                                                |                                 | Total     |  |     | 136   |  |  |    | 90 | 
|                                                |                                 |           |  |     |       | 
|Accrued expenses and other current liabilities: |                                 |           |  |     |       |  |  |   
|                                                | Accrued income and other taxes  |           |  | 185 |       |  |  |   |   
|                                                | Accrued expenses                |           |  | 229 |       |  |  | 1  |   
|                                                |                                 |           |  |     |       | 
|                                                |                                 | Total     |  |     | 414   |  |  |    | 1  | 
|                                                |                                 |           |  |     |       | 











|   |                           
|-- | --------------------------
|5. | Debt and credit facilities



| |                
| | ---------------
| | Short-term debt










|   |                               
|-- | ------------------------------
|6. | Business restructuring charges



F-17



---



##### Table of Contents









|                                                |  |            |   |         |        |  |                 |             |  |  |            |  |  |           |   |  |  |  |   | 
|----------------------------------------------- |  | ---------- | - | ------- | ------ |  | --------------- | ----------- |  |  | ---------- |  |  | --------- | - |  |  |  | - | 
|                                                |  |            |   | Charged |        |  | Utilized during |             |  | 
|                                                |  | Balance at |   |         | during |  |                 | fiscal 2005 |  |  | Balance at | 
|                                                |  | March 31,  |   |         | fiscal |  |                 | Net cash    |  |  | Non cash   |  |  | March 31, |  
|                                                |  | 2004       |   |         | 2005   |  |                 | payments    |  |  | movement   |  |  | 2005      |  
|                                                |  | £ 000     |   |         | £000  |  |                 | £000       |  |  | £000      |  |  | £000     |  
|                                                |  |            |  
|Direct costs:                                   |  |            |   |         |        |  |                 |             |  |  |            |  |  |           |   |  |  |  |   | 
|Manufacturing outsourcing                       |  |            |  |         |        |  |                |             |  |  |           |  |  |           |  |  |  |  |  | 
|Onerous contracts                               |  |            |  |         |        |  |                |             |  |  |           |  |  |           |  |  |  |  |  | 
|                                                |  |            |   |         |        |  |                 |             |  |  |            |  |  |           |  
|                                                |  |            |  |         |        |  |                |             |  |  |           |  |  |           |  |  |  |  |  | 
|                                                |  |            |   |         |        |  |                 |             |  |  |            |  |  |           |  
|Business restructuring costs:                   |  |            |  |         |        |  |                |             |  |  |           |  |  |           |  |  |  |  |  | 
|Employee severance                              |  |            |  |         |        |  |                |             |  |  |           |  |  |           |  |  |  |  |  | 
|Site rationalization                            |  |            |  |         |        |  |                |             |  |  |           |  |  |           |  |  |  |  |  | 
|Contractual commitments and other restructuring |  |            |  |         |        |  |                |             |  |  |           |  |  |           |  |  |  |  |  | 
|Advisor fees                                    |  |            |  |         |        |  |                |             |  |  |           |  |  |           |  |  |  |  |  | 
|                                                |  |            |   |         |        |  |                 |             |  |  |            |  |  |           |  
|                                                |  |            |  |         |        |  |                |             |  |  |           |  |  |           |  |  |  |  |  | 
|                                                |  |            |   |         |        |  |                 |             |  |  |            |  |  |           |  
|Total                                           |  |            |  |         |        |  |                |             |  |  |           |  |  |           |  |  |  |  |  | 
|                                                |  |            |   |         |        |  |                 |             |  |  |            |  |  |           |  

|                                                |  |            |        |         |        |  |                 |             |  |  |            |   |  |           |         |   |  |  |   | 
|----------------------------------------------- |  | ---------- | ------ | ------- | ------ |  | --------------- | ----------- |  |  | ---------- | - |  | --------- | ------- | - |  |  | - | 
|                                                |  |            |        | Charged |        |  | Utilized during |             |  | 
|                                                |  | Balance at |        |         | during |  |                 | fiscal 2004 |  |  | Balance at |  
|                                                |  | March 31,  |        |         | fiscal |  |                 | Net cash    |  |  | Non cash   |   |  | March 31, |        
|                                                |  | 2003       |        |         | 2004   |  |                 | payments    |  |  | movement   |   |  | 2004      |        
|                                                |  | £ 000     |        |         | £000  |  |                 | £000       |  |  | £000      |   |  | £000     |        
|                                                |  |            |       
|Direct costs:                                   |  |            |        |         |        |  |                 |             |  |  |            |   |  |           |         |   |  |  |   | 
|Manufacturing outsourcing                       |  |            | 8,000  |         |        |  | (1,000          | )           |  |  |           |   |  |           | (7,000  | ) |  |  |  | 
|Onerous contracts                               |  |            | 6,000  |         |        |  | (2,000          | )           |  |  |           |   |  |           | (4,000  | ) |  |  |  | 
|                                                |  |            |        |         |        |  |                 |             |  |  |            |   |  |           |        
|                                                |  |            | 14,000 |         |        |  | (3,000          | )           |  |  |           |   |  |           | (11,000 | ) |  |  |  | 
|                                                |  |            |        |         |        |  |                 |             |  |  |            |   |  |           |        
|Business restructuring costs:                   |  |            |        |         |        |  |                 |             |  |  |            |   |  |           |         |   |  |  |   | 
|Employee severance                              |  |            | 10,000 |         |        |  | 4,000           |             |  |  | (12,000    | ) |  |           | (2,000  | ) |  |  |  | 
|Site rationalization                            |  |            | 46,000 |         |        |  | 1,000           |             |  |  | (2,000     | ) |  |           | (45,000 | ) |  |  |  | 
|Contractual commitments and other restructuring |  |            | 3,000  |         |        |  |                |             |  |  |           |   |  |           | (3,000  | ) |  |  |  | 
|Advisor fees                                    |  |            | 10,000 |         |        |  |                |             |  |  | (6,000     | ) |  |           | (4,000  | ) |  |  |  | 
|                                                |  |            |        |         |        |  |                 |             |  |  |            |   |  |           |        
|                                                |  |            | 69,000 |         |        |  | 5,000           |             |  |  | (20,000    | ) |  |           | (54,000 | ) |  |  |  | 
|                                                |  |            |        |         |        |  |                 |             |  |  |            |   |  |           |        
|Total                                           |  |            | 83,000 |         |        |  | 2,000           |             |  |  | (20,000    | ) |  |           | (65,000 | ) |  |  |  | 
|                                                |  |            |        |         |        |  |                 |             |  |  |            |   |  |           |        

F-18



---



##### Table of Contents



|                                                |       |            |         |         |        |  |                 |             |  |  |            |         |  |           |        |        |  |  |        |        | 
|----------------------------------------------- | ----- | ---------- | ------- | ------- | ------ |  | --------------- | ----------- |  |  | ---------- | ------- |  | --------- | ------ | ------ |  |  | ------ | ------ | 
|                                                |       |            |         | Charged |        |  | Utilized during |             |  | 
|                                                |       | Balance at |         |         | during |  |                 | fiscal 2003 |  |  | Balance at |        
|                                                |       | March 31,  |         |         | fiscal |  |                 | Net cash    |  |  | Non cash   |         |  | March 31, |       
|                                                |       | 2002       |         |         | 2003   |  |                 | payments    |  |  | movement   |         |  | 2003      |       
|                                                |       | £ 000     |         |         | £000  |  |                 | £000       |  |  | £000      |         |  | £000     |       
|                                                |       |            |        
|Direct costs:                                   |       |            |         |         |        |  |                 |             |  |  |            |         |  |           |        |        |  |  |        |       
|Inventory write-downs and related costs         |       |            | 40,000  |         |        |  |                |             |  |  | 20,000     |         |  |           | 20,000 |        |  |  |       |       
|Manufacturing outsourcing                       |       |            | 31,000  |         |        |  | 21,000          |             |  |  | 21,000     |         |  |           | 23,000 |        |  |  | 8,000  |       
|Onerous contracts                               |       |            | 31,000  |         |        |  | 5,000           |             |  |  | 30,000     |         |  |           |       |        |  |  | 6,000  |       
|                                                |       |            |         |         |        |  |                 |             |  |  |            |         |  |           |       
|                                                |       |            | 102,000 |         |        |  | 26,000          |             |  |  | 71,000     |         |  |           | 43,000 |        |  |  | 14,000 |       
|                                                |       |            |         |         |        |  |                 |             |  |  |            |         |  |           |       
|Business restructuring costs:                   |       |            |         |         |        |  |                 |             |  |  |            |         |  |           |        |        |  |  |        |       
|Employee severance                              |       |            | 30,000  |         |        |  | 128,000         |             |  |  | 148,000    |         |  |           |       |        |  |  | 10,000 |       
|Site rationalization                            |       |            | 40,000  |         |        |  | 36,000          |             |  |  | 30,000     |         |  |           |       |        |  |  | 46,000 |       
|Contractual commitments and other restructuring |       |            | 13,000  |         |        |  |                |             |  |  |           |         |  |           | 10,000 |        |  |  | 3,000  |       
|Systems implementation                          |       |            | 24,000  |         |        |  | (7,000          | )           |  |  | 17,000     |         |  |           |       |        |  |  |       |       
|Advisor fees                                    |       |            |        |         |        |  | 73,000          |             |  |  | 63,000     |         |  |           |       |        |  |  | 10,000 |       
|                                                |       |            |         |         |        |  |                 |             |  |  |            |         |  |           |       
|                                                |       |            | 107,000 |         |        |  | 230,000         |             |  |  | 258,000    |         |  |           | 10,000 |        |  |  | 69,000 |       
|                                                |       |            |         |         |        |  |                 |             |  |  |            |         |  |           |       
|                                                | Total |            |         | 209,000 |        |  |                 | 256,000     |  |  |            | 329,000 |  |           |        | 53,000 |  |  |        | 83,000 | 
|                                                |       |            |         |         |        |  |                 |             |  |  |            |         |  |           |       

Inventory write-downs and related costs




Manufacturing outsourcing




Onerous contracts




Employee severance




F-19



---



##### Table of Contents



Site rationalization




Contractual commitments and other restructuring




Systems implementation




Advisor fees








|   |         
|-- | --------
|7. | Goodwill





|                                   |                        |        |           |             |              |  |            |           |  |  |         |          |  
|---------------------------------- | ---------------------- | ------ | --------- | ----------- | ------------ |  | ---------- | --------- |  |  | ------- | -------- | -
|                                   |                        |        |           | Accumulated |              |  |           
|                                   |                        | Cost   |           |             | amortization |  |            | Total     | 
|                                   |                        | £ 000 |           |             | £000        |  |            | £000     | 
|                                   |                        |        |          
|Balance at March 31, 2003          |                        |        | 1,880,000 |             |              |  | (1,223,000 | )         |  |  | 657,000 |         
|                                   | Goodwill disposed of   |        |           | (1,877,000  | )            |  |            | 1,223,000 |  |  |         | (654,000 | )
|                                   | Translation adjustment |        |           | (3,000      | )            |  |            |          |  |  |         | (3,000   | )
|                                   |                        |        |           |             |              |  |            |           | 
|Balance at March 31, 2004 and 2005 |                        |        |          |             |              |  |           |           |  |  |        |         
|                                   |                        |        |           |             |              |  |            |           | 

F-20



---



##### Table of Contents









|   |                  
|-- | -----------------
|8. | Intangible assets





|   |                                              
|-- | ---------------------------------------------
|9. | Pension plans and other post-retirement plans

Pension plans












F-21



---



##### Table of Contents





|                                                                 |                                                |                  |   |   |                  |  |   |            |   |  |        |   |  |  |   |          |  
|---------------------------------------------------------------- | ---------------------------------------------- | ---------------- | - | - | ---------------- |  | - | ---------- | - |  | ------ | - |  |  | - | -------- | -
|                                                                 |                                                | Pension benefits |   |   | Pension benefits | 
|                                                                 |                                                | U.K. plans       |   |   | Overseas plans   | 
|                                                                 |                                                | 2005             |   |   | 2004             |  |   | 2005       |   |  | 2004   |  
|                                                                 |                                                | £ 000           |   |   | £ 000           |  |   | £ 000     |   |  | £ 000 |  
|                                                                 |                                                |                  |  
|Change in benefit obligations:                                   |                                                |                  |   |   |                  |  |   |            |   |  |        |   |  |  |   |         
|                                                                 | Benefit obligation at beginning of year        |                  |   |  |                  |  |   | 2,444,000  |   |  |        |  |  |  |   | 245,000  |  
|                                                                 | Service cost                                   |                  |   |  |                  |  |   | 5,000      |   |  |        |  |  |  |   |         |  
|                                                                 | Interest income                                |                  |   |  |                  |  |   | (1,000     | ) |  |        |  |  |  |   |         |  
|                                                                 | Benefits paid                                  |                  |   |  |                  |  |   | (1,000     | ) |  |        |  |  |  |   | (1,000   | )
|                                                                 | Divestitures                                   |                  |   |  |                  |  |   | (2,447,000 | ) |  |        |  |  |  |   | (244,000 | )
|                                                                 |                                                |                  |   |   |                  |  |   |            |   |  |        |  
|Benefit obligations at end of year                               |                                                |                  |  |   |                  |  |  |            |   |  |       |   |  |  |  |         
|                                                                 |                                                |                  |   |   |                  |  |   |            |   |  |        |  
|Change in plan assets:                                           |                                                |                  |   |   |                  |  |   |            |   |  |        |   |  |  |   |         
|                                                                 | Fair value of plan assets at beginning of year |                  |   |  |                  |  |   | 2,237,000  |   |  |        |  |  |  |   | 134,000  |  
|                                                                 | Benefits paid                                  |                  |   |  |                  |  |   | (1,000     | ) |  |        |  |  |  |   | (1,000   | )
|                                                                 | Divestitures                                   |                  |   |  |                  |  |   | (2,236,000 | ) |  |        |  |  |  |   | (133,000 | )
|Fair value of plan assets at end of year                         |                                                |                  |  |   |                  |  |  |            |   |  |       |   |  |  |  |         
|Amounts recognized in the consolidated balance sheet consist of: |                                                |                  |   |   |                  |  |   |            |   |  |        |   |  |  |   |         
|                                                                 | Accumulated other comprehensive income         |                  |   |  |                  |  |   |           |   |  |        |  |  |  |   |         |  
|                                                                 |                                                |                  |   |   |                  |  |   |            |   |  |        |  
|Net amount recognized                                            |                                                |                  |  |   |                  |  |  |            |   |  |       |   |  |  |  |         
|                                                                 |                                                |                  |   |   |                  |  |   |            |   |  |        |  



|                              |                                       |                  |  |   |                  |  |  |      |  |  |      |     |  |      |  |   |      |  |  |     |  |  |  |     | 
|----------------------------- | ------------------------------------- | ---------------- |  | - | ---------------- |  |  | ---- |  |  | ---- | --- |  | ---- |  | - | ---- |  |  | --- |  |  |  | --- | 
|                              |                                       | Pension benefits |  |   | Pension benefits | 
|                              |                                       | U.K. plans       |  |   | Overseas plans   | 
|                              |                                       | 2005             |  |   | 2004             |  |  | 2003 |  |  | 2005 |     |  | 2004 |  |   | 2003 | 
|                              |                                       | %                |  |   | %                |  |  | %    |  |  | %    |     |  | %    |  |   | %    | 
|                              |                                       |                  | 
|Weighted average assumptions: |                                       |                  |  |   |                  |  |  |      |  |  |      |     |  |      |  |   |      |  |  |     |  |  |  |    
|                              | Discount rate for pension Expense     |                  |  |  |                  |  |  | 5.3  |  |  |      | 5.3 |  |      |  |  |      |  |  | 6.7 |  |  |  | 6.7 | 
|                              | Discount rate for year end disclosure |                  |  |  |                  |  |  | 5.3  |  |  |      | 5.3 |  |      |  |  |      |  |  | 6.0 |  |  |  | 6.0 | 
|                              | Expected return on plan Assets        |                  |  |  |                  |  |  | 5.7  |  |  |      | 5.7 |  |      |  |  |      |  |  | 8.5 |  |  |  | 8.5 | 
|                              | Rate of compensation increases        |                  |  |  |                  |  |  | 4.5  |  |  |      | 4.5 |  |      |  |  |      |  |  | 4.4 |  |  |  | 4.4 | 
|                              | Rate of pension increases             |                  |  |  |                  |  |  | 2.5  |  |  |      | 2.5 |  |      |  |  |      |  |  | 0.5 |  |  |  | 0.5 | 



|                                                      |                                                   |                  |   |   |                  |  |       |        |  |  |        |          |   |        |   |   |        |  |   |   |  |  |        |         |  
|----------------------------------------------------- | ------------------------------------------------- | ---------------- | - | - | ---------------- |  | ----- | ------ |  |  | ------ | -------- | - | ------ | - | - | ------ |  | - | - |  |  | ------ | ------- | -
|                                                      |                                                   | Pension benefits |   |   | Pension benefits | 
|                                                      |                                                   | U.K. plans       |   |   | Overseas plans   | 
|                                                      |                                                   | 2005             |   |   | 2004             |  |       | 2003   |  |  | 2005   |          |   | 2004   |   |   | 2003   | 
|                                                      |                                                   | £ 000           |   |   | £ 000           |  |       | £ 000 |  |  | £ 000 |          |   | £ 000 |   |   | £ 000 | 
|                                                      |                                                   |                  |  
|Components of net periodic Benefit Expense/(income):  |                                                   |                  |   |   |                  |  |       |        |  |  |        |          |   |        |   |   |        |  |   |   |  |  |        |        
|                                                      | Service cost                                      |                  |   |  |                  |  |       | 4,000  |  |  |        | 26,000   |   |        |   |  |        |  |   |  |  |  |        | 7,000   |  
|                                                      | Interest cost                                     |                  |   |  |                  |  |       | 1,000  |  |  |        | 138,000  |   |        |   |  |        |  |   |  |  |  |        | 14,000  |  
|                                                      | Expected return on plan Assets                    |                  |   |  |                  |  |       |       |  |  |        | (138,000 | ) |        |   |  |        |  |   |  |  |  |        | (13,000 | )
|                                                      | Amortization of unrecognized transition liability |                  |   |  |                  |  |       |       |  |  |        | 3,000    |   |        |   |  |        |  |   |  |  |  |        |        |  
|Net periodic benefit expense of defined benefit plans |                                                   |                  |  |   |                  |  | 5,000 |        |  |  | 29,000 |          |   |        |  |   |        |  |  |   |  |  | 8,000  |        
|Net curtailment loss                                  |                                                   |                  |  |   |                  |  |      |        |  |  |       |          |   |        |  |   |        |  |  |   |  |  | 3,000  |        
|Net periodic benefit expense                          |                                                   |                  |  |   |                  |  | 5,000 |        |  |  | 29,000 |          |   |        |  |   |        |  |  |   |  |  | 11,000 |        

F-22



---



##### Table of Contents







| |                               
| | ------------------------------
| | Other post-retirement benefits





|                                         |                                        |                 |   |   |        |  |        |         |  
|---------------------------------------- | -------------------------------------- | --------------- | - | - | ------ |  | ------ | ------- | -
|                                         |                                        | Post retirement |  
|                                         |                                        | Benefits        |  
|                                         |                                        | March 31,       |  
|                                         |                                        | 2005            |   |   | 2004   | 
|                                         |                                        | £ 000          |   |   | £ 000 | 
|                                         |                                        |                 |  
|Change in benefit obligations:           |                                        |                 |   |   |        |  |        |        
|Benefit obligations at beginning of year |                                        |                 |  |   |        |  | 29,000 |        
|                                         | Businesses disposed                    |                 |   |  |        |  |        | (28,000 | )
|                                         | Foreign currency exchange rate changes |                 |   |  |        |  |        | (1,000  | )
|Benefit obligations at end of year       |                                        |                 |  |   |        |  |       |        
|Funded status                            |                                        |                 |  |   |        |  |       |        
|Unrecognized net actuarial gain          |                                        |                 |  |   |        |  |       |        
|Unrecognized prior service cost          |                                        |                 |  |   |        |  |       |        
|Net accrued benefit cost                 |                                        |                 |  |   |        |  |       |        



|                                                           |                          |                    |   |   |        |  |   |        |  |  |        |        |  
|---------------------------------------------------------- | ------------------------ | ------------------ | - | - | ------ |  | - | ------ |  |  | ------ | ------ | -
|                                                           |                          | Post retirement    |  
|                                                           |                          | benefits March 31, |  
|                                                           |                          | 2005               |   |   | 2004   |  |   | 2003   | 
|                                                           |                          | £ 000             |   |   | £ 000 |  |   | £ 000 | 
|                                                           |                          |                    |  
|Components of net periodic benefit (income)/expense:       |                          |                    |   |   |        |  |   |        |  |  |        |       
|                                                           | Interest cost            |                    |   |  |        |  |   |       |  |  |        | 2,000  |  
|                                                           | Amortization of net gain |                    |   |  |        |  |   |       |  |  |        | (1,000 | )
|                                                           | Net curtailment gain     |                    |   |  |        |  |   |       |  |  |        | (5,000 | )
|                                                           |                          |                    |   |   |        |  |   |        | 
|Net periodic benefit income of other post-retirement plans |                          |                    |  |   |        |  |  |        |  |  | (4,000 | )     
|                                                           |                          |                    |   |   |        |  |   |        | 







F-23



---



##### Table of Contents



Defined contribution plans






|    |                                            
|--- | -------------------------------------------
|10. | Segment and related information disclosures





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The Network Equipment segment developed, manufactured, sold and
    supported optical networks, transmission systems and network
    management software for customers in the carrier network market.
    It also provided to customers in the carrier network market a
    broad range of access products. In addition, it supplied
    customers in both the carrier and the enterprise network markets
    a broad range of high-performance, high-capacity broadband
    switches, which select paths for sending large amounts of voice
    and data traffic through a network
|
| |  | The Network Services segment provided a broad range of support
    services to the communications industry worldwide tailored to
    suit customers needs. It supported both the Companys
    products and those of other network equipment manufacturers.                                                                                                                                                                                                                                                                                                                       
|
| |  | The Other segment contains the Companys other investments
    and businesses not included in other segments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                      



Segmental performance










F-24



---



##### Table of Contents







| |                                            
| | -------------------------------------------
| | Analysis of reportable segments (U.K. GAAP)

|                                       |  |          |   |           |               |  |         |             |  |  |   | 
|-------------------------------------- |  | -------- | - | --------- | ------------- |  | ------- | ----------- |  |  | - | 
|                                       |  |          |   | Segment   |               |  |        
|                                       |  |          |   | operating |               |  | Capital |            
|As of and For the Year Ended           |  | Revenues |   |           | (loss)/profit |  |         | employed(2) | 
|March 31, 2005                         |  | £ 000   |   |           | £ 000        |  |         | £ 000      | 
|                                       |  |          |  
|Network equipment                      |  |          |  |           |               |  |        |             |  |  |  | 
|Network services                       |  |          |  |           |               |  |        |             |  |  |  | 
|Other (including intra activity sales) |  |          |  |           |               |  | (226    | )           |  |  |  | 
|                                       |  |          |   |           |               |  |         |             | 
|Segment total  U.K. GAAP              |  |          |  |           |               |  | (226    | )           |  |  |  | 
|                                       |  |          |   |           |               |  |         |             | 

|                                       |  |          |         |           |               |  |         |             |  |  |   | 
|-------------------------------------- |  | -------- | ------- | --------- | ------------- |  | ------- | ----------- |  |  | - | 
|                                       |  |          |         | Segment   |               |  |        
|                                       |  |          |         | operating |               |  | Capital |            
|As of and For the Year Ended           |  | Revenues |         |           | (loss)/profit |  |         | employed(2) | 
|March 31, 2004                         |  | £ 000   |         |           | £ 000        |  |         | £ 000      | 
|                                       |  |          |        
|Network equipment                      |  |          | 100,000 |           |               |  | (28,000 | )           |  |  |  | 
|Network services                       |  |          | 68,000  |           |               |  | 4,000   |             |  |  |  | 
|Other (including intra activity sales) |  |          |        |           |               |  | (14,000 | )           |  |  |  | 
|                                       |  |          |         |           |               |  |         |             | 
|Segment total  U.K. GAAP              |  |          | 168,000 |           |               |  | (38,000 | )           |  |  |  | 
|                                       |  |          |         |           |               |  |         |             | 

|                                              |  |          |           |           |               |  |          |             |  |  |         |  
|--------------------------------------------- |  | -------- | --------- | --------- | ------------- |  | -------- | ----------- |  |  | ------- | -
|                                              |  |          |           | Segment   |               |  |         
|                                              |  |          |           | operating |               |  | Capital  |            
|As of and For the Year Ended                  |  | Revenues |           |           | (loss)/profit |  |          | employed(2) | 
|March 31, 2003                                |  | £ 000   |           |           | £ 000        |  |          | £ 000      | 
|                                              |  |          |          
|Network equipment                             |  |          | 1,131,000 |           |               |  | (259,000 | )           |  |  | 220,000 |  
|Network services                              |  |          | 743,000   |           |               |  | 52,000   |             |  |  |         |  
|Capital (net of intra segment revenue of £32) |  |          | 40,000    |           |               |  | (107,000 | )           |  |  | (27,000 | )
|Discontinued(1)                               |  |          | 88,000    |           |               |  | (2,000   | )           |  |  |        |  
|                                              |  |          |           |           |               |  |          |             | 
|Segment total  U.K. GAAP                     |  |          | 2,002,000 |           |               |  | (316,000 | )           |  |  | 193,000 |  
|                                              |  |          |           |           |               |  |          |             | 



| |     |                                                                                                                                                                                                                                                                                         
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | For fiscal 2003 discontinued operations relate to mobile.                                                                                                                                                                                                                               
|
| | (2) | Included in capital employed are the following: property, plant
    and equipment, inventory, accounts receivable, prepaid expense
    and other current assets, other non-current assets, accounts
    payable, accrued liabilities, non-current liabilities and other
    liabilities.

F-25



---



##### Table of Contents



Analysis of revenue by product (U.K. GAAP)


|                        |       |                                                       |   |   |       |  |         |         |         |  |           |           |           | 
|----------------------- | ----- | ----------------------------------------------------- | - | - | ----- |  | ------- | ------- | ------- |  | --------- | --------- | --------- | 
|                        |       | 2005                                                  |   |   | 2004  |  |         | 2003    |        
|                        |       | £ 000                                                |   |   | £000 |  |         | £000   |        
|                        |       |                                                       |  
|Network Equipment:      |       |                                                       |   |   |       |  |         |         |         |  |           |          
|Optical Networks        |       |                                                       |  |   |       |  | 35,000  |         |         |  | 439,000   |          
|BBRS                    |       |                                                       |  |   |       |  | 9,000   |         |         |  | 142,000   |          
|European Access         |       |                                                       |  |   |       |  | 19,000  |         |         |  | 258,000   |          
|North American Access   |       |                                                       |  |   |       |  | 13,000  |         |         |  | 95,000    |          
|Outside Plant & Power   |       |                                                       |  |   |       |  | 18,000  |         |         |  | 140,000   |          
|Other Network Equipment |       |                                                       |  |   |       |  | 6,000   |         |         |  | 57,000    |          
|                        |       |                                                       |   |   |       |  |         |         |        
|                        | Total |                                                       |   |  |       |  |         | 100,000 |         |  |           | 1,131,000 |          
|Network Services:       |       |                                                       |   |   |       |  |         |         |         |  |           |          
|IC&M                    |       |                                                       |  |   |       |  | 35,000  |         |         |  | 370,000   |          
|VAS                     |       |                                                       |  |   |       |  | 33,000  |         |         |  | 373,000   |          
|                        |       |                                                       |   |   |       |  |         |         |        
|                        | Total |                                                       |   |  |       |  |         | 68,000  |         |  |           | 743,000   |          
|                        |       |                                                       |   |   |       |  |         |         |        
|                        |       | Total Network Equipment and Network Services revenues |   |   |      |  |         |         | 168,000 |  |           |           | 1,874,000 | 
|                        |       |                                                       |   |   |       |  |         |         |        
|Total capital revenue   |       |                                                       |  |   |       |  |        |         |         |  | 40,000    |          
|Total discontinued      |       |                                                       |  |   |       |  |        |         |         |  | 88,000    |          
|                        |       |                                                       |   |   |       |  |         |         |        
|Total revenues          |       |                                                       |  |   |       |  | 168,000 |         |         |  | 2,002,000 |          
|                        |       |                                                       |   |   |       |  |         |         |        



| |                                                                   
| | ------------------------------------------------------------------
| | Reconciliation of U.K. GAAP segmental information to
    U.S. GAAP



| |        
| | -------
| | Revenue

|                                     |        |        |   |   |        |  |         |        |  |  |           |          |  
|------------------------------------ | ------ | ------ | - | - | ------ |  | ------- | ------ |  |  | --------- | -------- | -
|                                     |        | 2005   |   |   | 2004   |  |         | 2003   | 
|                                     |        | £ 000 |   |   | £ 000 |  |         | £ 000 | 
|                                     |        |        |  
|Revenue in accordance with U.K. GAAP |        |        |  |   |        |  | 168,000 |        |  |  | 2,002,000 |         
|Discontinued operations:             |        |        |   |   |        |  |         |        |  |  |           |         
|                                     | Mobile |        |   |  |        |  |         |       |  |  |           | (106,000 | )
|                                     |        |        |   |   |        |  |         |        | 
|Revenue in accordance with U.S. GAAP |        |        |  |   |        |  | 168,000 |        |  |  | 1,896,000 |         
|                                     |        |        |   |   |        |  |         |        | 

F-26



---



##### Table of Contents



Operating (loss)/income


|                                                                                                                                                              |                                                                   |        |        |        |        |  |           |           |   |  |          |          |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------- | ------ | ------ | ------ | ------ |  | --------- | --------- | - |  | -------- | -------- | -
|                                                                                                                                                              |                                                                   | 2005   |        |        | 2004   |  |           | 2003      |  
|                                                                                                                                                              |                                                                   | £ 000 |        |        | £ 000 |  |           | £ 000    |  
|                                                                                                                                                              |                                                                   |        |       
|Segmental operating loss per U.K. GAAP                                                                                                                        |                                                                   |        | (226   | )      |        |  | (38,000   | )         |   |  | (316,000 | )       
|                                                                                                                                                              | Amortization expense                                              |        |        |       |        |  |           | (13,000   | ) |  |          | (104,000 | )
|                                                                                                                                                              | Share of associates operating loss)                               |        |        |       |        |  |           |          |   |  |          | (89,000  | )
|                                                                                                                                                              | Operating exceptional items                                       |        |        |       |        |  |           | (2,000    | ) |  |          | (358,000 | )
|                                                                                                                                                              |                                                                   |        |        |        |        |  |           |           |  
|U.K. GAAP operating loss                                                                                                                                      |                                                                   |        | (226   | )      |        |  | (53,000   | )         |   |  | (867,000 | )       
|                                                                                                                                                              | Joint ventures and associates operating loss                      |        |        |       |        |  |           |          |   |  |          | 129,000  |  
|                                                                                                                                                              | U.K. GAAP operating loss of discontinued operations               |        |        |       |        |  |           |          |   |  |          | 70,000   |  
|U.S. GAAP adjustments:                                                                                                                                        |                                                                   |        |        |        |        |  |           |           |   |  |          |         
|                                                                                                                                                              | Share option plans                                                |        |        |       |        |  |           | (9,000    | ) |  |          | (14,000  | )
|                                                                                                                                                              | Pension and other post-retirement benefits                        |        |        |       |        |  |           | (3,000    | ) |  |          | 11,000   |  
|                                                                                                                                                              | Goodwill and intangible asset amortization and impairment Charges |        |        |       |        |  |           | 7,000     |   |  |          | 37,000   |  
|                                                                                                                                                              | Gain on disposal of businesses                                    |        |        |       |        |  |           |          |   |  |          | 5,000    |  
|                                                                                                                                                              | Restructuring costs                                               |        |        |       |        |  |           |          |   |  |          | 18,000   |  
|                                                                                                                                                              | Other                                                             |        |        | (1,108 | )      |  |           |          |   |  |          | 3,000    |  
|                                                                                                                                                              |                                                                   |        |        |        |        |  |           |           |  
|U.S. GAAP operating income/(loss)                                                                                                                             |                                                                   |        | (1,334 | )      |        |  | (58,000   | )         |   |  | (608,000 | )       
|                                                                                                                                                              | Loss on investments, net                                          |        |        |       |        |  |           |          |   |  |          | (45,000  | )
|                                                                                                                                                              | Gain on financial restructuring                                   |        |        |       |        |  |           | 2,183,000 |   |  |          |         |  
|                                                                                                                                                              | Gain on settlement of equity forward contracts                    |        |        |       |        |  |           | 123,000   |   |  |          |         |  
|                                                                                                                                                              | Other income                                                      |        |        |       |        |  |           |          |   |  |          | 34,000   |  
|                                                                                                                                                              | Interest income                                                   |        |        | 411    |        |  |           | 29,000    |   |  |          | 45,000   |  
|                                                                                                                                                              | Interest expense                                                  |        |        |       |        |  |           |          |   |  |          | (329,000 | )
|                                                                                                                                                              |                                                                   |        |        |        |        |  |           |           |  
|U.S. GAAP income/(loss) from continuing operations before
    income taxes, minority interests and cumulative effects of
    changes in accounting principles |                                                                   |        | (923   | )      |        |  | 2,277,000 |           |   |  | (903,000 | )       
|                                                                                                                                                              |                                                                   |        |        |        |        |  |           |           |  



| |                              
| | -----------------------------
| | Capital employed/total assets

|                                         |                                                                             |        |       |       |        |  |       |       | 
|---------------------------------------- | --------------------------------------------------------------------------- | ------ | ----- | ----- | ------ |  | ----- | ----- | 
|                                         |                                                                             | 2005   |       |       | 2004   | 
|                                         |                                                                             | £ 000 |       |       | £ 000 | 
|                                         |                                                                             |        |      
|Total U.K. GAAP segment capital employed |                                                                             |        |      |       |        |  |      |      
|U.K. GAAP capital employed               |                                                                             |        |      |       |        |  |      |      
|U.S. GAAP adjustments:                   |                                                                             |        |       |       |        |  |       |      
|                                         | Provisions for restructuring not included in U.S. GAAP
    capital employed |        |       | 7,852 |        |  |       | 8,960 | 
|                                         |                                                                             |        |       |       |        | 
|Total U.S. GAAP assets                   |                                                                             |        | 7,852 |       |        |  | 8,960 |      
|                                         |                                                                             |        |       |       |        | 



| |                             
| | ----------------------------
| | U.K.  U.S. GAAP adjustments





| |   |                                           
| | - | ------------------------------------------
| |  | Pension and other post-retirement benefits



F-27



---



##### Table of Contents





| |   |            
| | - | -----------
| |  | Derivatives





| |                                 
| | --------------------------------
| | Revenue by geography (U.S. GAAP)



|                                     |                                          |                      |   |   |        |  |        |         |  |  |         |           | 
|------------------------------------ | ---------------------------------------- | -------------------- | - | - | ------ |  | ------ | ------- |  |  | ------- | --------- | 
|                                     |                                          | Year ended March 31, |  
|                                     |                                          | 2005                 |   |   | 2004   |  |        | 2003    | 
|                                     |                                          | £ 000               |   |   | £ 000 |  |        | £ 000  | 
|                                     |                                          |                      |  
|Revenue by territory of destination: |                                          |                      |   |   |        |  |        |         |  |  |         |          
|United Kingdom                       |                                          |                      |  |   |        |  | 42,000 |         |  |  | 500,000 |          
|Other                                |                                          |                      |  |   |        |  | 58,000 |         |  |  | 668,000 |          
|                                     |                                          |                      |   |   |        |  |        |         | 
|                                     | Total Europe, Middle East, Africa (EMEA) |                      |   |  |        |  |        | 100,000 |  |  |         | 1,168,000 | 
|                                     |                                          |                      |   |   |        |  |        |         | 
|United States                        |                                          |                      |  |   |        |  | 50,000 |         |  |  | 519,000 |          
|Central and Latin America (CALA)     |                                          |                      |  |   |        |  | 5,000  |         |  |  | 62,000  |          
|Other                                |                                          |                      |  |   |        |  |       |         |  |  | 15,000  |          
|                                     |                                          |                      |   |   |        |  |        |         | 
|                                     | Total the Americas                       |                      |   |  |        |  |        | 55,000  |  |  |         | 596,000   | 
|                                     |                                          |                      |   |   |        |  |        |         | 
|Asia Pacific (APAC)                  |                                          |                      |  |   |        |  | 13,000 |         |  |  | 132,000 |          
|                                     |                                          |                      |   |   |        |  |        |         | 
|                                     | Total external revenue                   |                      |   |  |        |  |        | 168,000 |  |  |         | 1,896,000 | 
|                                     |                                          |                      |   |   |        |  |        |         | 

|                                 |                                          |                      |   |   |       |  |        |         |  |  |         |           | 
|-------------------------------- | ---------------------------------------- | -------------------- | - | - | ----- |  | ------ | ------- |  |  | ------- | --------- | 
|                                 |                                          | Year ended March 31, |  
|                                 |                                          | 2005                 |   |   | 2004  |  |        | 2003    | 
|                                 |                                          | £000                |   |   | £000 |  |        | £000   | 
|                                 |                                          |                      |  
|Revenue by territory of origin:  |                                          |                      |   |   |       |  |        |         |  |  |         |          
|United Kingdom                   |                                          |                      |  |   |       |  | 58,000 |         |  |  | 692,000 |          
|Italy                            |                                          |                      |  |   |       |  | 19,000 |         |  |  | 230,000 |          
|Other                            |                                          |                      |  |   |       |  | 21,000 |         |  |  | 219,000 |          
|                                 |                                          |                      |   |   |       |  |        |         | 
|                                 | Total Europe, Middle East, Africa (EMEA) |                      |   |  |       |  |        | 98,000  |  |  |         | 1,141,000 | 
|                                 |                                          |                      |   |   |       |  |        |         | 
|United States                    |                                          |                      |  |   |       |  | 58,000 |         |  |  | 534,000 |          
|Central and Latin America (CALA) |                                          |                      |  |   |       |  | 4,000  |         |  |  | 57,000  |          
|Other                            |                                          |                      |  |   |       |  |       |         |  |  | 18,000  |          
|                                 |                                          |                      |   |   |       |  |        |         | 
|                                 | Total the Americas                       |                      |   |  |       |  |        | 62,000  |  |  |         | 609,000   | 
|                                 |                                          |                      |   |   |       |  |        |         | 
|Asia Pacific (APAC)              |                                          |                      |  |   |       |  | 8,000  |         |  |  | 146,000 |          
|                                 |                                          |                      |   |   |       |  |        |         | 
|                                 | Total external revenue                   |                      |   |  |       |  |        | 168,000 |  |  |         | 1,896,000 | 
|                                 |                                          |                      |   |   |       |  |        |         | 



F-28



---



##### Table of Contents



Revenue by product (U.S. GAAP)




|                   |                                             |                      |   |   |       |  |         |         |  |  |           |           | 
|------------------ | ------------------------------------------- | -------------------- | - | - | ----- |  | ------- | ------- |  |  | --------- | --------- | 
|                   |                                             | Year ended March 31, |  
|                   |                                             | 2005                 |   |   | 2004  |  |         | 2003    | 
|                   |                                             | £000                |   |   | £000 |  |         | £000   | 
|                   |                                             |                      |  
|                   | Optical networks                            |                      |   |  |       |  |         | 35,000  |  |  |           | 439,000   | 
|                   | Access systems                              |                      |   |  |       |  |         | 50,000  |  |  |           | 493,000   | 
|                   | Broadband routing and switching             |                      |   |  |       |  |         | 9,000   |  |  |           | 142,000   | 
|                   | Other network equipment                     |                      |   |  |       |  |         | 6,000   |  |  |           | 57,000    | 
|                   |                                             |                      |   |   |       |  |         |         | 
|Network Equipment  |                                             |                      |  |   |       |  | 100,000 |         |  |  | 1,131,000 |          
|                   |                                             |                      |   |   |       |  |         |         | 
|                   | Value-added services                        |                      |   |  |       |  |         | 33,000  |  |  |           | 373,000   | 
|                   | Installation, commissioning and maintenance |                      |   |  |       |  |         | 35,000  |  |  |           | 370,000   | 
|                   |                                             |                      |   |   |       |  |         |         | 
|Network Services   |                                             |                      |  |   |       |  | 68,000  |         |  |  | 743,000   |          
|                   |                                             |                      |   |   |       |  |         |         | 
|                   | Total Core revenues                         |                      |   |  |       |  |         | 168,000 |  |  |           | 1,874,000 | 
|Capital businesses |                                             |                      |  |   |       |  |        |         |  |  | 22,000    |          
|                   |                                             |                      |   |   |       |  |         |         | 
|                   | Total external revenue                      |                      |   |  |       |  |         | 168,000 |  |  |           | 1,896,000 | 
|                   |                                             |                      |   |   |       |  |         |         | 



| |                  
| | -----------------
| | Long-lived assets





|                        |       |                      |   |   |       |  |   |       |  |  |        |        | 
|----------------------- | ----- | -------------------- | - | - | ----- |  | - | ----- |  |  | ------ | ------ | 
|                        |       | Year ended March 31, |  
|                        |       | 2005                 |   |   | 2004  |  |   | 2003  | 
|                        |       | £000                |   |   | £000 |  |   | £000 | 
|                        |       |                      |  
|Network Equipment       |       |                      |  |   |       |  |  |       |  |  | 34,000 |       
|Network Services        |       |                      |   |   |       |  |   |       |  |  |        |       
|Capital                 |       |                      |  |   |       |  |  |       |  |  | 1,000  |       
|                        |       |                      |   |   |       |  |   |       | 
|                        | Total |                      |   |  |       |  |   |      |  |  |        | 35,000 | 
|Discontinued operations |       |                      |  |   |       |  |  |       |  |  | 8,000  |       
|                        |       |                      |   |   |       |  |   |       | 
|                        | Total |                      |   |  |       |  |   |      |  |  |        | 43,000 | 
|                        |       |                      |   |   |       |  |   |       | 



|               |  |                      |   |  |       |  |   |       |  |  |           | 
|-------------- |  | -------------------- | - |  | ----- |  | - | ----- |  |  | --------- | 
|               |  | Year ended March 31, |  
|               |  | 2005                 |   |  | 2004  |  |   | 2003  | 
|               |  | £000                |   |  | £000 |  |   | £000 | 
|               |  |                      |  
|United Kingdom |  |                      |  |  |       |  |  |       |  |  | 567,000   | 
|United States  |  |                      |  |  |       |  |  |       |  |  | 249,000   | 
|Italy          |  |                      |  |  |       |  |  |       |  |  | 48,000    | 
|Other          |  |                      |  |  |       |  |  |       |  |  | 157,000   | 
|               |  |                      |   |  |       |  |   |       | 
|Total          |  |                      |  |  |       |  |  |       |  |  | 1,021,000 | 
|               |  |                      |   |  |       |  |   |       | 



F-29



---



##### Table of Contents



11. Commitments and contingencies


Legal proceedings


de minimis






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Marconi Corporation plc, M (2003) plc, Marconi Inc.
    and Marconi Data Systems Inc. are defendants in an action
    brought by a former employee, Thomas Edeus, or Edeus. The
    complaint asserts three causes of action; firstly that Edeus was
    unlawfully deprived of benefits to which he was entitled under
    Marconi Data Systems Incs United States severance plan;
    secondly for failure to provide Edeus with a summary plan
    description relating to the severance plan; and thirdly for age
    discrimination in employment. The plaintiff has purported to
    have made out claims in various specified amounts totaling over
    U.S.$901,000, some of which may be in the alternative, and also
    unspecified punitive damages, liquidated damages and front and
    back pay, making the impact of this claim on us and the former
    group difficult to assess. An answer and affirmative defenses
    have been filed on behalf of all defendants. On June 5,
    2003, the court entered an order providing as follows:
    Plaintiff having advised the court that one or more
    defendants [sic] are in Bankruptcy, this action is placed
    on the courts [suspense] calendar pending disposition of
    the bankruptcy case. Plaintiff is directed to file a notice for
    hearing a motion to reinstate upon disposition of the bankruptcy
    proceedings. Potential liabilities in respect of the claim
    against Marconi Corporation plc and M (2003) plc were
    compromised pursuant to our restructuring.
|
| |  | In April 2002, 11 former employees of Ten Square Inc. brought a
    claim against directors of their company for fraud in reducing
    their compensation package before liquidating the company and
    restarting it under a different name. The claim was for
    $2,160,050.91, plus $1 million in punitive damages for all
    plaintiffs (it is unclear if this was for each of the plaintiffs
    or in total). The plaintiffs alleged that M (2003) plc
    was a director of Ten Square Inc. although in fact
    M (2003) plc only had a right to appoint a director, a
    right M (2003) plc had not recently exercised. Marconi
    Ventures was also named as a plaintiff on September 9,
    2002. The plaintiffs did not serve proceedings upon
    M (2003) plc and on October 24, 2002 an order for
    the dismissal of the claim against M (2003) plc was
    entered. However, M (2003) plc was named in the second
    amended complaint which was filed on December 24, 2002.
    M (2003) plc is aware of the action but has not served
    and is not yet a party to it. Potential liabilities in respect
    of the claim against M (2003) plc have been
    compromised pursuant to the M (2003) plc scheme of
    arrangement.                                                                                                                                                                                                                                                                                                            



F-30



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##### Table of Contents



Purchase commitments




|            |  |                                 |   |  |       |  |   |       |  |  |       | 
|----------- |  | ------------------------------- | - |  | ----- |  | - | ----- |  |  | ----- | 
|            |  | Capital expenditure commitments |  
|            |  | 2005                            |   |  | 2004  |  |   | 2003  | 
|            |  | £000                           |   |  | £000 |  |   | £000 | 
|            |  |                                 |  
|At March 31 |  |                                 |  |  |       |  |  |       |  |  | 4,000 | 
|            |  |                                 |   |  |       |  |   |       | 

Leases






14. Investments in affiliates


Fiscal 2004




Fiscal 2003








Summarized financial information for investment in affiliates
is as follows:




|                             |  |           |   |  |       |  |   |       |  |  |     |  
|---------------------------- |  | --------- | - |  | ----- |  | - | ----- |  |  | --- | -
|                             |  | March 31, |  
|                             |  | 2005      |   |  | 2004  |  |   | 2003  | 
|                             |  | £000     |   |  | £000 |  |   | £000 | 
|                             |  |           |  
|Statement of operations data |  |           |   |  |       |  |   |       |  |  |     |  
|Revenues                     |  |           |  |  |       |  |  |       |  |  | 89  |  
|Operating (loss)/income      |  |           |  |  |       |  |  |       |  |  | (74 | )
|Net (loss)/income            |  |           |  |  |       |  |  |       |  |  | (81 | )

F-31



---



##### Table of Contents



15. Investment in securities






16. Shareholders equity




17. Employee stock option plans










Plans under which options were still outstanding in respect
of the Companys ordinary shares at March 31, 2005:


Non-savings related plans


The Marconi Launch Share Plan




F-32



---



##### Table of Contents





Metapath
Software Corporation Amended and Restated 1995 Stock Option
Plan, the Metapath Software International, Inc. Amended and
Restated 1999 Stock Option Plan, and the Mobile Systems
International Holdings Limited Share Option Plan.






Mariposa
Technology, Inc. 1998 Employee Incentive Plan






The
Marconi Long Term Incentive Plan




F-33



---



##### Table of Contents





Additional plans at March 31, 2003:


Savings related plans




| |                                
| | -------------------------------
| | The Marconi U.K. Sharesave Plan







| |                                         
| | ----------------------------------------
| | The Marconi International Sharesave Plan







| |                                                                
| | ---------------------------------------------------------------
| | The Marconi International Sharesave Plan  Italian
    Appendix







| |                                                                            
| | ---------------------------------------------------------------------------
| | The Marconi Employee Stock Purchase Plan for Employees in
    North America



F-34



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##### Table of Contents









| |                          
| | -------------------------
| | Non-savings related plans



| |                                   
| | ----------------------------------
| | The Marconi 1999 Share Option Plan









| |                                
| | -------------------------------
| | The Marconi Phantom Option Plan







F-35



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##### Table of Contents





| |                              
| | -----------------------------
| | Marconi Restricted Share Plan







| |                                                   
| | --------------------------------------------------
| | The Marconi Associated Companies Share Option Plan





| |                                
| | -------------------------------
| | Existing GEC share option plans







| |                                                                                                                                                                                       
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The 1998 Equity Participation Plan of Reltec Corporation, the
    Amended and Restated 1995 Stock Purchase and Option Plan for
    Employees of Reltec Holdings, Inc. and Subsidiaries



| |                                                  
| | -------------------------------------------------
| | The Northwood Technologies Inc. Stock Option Plan





F-36



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##### Table of Contents





|                           |           |           |             |              |          |  |      |      | 
|-------------------------- | --------- | --------- | ----------- | ------------ | -------- |  | ---- | ---- | 
|                           |           |           |             | Weighted     |         
|                           |           |           |             | average      |         
|                           |           | Number of |             |              | exercise | 
|                           |           | shares    |             |              | price    | 
|                           |           |           |            
|Outstanding March 31, 2003 |           |           | 197,121,951 |              |          |  | 3.24 |     
|                           | Granted   |           |             |             |          |  |      |     | 
|                           | Lapsed    |           |             | (174,063,851 | )        |  |      | 3.61 | 
|                           | Exercised |           |             |             |          |  |      |     | 
|                           |           |           |             |              |          | 
|Outstanding March 31, 2004 |           |           | 23,058,100  |              |          |  | 0.43 |     
|                           |           |           |             |              |          | 
|                           | Granted   |           |             |             |          |  |      |     | 
|                           | Lapsed    |           |             |             |          |  |      |     | 
|                           | Exercised |           |             |             |          |  |      |     | 
|                           |           |           |             |              |          | 
|Outstanding March 31, 2005 |           |           | 23,058,100  |              |          |  | 0.43 |     
|                           |           |           |             |              |          | 







|            |  |                           |            |                  |                  |  |          |           |  |  |             |          |         |           |           |  |  |  |      | 
|----------- |  | ------------------------- | ---------- | ---------------- | ---------------- |  | -------- | --------- |  |  | ----------- | -------- | ------- | --------- | --------- |  |  |  | ---- | 
|            |  |                           |            | Total options    |                 
|            |  | Total options outstanding |            |                  | exercisable      | 
|            |  |                           |            | Weighted average |                  |  | Weighted |           |  |  |             | Weighted |        
|Range of    |  | Total                     |            |                  | remaining        |  |          | average   |  |  |             |          | average |          
|exercise    |  | number                    |            |                  | contractual life |  |          | exercise  |  |  | Number      |          |         | exercise  |          
|prices (£)  |  | outstanding               |            |                  | (years)          |  |          | price (£) |  |  | exercisable |          |         | price (£) |          
|            |  |                           |           
|Nil         |  |                           | 20,207,191 |                  |                  |  | 2.59     |           |  |  | nil         |          |         |           | 617,963   |  |  |  | nil  | 
|0.03  0.2  |  |                           | 66,715     |                  |                  |  | 2.54     |           |  |  | 0.19        |          |         |           | 66,715    |  |  |  | 0.19 | 
|0.35  0.8  |  |                           | 324,118    |                  |                  |  | 5.71     |           |  |  | 0.56        |          |         |           | 324,118   |  |  |  | 0.56 | 
|1.22  2.66 |  |                           | 1,708,105  |                  |                  |  | 5.21     |           |  |  | 2.12        |          |         |           | 1,708,105 |  |  |  | 2.12 | 
|2.73  4.72 |  |                           | 63,367     |                  |                  |  | 4.61     |           |  |  | 2.91        |          |         |           | 63,367    |  |  |  | 2.91 | 
|6.85  9.57 |  |                           | 688,604    |                  |                  |  | 5.89     |           |  |  | 8.73        |          |         |           | 688,604   |  |  |  | 8.73 | 
|nil  9.57  |  |                           | 23,058,100 |                  |                  |  | 2.93     |           |  |  | 0.43        |          |         |           | 2,850,909 |  |  |  | 3.51 | 

18. Fair values of financial instruments








| |                         
| | ------------------------
| | Equity forward contracts



F-37



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##### Table of Contents



19. Valuation and qualifying accounts


|                                |  |           |   |  |            |               |   |                |           |  |               |  |  |             |   |           |      |  |   |  |  |  |   | 
|------------------------------- |  | --------- | - |  | ---------- | ------------- | - | -------------- | --------- |  | ------------- |  |  | ----------- | - | --------- | ---- |  | - |  |  |  | - | 
|                                |  |           |   |  |            | Net effect of |   |                | Effect of |  |               |  |  |            
|                                |  | March 31, |   |  | Additions/ |               |   | acquisitions   |           |  | exchange rate |  |  |             |   | March 31, |     
|                                |  | 2004      |   |  | (release)  |               |   | less disposals |           |  | changes       |  |  | Utilization |   |           | 2005 | 
|Description                     |  | £         |   |  | £          |               |   | £              |           |  | £             |  |  | £           |   |           | £    | 
|                                |  |           |  
|Allowance for doubtful accounts |  |           |  |  |            |               |  |                |           |  |              |  |  |             |  |           |      |  |  |  |  |  |  | 
|Warranty reserve*               |  |           |  |  |            |               |  |                |           |  |              |  |  |             |  |           |      |  |  |  |  |  |  | 
|Total                           |  |           |  |  |            |               |  |                |           |  |              |  |  |             |  |           |      |  |  |  |  |  |  | 

|                                |  |           |         |  |            |               |        |                |           |  |               |   |  |             |   |           |      |  |        |   |  |  |   | 
|------------------------------- |  | --------- | ------- |  | ---------- | ------------- | ------ | -------------- | --------- |  | ------------- | - |  | ----------- | - | --------- | ---- |  | ------ | - |  |  | - | 
|                                |  |           |         |  |            | Net effect of |        |                | Effect of |  |               |   |  |            
|                                |  | March 31, |         |  | Additions/ |               |        | acquisitions   |           |  | exchange rate |   |  |             |   | March 31, |     
|                                |  | 2003      |         |  | (release)  |               |        | less disposals |           |  | changes       |   |  | Utilization |   |           | 2004 | 
|Description                     |  | £         |         |  | £          |               |        | £              |           |  | £             |   |  | £           |   |           | £    | 
|                                |  |           |        
|Allowance for doubtful accounts |  |           | 78,000  |  |            |               | (2,000 | )              |           |  | (76,000       | ) |  |             |  |           |      |  |       |   |  |  |  | 
|Warranty reserve*               |  |           | 43,000  |  |            |               | 2,000  |                |           |  | (43,000       | ) |  |             |  |           |      |  | (2,000 | ) |  |  |  | 
|                                |  |           |         |  |            |               |        |                |           |  |               |   |  |             |   |           |      | 
|Total                           |  |           | 121,000 |  |            |               |       |                |           |  | (119,000      | ) |  |             |  |           |      |  | (2,000 | ) |  |  |  | 
|                                |  |           |         |  |            |               |        |                |           |  |               |   |  |             |   |           |      | 

|                                |  |           |         |  |            |           |         |               |  |  |             |   |           |      |          |   |  |  |         | 
|------------------------------- |  | --------- | ------- |  | ---------- | --------- | ------- | ------------- |  |  | ----------- | - | --------- | ---- | -------- | - |  |  | ------- | 
|                                |  |           |         |  |            | Effect of |         |               |  |  |            
|                                |  | March 31, |         |  | Additions/ |           |         | exchange rate |  |  |             |   | March 31, |     
|                                |  | 2002      |         |  | (release)  |           |         | changes       |  |  | Utilization |   |           | 2003 |         
|Description                     |  | £         |         |  | £          |           |         | £             |  |  | £           |   |           | £    |         
|                                |  |           |        
|Allowance for doubtful accounts |  |           | 167,000 |  |            |           | (10,000 | )             |  |  | (7,000      | ) |           |      | (72,000  | ) |  |  | 78,000  | 
|Warranty reserve*               |  |           | 29,000  |  |            |           | 49,000  | (1)           |  |  | (1,000      | ) |           |      | (34,000  | ) |  |  | 43,000  | 
|                                |  |           |         |  |            |           |         |               |  |  |             |   |           |      |         
|Total                           |  |           | 196,000 |  |            |           | 39,000  |               |  |  | (8,000      | ) |           |      | (106,000 | ) |  |  | 121,000 | 
|                                |  |           |         |  |            |           |         |               |  |  |             |   |           |      |         






| |     |                                                                                                                                                                    
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | The addition of £49 million in fiscal 2003 includes a
    £12 million change in liability in respect of the
    estimated pre-existing warranties at April 1, 2002.



F-38



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##### Table of Contents



20. Earnings per share




|                                            |                                              |           |         |         |       |  |           |         |  |  |          |         |  
|------------------------------------------- | -------------------------------------------- | --------- | ------- | ------- | ----- |  | --------- | ------- |  |  | -------- | ------- | -
|                                            |                                              | March 31, |        
|                                            |                                              | 2005      |         |         | 2004  |  |           | 2003    | 
|                                            |                                              | £000     |         |         | £000 |  |           | £000   | 
|                                            |                                              |           |        
|Net (loss)/income                           |                                              |           | (1,108  | )       |       |  | 2,276,000 |         |  |  | (807,000 | )      
|Basic (loss)/earnings per ordinary share:   |                                              |           |         |         |       |  |           |         |  |  |          |        
|                                            | Weighted average ordinary shares outstanding |           |         | 2,793.0 |       |  |           | 2,793.0 |  |  |          | 2,792.6 |  
|                                            | Basic (loss)/earnings per ordinary share     |           |         |        |       |  |           | 0.92    |  |  |          | (0.29   | )
|Diluted (loss)/earnings per ordinary share: |                                              |           |         |         |       |  |           |         |  |  |          |        
|                                            | Weighted average ordinary shares outstanding |           |         | 2,793.0 |       |  |           | 2,793.0 |  |  |          | 2,792.6 |  
|                                            | Effect of dilutive options                   |           |         |        |       |  |           |        |  |  |          |        |  
|                                            |                                              |           | 2,793.0 |         |       |  | 2,793.0   |         |  |  | 2,792.6  |        
|                                            | Diluted (loss)/earnings per ordinary share   |           |         |        |       |  |           | 0.92    |  |  |          | (0.29   | )



21. Income taxes




|                   |  |           |      |   |       |  |           |       |  |  |          |  
|------------------ |  | --------- | ---- | - | ----- |  | --------- | ----- |  |  | -------- | -
|                   |  | March 31, |     
|                   |  | 2005      |      |   | 2004  |  |           | 2003  | 
|                   |  | £000     |      |   | £000 |  |           | £000 | 
|                   |  |           |     
|United Kingdom     |  |           | (923 | ) |       |  | 2,304,000 |       |  |  | (673,000 | )
|Non-United Kingdom |  |           |     |   |       |  | (27,000   | )     |  |  | (230,000 | )
|                   |  |           |      |   |       |  |           |       | 
|Total              |  |           | (923 | ) |       |  | 2,277,000 |       |  |  | (903,000 | )
|                   |  |           |      |   |       |  |           |       | 



|                      |                    |                      |  |      |       |   |  |        |        |   |  |         |         | 
|--------------------- | ------------------ | -------------------- |  | ---- | ----- | - |  | ------ | ------ | - |  | ------- | ------- | 
|                      |                    | March 31,            | 
|                      |                    | 2005                 |  |      | 2004  |   |  | 2003   |       
|                      |                    | £000                |  |      | £000 |   |  | £000  |       
|                      |                    |                      | 
|Current income taxes  |                    |                      |  |      |       |   |  |        |        |   |  |        
|                      | United Kingdom     |                      |  | (185 | )     |   |  |       |        |   |  | 155,000 |        
|                      | Non-United Kingdom |                      |  |     |       |   |  | (1,000 | )      |   |  | 32,000  |        
|                      |                    |                      |  |      |       |   |  |        |       
|                      |                    | Total current taxes  |  |      | (185  | ) |  |        | (1,000 | ) |  |         | 187,000 | 
|                      |                    |                      |  |      |       |   |  |        |       
|Deferred income taxes |                    |                      |  |      |       |   |  |        |        |   |  |        
|                      | United Kingdom     |                      |  |     |       |   |  |       |        |   |  | 29,000  |        
|                      | Non-United Kingdom |                      |  |     |       |   |  |       |        |   |  | (7,000  | )      
|                      |                    |                      |  |      |       |   |  |        |       
|                      |                    | Total deferred taxes |  |      |      |   |  |        |       |   |  |         | 22,000  | 
|                      |                    |                      |  |      |       |   |  |        |       
|                      |                    | Total income taxes   |  |      | (185  | ) |  |        | (1,000 | ) |  |         | 209,000 | 
|                      |                    |                      |  |      |       |   |  |        |       

F-39



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##### Table of Contents





|                                                                |  |           |      |   |       |  |          |       |  |  |      |  
|--------------------------------------------------------------- |  | --------- | ---- | - | ----- |  | -------- | ----- |  |  | ---- | -
|                                                                |  | March 31, |     
|                                                                |  | 2005      |      |   | 2004  |  |          | 2003  | 
|                                                                |  | £000     |      |   | £000 |  |          | £000 | 
|                                                                |  |           |     
|Taxes computed at the statutory rate: (30% 2005, 2004 and 2003) |  |           | (277 | ) |       |  | 683,000  |       |  |  | (271 | )
|Non-deductible intangible amortization and impairment charge    |  |           |     |   |       |  |         |       |  |  |      |  
|Non-U.K. tax rate differences                                   |  |           |     |   |       |  |         |       |  |  | (9   | )
|Non-deductible/(non-taxable) items                              |  |           | 462  |   |       |  | (682,000 | )     |  |  | (30  | )
|Changes in reinvestment position                                |  |           |     |   |       |  |         |       |  |  |      |  
|Valuation allowances on losses and other assets                 |  |           |     |   |       |  |         |       |  |  | 38   |  
|Other, net                                                      |  |           |     |   |       |  |         |       |  |  | 3    |  
|                                                                |  |           |      |   |       |  |          |       | 
|Income tax (benefit)/provision                                  |  |           | 185  |   |       |  | 1,000    |       |  |  | (209 | )
|                                                                |  |           |      |   |       |  |          |       | 
|Effective tax rate                                              |  |           | 20%  |   |       |  | 0        | %     |  |  | 23.1 | %









|    |                           
|--- | --------------------------
|22. | Related party transactions



|                         |  |                |   |  |       |  |       | 
|------------------------ |  | -------------- | - |  | ----- |  | ----- | 
|                         |  | Year ended     |  
|                         |  | March 31, 2004 |  
|                         |  | MMFG(1)        |   |  | Other | 
|                         |  | £000          |   |  | £000 | 
|                         |  |                |  
|Statement of operations: |  |                |   |  |       |  |       | 
|Net sales                |  |                |  |  |       |  | 4,000 | 

|                         |  |                |   |  |       |  |        | 
|------------------------ |  | -------------- | - |  | ----- |  | ------ | 
|                         |  | Year ended     |  
|                         |  | March 31, 2003 |  
|                         |  | MMFG(1)        |   |  | Other | 
|                         |  | £000          |   |  | £000 | 
|                         |  |                |  
|Statement of operations: |  |                |   |  |       |  |        | 
|Net sales                |  |                |  |  |       |  | 30,000 | 
|Balance sheet:           |  |                |   |  |       |  |        | 
|Trade receivables        |  |                |  |  |       |  | 26,000 | 
|Trade payables           |  |                |  |  |       |  | 9,000  | 



| |     |                                                                                
| | --- | -------------------------------------------------------------------------------
| | (1) | MMFG  Marconi Medical Financial Group (formerly known
    as Picker Financial)

F-40



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##### Table of Contents





Atlantic Telecommunications Limited/ GaMMa




CosmoCom






| |                           
| | --------------------------
| | Marconi (Malaysia) SDN BHD





| |          
| | ---------
| | Ultramast





| |           
| | ----------
| | Confirmant



F-41



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##### Table of Contents



Easynet Group plc








|    |                                                   
|--- | --------------------------------------------------
|23. | Subsidiary company and equity investee information



|                               |                                                                         |                   |                                                                                                                        
|------------------------------ | ----------------------------------------------------------------------- | ----------------- | -----------------------------------------------------------------------------------------------------------------------
|Name                           |                                                                         | Registered Office
|                               |                                                                         |                  
|Network Equipment and Services |                                                                         |                  
|                               | Marconi Communications Limited                                          |                   | New Century Park, PO Box 53, Coventry CV3 1HJ, England                                                                 
|                               | Marconi Communications S.p.A.                                           |                   | Via Ludovico Calda 5, 16153 Genoa, Italy                                                                               
|                               | Marconi Communications, Inc.                                            |                   | c/o The Corporation Trust Company, Corporation Trust Center,
    1209 Orange Street, Wilmington, Delaware, 19801, U.S.A
|                               | Marconi Communications GmbH                                             |                   | Gerberstrasse 33, D 71522 Backnang, Germany                                                                            
|Capital                        |                                                                         |                  
|                               | Marconi Mobile
    S.p.A.(1)                                            |                   | Via A. Negrone 1/A, 16153 Genoa, Italy                                                                                 
|Other Associated Companies     |                                                                         |                  
|                               | Easynet Group plc (72.7% group equity share; 49.9% voting
    share)(2) |                   | 44-46 Whitfield Street, London W1T 2RJ, England                                                                        



| |     |                                                                                                                                           
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | Marconi Mobile S.p.A. was sold as part of the disposal of
    Marconi Mobile Holdings S.p.A. to Finmeccanica S.p.A. on
    August 2, 2002.
|
| | (2) | See note 14, Investments in affiliates.                                                                                                   

F-42



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##### Table of Contents





|                   |  |                   |  |             |  |             |      | 
|------------------ |  | ----------------- |  | ----------- |  | ----------- | ---- | 
|                   |  |                   |  |             |  | Class and   |     
|                   |  |                   |  |             |  | percentage  |     
|                   |  | Country of        |  | Principal   |  | of ordinary |     
|Undertakings       |  | incorporation     |  | activity    |  | shares held |     
|                   |  |                   | 
|Ancrane            |  | England and Wales |  | Non trading |  |             | 100% | 
|M Ansty Limited    |  | England and Wales |  | Dormant     |  |             | 100% | 
|M Nominees Limited |  | England and Wales |  | Dormant     |  |             | 100% | 
|Photoniqa Limited  |  | England and Wales |  | Dormant     |  |             | 100% | 
|Yeslink Unlimited* |  | England and Wales |  | Dormant     |  |             | 100% | 



| |   |                                                        
| | - | -------------------------------------------------------
| | * | Yeslink Unlimited is a subsidiary of Photoniqa Limited.



F-43