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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   ---------

                                   FORM 20-F

[ ]   REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
                                       OR
[X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                  For the fiscal year ended: December 31, 2001

                                       OR

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

                        Commission file number: 0-30932


                                   REGUS PLC
             (Exact Name of Registrant as Specified in Its Charter)

                               England and Wales
                (Jurisdiction of Incorporation or Organization)

                                   ---------

                              3000 Hillswood Drive
                           Chertsey KT16 0RS, England
                    (Address of Principal Executive Offices)

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

 Securities registered or to be registered pursuant to Section 12(g) of the Act:
  American Depositary Shares evidenced by American Depositary Receipts, each
         representing five Ordinary Shares, nominal value 5p per share

Securities for which there is a reporting obligation pursuant to Section 15(d)
                                  of the Act:
                                      None

                                   ---------

      The number of outstanding shares in the capital of Regus plc as of
                              December 31, 2001:
                          582,112,320 Ordinary Shares

                                   ---------

     Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.

                         Yes [X]                  No [ ]

   Indicate by check mark which financial statement item the registrant has
                              elected to follow.

                     Item 17 [ ]                  Item 18 [X]


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<PAGE>


                               TABLE OF CONTENTS
                                                                           Page
                                                                           ----
Introduction
          Forward-Looking Statements..........................................3
          Certain Information.................................................3
Part I    Item 1  Identity of Directors, Senior Management and
                  Advisers.......................................Not applicable

          Item 2  Offer Statistics and Expected Timetable........Not applicable

          Item 3  Key Information.............................................4
                    Selected Financial Data...................................4
                    Risk Factors..............................................6

          Item 4  Information on the Company.................................12
                    History and Development of Regus plc.....................12
                    Business Overview........................................13
                    Organizational Structure.................................21
                    Properties...............................................23

          Item 5  Operating and Financial Review and Prospects...............26
                    Operating Results........................................26
                    Liquidity and Capital Resources..........................41
                    Prospects................................................44

          Item 6  Directors, Senior Management and Employees.................45
                    Directors and Senior Management..........................45
                    Compensation.............................................47
                    Board Practices..........................................47
                    Employees................................................52
                    Share Ownership..........................................53

          Item 7  Major Shareholders and Related Party Transactions..........64
                    Major Shareholders.......................................64
                    Related Party Transactions...............................65

          Item 8  Financial Information......................................67
                    Consolidated Statements and Other Financial Information..67
                    Legal Proceedings........................................67
                    Significant Changes......................................67

          Item 9  Listing Details............................................67


<PAGE>


                    Market Price Information.................................67
                    Markets..................................................69

          Item 10 Additional Information ....................................69
                    Memorandum and Articles of Association...................69
                    Material Contracts.......................................69
                    Taxation.................................................69
                    Documents on Display.....................................73

          Item 11 Quantitative and Qualitative Disclosures about Market Risk.74
                    Currency Translation Risk................................74
                    Currency Transaction Exposure Risk.......................74
                    Funding and Deposits.....................................74
                    Counter-Party Risk.......................................74
                    Interest Rate Risk.......................................74

          Item 12 Description of Securities Other Than Equity
                  Securities.....................................Not applicable

Part II   Item 13 Defaults, Dividend Arrearages and
                  Delinquencies..................................Not applicable

          Item 14 Material Modifications to the Rights of
                  Security Holders and Use of Proceeds...........Not applicable

Part III  Item 18 Financial Statements.......................................75

          Item 19 Exhibits..................................................116

<PAGE>


                                  INTRODUCTION



Forward-looking Statements

     This annual report contains forward-looking statements. These
forward-looking statements are not historical facts, but rather are based on
our current expectations, estimates and projections about our industry, our
beliefs and assumptions. Words such as "anticipates", "expects", "intends",
"plans", "believes", "seeks", "estimates" and similar expressions are intended
to identify forward-looking statements. These statements are not guarantees of
future performance and are subject to risks, uncertainties and other factors,
some of which are beyond our control, are difficult to predict and could cause
actual results to differ materially from those expressed or forecasted in the
forward-looking statements. These risks and uncertainties are described in
"Item 3. Key Information--Risk Factors" and elsewhere in this annual report. We
caution you not to place undue reliance on these forward-looking statements,
which reflect our management's view only as of the date of this annual report.

Certain Information

     As used in this annual report, "we", "us", "our", the "Company" and
"Regus" refer to Regus plc and its subsidiaries, except where it is clear that
such terms mean only Regus plc.

     We publish our consolidated financial statements in UK pounds sterling. In
this annual report, references to "pounds sterling", "pounds", "(pound)",
"pence" and "p" are to the currency of the UK and references to "US dollars",
"dollars", "$", "cents", or "c" are to the currency of the US. See "Item 3. Key
Information--Selected Financial Data--Exchange Rate Information" for historical
information regarding the noon buying rates in The City of New York for cable
transfers in pounds as certified for customs purposes by the Federal Reserve
Bank of New York with respect to the pound. You should not construe these
translations as representations that the pound amounts actually represent such
US dollar amounts or could have been or could be converted into US dollars at
the rates indicated or at any other rates.

     This annual report includes product names and other trade names, logos and
trade marks, either registered or with respect to which applications are
pending, of Regus and of other companies.

     Various amounts and percentages set out in this annual report have been
rounded and accordingly may not total.


                                       3
<PAGE>


                                     PART I

ITEM 1.  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

     Not applicable.

ITEM 2.  OFFER STATISTICS AND EXPECTED TIMETABLE

     Not applicable.

ITEM 3.  KEY INFORMATION

                            SELECTED FINANCIAL DATA

     Our selected financial data at December 31, 2000 and 2001 and for the
years ended December 31, 1999, 2000 and 2001 have been derived from our
consolidated financial statements prepared in accordance with generally
accepted accounting principles in the United Kingdom or UK GAAP and included in
this annual report. Our consolidated financial statements have been audited by
KPMG Audit Plc, independent accountants. Our summary financial data for the
years ended December 31, 1997 and 1998 and at December 31, 1997, 1998 and 1999
have been derived from our consolidated financial statements that are not
included in this annual report. You should read the following data with the
more detailed information contained in "Item 5, Operating and Financial Review
and Prospects" included herein.

     We prepare our accounts in accordance with UK GAAP, which differs in
significant respects from generally accepted accounting principles in the
United States or US GAAP. For a discussion of significant differences between
UK GAAP and US GAAP and reconciliation of net loss and shareholders' funds to
US GAAP, see note 28 to the consolidated financial statements.

<TABLE>
<CAPTION>
                                                                          Year ended December 31,
                                                ------------------------------------------------------------------------------
                                                   1997          1998         1999          2000         2001        2001(1)
                                                -----------  ------------- -----------   -----------  -----------  -----------
                                                  (pound)       (pound)      (pound)       (pound)      (pound)         $
                                                                    (in millions except per share data)
<S>                                                   <C>           <C>         <C>           <C>          <C>          <C>
Amounts under UK GAAP:
Income Statement Data:
Revenue (including share of joint venture)..          58.8          111.6       200.6         429.2        524.6        754.5
Less: Share of revenue in joint venture(2)..             -              -           - (3)      (8.1)       (12.0)       (17.3)
                                                -----------  ------------- -----------   -----------  -----------  -----------
Total revenue...............................          58.8          111.6       200.6         421.1        512.6        737.2
Cost of sales (center costs)................         (50.3)         (97.2)     (183.5)       (320.8)      (434.7)      (625.2)
Exceptional item(4) ........................             -              -           -             -        (38.0)       (54.7)
                                                -----------  ------------- -----------   -----------  -----------  -----------
Gross profit (center contribution)..........           8.5           14.4        17.1         100.3         39.9         57.3
Administration expenses.....................         (13.1)         (29.6)      (60.0)        (86.9)       (91.3)      (131.3)
Exceptional item(5).........................             -              -        (5.1)         (9.5)       (52.5)       (75.5)
                                                -----------  ------------- -----------   -----------  -----------  -----------
Operating (loss) income.....................          (4.6)         (15.2)      (48.0)          3.9       (103.9)      (149.5)
Share of operating loss in joint venture(2).             -              -        (0.1)         (1.0)        (5.6)        (8.1)
                                                -----------  ------------- -----------   -----------  -----------  -----------
Total operating (loss) income...............          (4.6)         (15.2)      (48.1)          2.9       (109.5)      (157.6)
Net interest payable........................          (1.8)          (2.0)       (6.8)         (6.8)        (0.6)        (0.9)
                                                -----------  ------------- -----------   -----------  -----------  -----------
Loss on ordinary activities before tax......          (6.4)         (17.2)      (54.9)         (3.9)      (110.1)      (158.5)
Tax on loss on ordinary activities..........          (0.5)          (0.8)       (1.5)         (9.9)       (10.1)       (14.5)
                                                -----------  ------------- -----------   -----------  -----------  -----------
Loss on ordinary activities after tax.......          (6.9)         (18.0)      (56.4)        (13.8)      (120.2)      (173.0)
Minority interests..........................             - (6)        0.1           -           0.3          1.9          2.7
                                                -----------  ------------- -----------   -----------  -----------  -----------
Net loss....................................          (6.9)         (17.9)      (56.4)        (13.5)      (118.3)      (170.3)
                                                ===========  ============= ===========   ===========  ===========  ===========


                                                                4
<PAGE>


<CAPTION>
                                                                          Year ended December 31,
                                                ------------------------------------------------------------------------------
                                                   1997          1998         1999          2000         2001        2001(1)
                                                -----------  ------------- -----------   -----------  -----------  -----------
                                                  (pound)       (pound)      (pound)       (pound)      (pound)         $
                                                                    (in millions except per share data)

<S>                                                  <C>            <C>         <C>           <C>          <C>          <C>
Net loss per share - basic and fully diluted         (0.02)         (0.04)      (0.12)        (0.03)       (0.21)       (0.30)
Net loss per ADS - basic....................         (0.09)         (0.21)      (0.60)        (0.14)       (1.05)       (1.51)
                 - fully diluted............         (0.09)         (0.16)      (0.60)        (0.13)       (1.05)       (1.51)
Weighted average number of shares
   outstanding (in thousands)...............       400,000        427,729     469,486       497,889      563,528      563,528

Balance Sheet Data (at period end):
Fixed assets................................          24.0           54.7       126.8         244.6        251.5        361.7
Cash........................................          14.8           48.0        72.1         169.8        117.1        168.4
Total assets................................          53.0          142.2       268.3         544.4        486.3        699.4
Other net current liabilities(7)............         (32.7)         (59.9)     (120.4)       (187.9)      (246.7)      (354.8)
Creditors: amounts falling due after
   more than one year.......................         (22.8)         (29.1)     (102.4)        (23.8)       (33.2)       (47.7)
Minority interests..........................          (0.1)          (0.2)       (0.2)         (0.4)          0.3          0.4
Equity shareholders' (deficit) funds........         (16.6)         (13.9)      (23.7)         203.1         88.4        127.1
</TABLE>
<TABLE>
                                                                                 Year ended December 31,
                                                               --------------------------------------------------------------
                                                                  1998         1999        2000         2001       2001(1)
                                                               -----------  ----------- -----------  -----------  -----------
                                                                 (pound)      (pound)     (pound)      (pound)         $
                                                                            (in millions except per share data)
<S>                                                                 <C>          <C>         <C>          <C>          <C>
Amounts under US GAAP:
Income Statement Data:
Net sales....................................                       111.6        200.6       421.1        512.6        737.2
Net loss.....................................                       (16.4)       (70.6)      (16.8)       (51.4)       (73.9)
Net loss per share basic and fully diluted...                       (0.04)       (0.15)      (0.03)       (0.09)       (0.13)
Net loss per ADS - basic and diluted ........                       (0.19)       (0.75)      (0.17)       (0.44)       (0.63)
Balance Sheet Data (at period end):
Total assets.................................                       143.3        270.7       499.3        489.8        704.4
Long-term liabilities........................                       (34.1)      (110.9)      (23.8)       (25.7)       (37.0)
Cash (including restricted cash)(8)..........                        48.0         72.1       169.8         97.5        139.8
Equity shareholders' funds (deficit).........                        10.0        (29.9)      168.7        119.3        171.6
</TABLE>

---------
(1)  Pounds sterling amounts for 2001 have been translated into US dollars
     using the noon buying rate in effect on December 31, 2001 of $1.4382 =
     (pound)1.00. Such information is provided for the convenience of the
     reader and is unaudited.

(2)  Includes our 50% interest in Regus Equity Business Centers LLC, Regus
     Business Centres Ltd, our joint venture in the US with Equity Office
     Properties Trust, Regus Duke-Weeks Business Centers LLC and Regus Crescent
     Business Centers LLC, accounted for under the equity method of accounting.

(3)  Constituted revenue of(pound)9,000 in 1999.

(4)  Included costs related to reduction in workstation capacity, restructuring
     and redundancy costs in 2001.

(5)  Included costs associated with our postponed flotation on the London Stock
     Exchange in 1999, with the reduction of the reward employee share options
     in 2000 and in 2001 with our aborted merger with HQ Global Holdings, Inc.,
     our write-down related to the ESOP, acquisition goodwill and software
     development assets and the non-recoverable Ryder Cup sponsorship
     expenditure.

(6)  Constituted a loss of(pound)13,000 in 1997.


                                       5
<PAGE>


(7)  Other net current liabilities are current assets (excluding cash) less
     current liabilities.

(8)  Restricted cash is primarily deposits held as security for lease
     guarantees and represented, (pound)22.0 million at December 31, 1999,
     (pound)40.9 million at December 31, 2000 and (pound)31.6 million at
     December 31, 2001.

Exchange Rate Information

     The tables below set forth, for the periods indicated, information
concerning the noon buying rates for pounds, expressed in US dollars per pound.

Year ended December 31,
-----------------------
                                        Period
                                      Average(1)     Period End
                                      ----------     ----------

1997..................................   1.64           1.64
1998..................................   1.66           1.66
1999..................................   1.61           1.62
2000..................................   1.51           1.50
2001 .................................   1.44           1.45
2002 (through June 21)................   1.44           1.50

(1)  The average of the noon buying rates on the last day of each full month
     during the period.

Month
-----
                                         High            Low
                                         ----            ---
December 2001.........................   1.46            1.42
January 2002..........................   1.45            1.41
February 2002.........................   1.43            1.41
March 2002............................   1.43            1.41
April 2002............................   1.46            1.43
May 2002..............................   1.47            1.45
June 2002 (through June 21)...........   1.50            1.46

                                  RISK FACTORS

     You should carefully consider the risks described below as well as the
other information contained in this annual report in evaluating us and our
business. If any of the following risks actually occurs, our business,
financial condition or results of future operations could be significantly
harmed. In that case, the trading price of our shares and ADSs could decline
and you may lose all or part of your investment. This annual report contains
forward-looking statements that involve risks and uncertainties. Our actual
results could differ materially from those anticipated in the forward-looking
statements as a result of many factors, including the risks faced by us
described below and elsewhere in this annual report. You should also refer to
the other information in this annual report, including our consolidated
financial statements and the related notes.

Risks Associated with the Serviced Office Market

   We face competition, and if we are unable to compete effectively, we may be
unable to maintain our network of centers and we may lose customers



                                       6
<PAGE>


     Barriers to entry into the serviced office market at the local level are
low. Although barriers to establishing a national or international network are
higher, we cannot assure you that these barriers will remain or will deter new
entrants or existing competitors. In addition, there is the potential for local
operators to overcome these barriers to establishing wider networks by forming
alliances. There is also the potential for property companies, hotel operators
or other companies to enter the market, either alone or in collaboration with
service providers such as us. If we are unable to respond adequately to the
competitive challenges we face or establish a sustainable competitive
advantage, we may be unable to maintain our network of centers and we may lose
market share. In addition, in more competitive markets there is pressure on our
prices, causing an adverse impact on our revenue and profitability.


                                       7
<PAGE>


   The concept of serviced offices may not be widely accepted in all markets

     The acceptance of the concept of serviced offices is at varying stages of
development across the different geographical regions in which we operate. For
example, in many less developed countries, such as Russia and China, serviced
offices are a relatively new concept while in the UK, the US and Western
Europe, the serviced office market is more developed. However, even in these
more developed markets, the serviced office market represents only a small
percentage of the entire office market. We cannot assure you that the concept
will become increasingly accepted around the world. If the concept is not more
widely accepted in areas where we operate our centers, our revenue and
profitability could be adversely affected.

   Current drivers of the long term growth of the serviced office market may
not develop as expected and could hinder market demand for serviced offices

     There can be no assurance that the factors that we expect to drive the
long term growth of the serviced office market in the future will in fact do
so. For example, the trends towards globalization of trade and increased
outsourcing of office and related services may not develop as expected.

   Changes in the structure of the property industry could reduce demand
for serviced offices

     In some markets, the attraction of our products derives in part from the
long length of leases for traditional office space. A shortening of normal
lease terms or other changes in the property market could make serviced offices
less attractive to customers.

   Changes in work practices and technological advances could be detrimental
to our business

     Changes in work practices could occur which are detrimental to our
business, such as a move to working at home where office infrastructure is not
necessary. In addition, technological advances could occur that facilitate this
shift to working at home. For example, improvements in the connectivity of
homes around the world could allow employees of our current and potential
customers to participate in video conferences at home or participate in virtual
meetings from home using broadband Internet or other technologies.

   Technological advances could require us to make substantial investments
to maintain our competitive position

     We provide our customers with access to information technology and
telecommunications equipment and infrastructure for use in their businesses. We
cannot assure you that there will not be significant developments in the
technology which businesses use that would require us to make a further
substantial investment in new technology to maintain our competitive position
or which would adversely affect the attraction of our products.

Risks Associated with Regus

   As demand for our business services falls, our profitability will be
disproportionately affected due to the long-term nature of our lease
commitments

     We lease substantially all of our properties. The length of our leases or
the period after which we can exercise any break option in the leases is nearly
always longer, and usually significantly longer, than the duration of our
contracts with customers, the majority of which are for the short-term leasing
of serviced office space between 3 and 18 months. As demand has fallen, we have
been unable to build or maintain either occupancy rates or prices. For example,
to combat the economic downturn, we have entered into longer term contracts
with businesses at reduced average prices, which limits our ability to increase
prices as conditions improve. When revenues decline, we are not immediately
able to reduce our lease cost base and are also constrained in doing so over
the long term. Some of our leases contain restrictions that prevent us from
transferring the lease or assigning the premises. Additionally, significant
costs could be incurred as we dispose of unprofitable centers.


                                       8
<PAGE>


     A reduction in revenues has resulted in a negative impact on our cash
flow, as a consequence of the nature of our working capital cycle. If revenues
were to deteriorate further, we would need to seek external funding. Currently,
we have no committed bank or other facilities that are not cash collateralized.
No assurance can be given to as to whether or on what terms external sources of
funding would be available. As of May 31, 2002, we had cash in hand or in the
bank of (pound)70.6 million including (pound)37.7 million of restricted cash.

     Due to the concentration of our business centers in the UK and the US,
continued adverse economic conditions in the UK and US could cause our business
to suffer

     Currently our most profitable geographic segment is the UK and Ireland
segment. The UK and Ireland accounted for approximately 41% of our revenues and
76% of our center contribution in 2001. Continued adverse economic conditions
in the UK could have a material adverse effect on our results of operations and
financial condition.

     The UK property market may be affected by increased levels of subletting
as organizations attempt to reduce their overheads in the current economic
climate. This will lead to increased pressure on our margins.

     We have expanded our network of centers most rapidly in recent years in
the US. We had 99 centers open in the US at the end of 2001. Continued adverse
economic conditions in the US could have a material adverse effect on our
results and financial condition.

     Traditional office space may become a greater competitive threat in
difficult economic conditions.

     In these difficult economic conditions, landlords are more willing to
offer incentives such as rent free periods or shorter leases. This is
particularly the case in markets which have substantial excess capacity, for
example, the West Coast of the US. In addition, many companies are seeking to
reduce their costs by subletting, in many cases at below market rents.

   We are dependent on our Chief Executive

     We believe that our future success depends on the continued service of
Mark Dixon, our Chief Executive and the founder of our business. While we have
an employment agreement with him, this agreement does not prevent him from
terminating his employment at any time on 12 months' notice. If we lose Mark
Dixon without suitable replacement, our business and future operations may by
adversely affected.

   Our leases contain upward only rent reviews that could adversely impact
our cost base

     We are exposed to movements in property markets. All of our UK leases,
together with a small number of other leases, contain provisions for upward
only rent reviews linked to open market rents that could adversely impact our
cost base. These rent reviews have potential increased cost implications in
periods of relatively high rents. If open market rents were to decrease, the
rent payable by us under these leases would stay the same as that for the prior
period and would not decrease in line with open market rents. We cannot assure
you that we will be able to maintain our margins in these circumstances.
Likewise, in the event of a reduction in the prices that we charge our
customers, whether as a result of a reduction in demand for serviced offices or
otherwise, we would not be entitled to reduce the rent payable by us, even
following rent reviews. In addition, the majority of our other leases contain
upward only rent reviews which are fixed or are linked to the consumer price
index or other inflation-related indices.

   We are exposed to foreign exchange, economic and, in some instances,
political risks as well as other geographical risks related to the 50 countries
in which we operate, which could cause an adverse impact on our business

     We operate business centers in 50 countries around the world and our
overall success as a global business depends, in part, upon our ability to
succeed in differing economic, social and political conditions. We are


                                       9
<PAGE>


confronted with different legal and regulatory requirements in many
jurisdictions. These include, but are not limited to, different tax regimes,
laws relating to health and safety, and laws relating to the repatriation of
funds or nationalization of assets. Our international operations also expose us
to different local business risks and challenges, such as exchange rate risks
in translating non-sterling profits, management and control of an international
organization and other political risks. Our expansion in the US as well as in
emerging markets requires us to respond to rapid changes in market conditions
in these countries. We cannot assure you that we will continue to succeed in
developing and implementing policies and strategies that are effective in each
country where we do business. In addition, there can be no assurance that any
of the foregoing factors will not have a material adverse effect on our results
of operations and financial condition.

   We may incur significant costs related to the refurbishment of our centers
or the reinstatement of the properties we rent

     We have not undertaken a major refurbishment exercise to date since the
majority of our centers have been opened in the last few years. We anticipate
that we will be required to refurbish those of our business centers that are
more than seven to nine years old, but we cannot assure you that the costs,
timing or disruption of refurbishment will not impact our business to an extent
greater than anticipated.

     In addition, the terms of most building leases require us to ensure that a
property is kept in good repair throughout the lease term and that alterations
carried out to the premises are reinstated at the end of the lease term. We
cannot assure you that reinstatement costs and, if we have failed to comply
with our repairing obligations during the lease term, full repairing costs will
not be incurred on termination of such leases, causing an adverse impact on our
results of operations and financial condition.

   You may have difficulty assessing our business because the serviced office
market is a developing and rapidly evolving sector and there are very few other
public companies in this sector

     As a company in the serviced office market, you may have difficulty
assessing our business because this market is a developing and rapidly evolving
sector and there are very few other public companies in this sector. In
addition, we believe that none of these other public companies is comparable to
us for reasons related to their geographical focus and corporate structure.
Performance and trends are therefore more difficult to assess than in many
other more established sectors.

   You should not rely on our quarterly operating results as an indication of
our future results because they are subject to significant fluctuations

     Our results of operations may fluctuate significantly on a quarterly basis
due to a variety of factors, including:

     o    the timing of opening new centers;

     o    capital expenditure relating to the expansion of our network of
          centers and periodic refurbishment of existing centers;

     o    changes in revenue and working capital caused by changes in pricing,
          occupancy or other business conditions; and

     o    increases in costs, including employment costs.

     Accordingly, you should not rely on quarter-to-quarter comparisons of our
results of operations as an indication of our future performance.

Risks Associated with the ADSs

   We are subject to the control of Mark Dixon


                                      10
<PAGE>


     Our Chief Executive, Mark Dixon, through Maxon Investments BV, owns
beneficially 62.34% of our issued shares. As the majority shareholder, he is
able to exercise significant control over our operations, including the
election of our board of directors, the declaration of some dividends, the
approval or disapproval of major corporate transactions and the determination
of other matters to be decided by the holders of our shares. Our business goals
and those of Mr. Dixon may not always remain aligned. As a result, the market
price of our shares and ADSs could be adversely affected.

   Substantial sales of our shares or ADSs could cause the price of our shares
and ADSs to decline

     There can be no assurance that our directors and executive officers, Maxon
Investments BV or other existing shareholders will not elect to sell shares.
The market price of our shares and ADSs could decline as a result of any sales
of shares by our directors, executive officers or shareholders or the
perception that these sales could occur. If these, or any other, sales were to
occur, we may have difficulty in selling securities in the future at a time or
at a price we deem appropriate.

   Your rights as shareholders are governed by English law, which significantly
limits your rights to bring derivative actions and may make it more difficult
for you to win US securities law claims against us

     We are a public limited company incorporated under the laws of England and
Wales. The rights of holders of shares and, therefore, many of the rights of
ADS holders, are governed by English law and by our memorandum and articles of
association. These rights differ from the rights of shareholders in typical US
corporations. In particular, English law significantly limits the circumstances
under which shareholders of English companies may bring derivative actions.
Under English law generally, only we can be the proper claimant in proceedings
in respect of wrongful acts committed against us. In addition, it may be
difficult for you to prevail in a claim against us under, or to enforce
liabilities predicated upon, US securities laws.

   The depositary is not responsible for any failure to carry out voting
instructions of ADR holders

     The depositary will not be responsible for failing to carry out
instructions to vote the ADRs or for the manner in which the ADRs are voted or
the effect of the vote.

   Holders of our ADRs may incur fees that holders of capital stock may
not incur

     ADR holders may be charged a fee for issuances of ADRs resulting from
distributions of shares, rights and other property and for each surrender of
ADRs in exchange for deposited securities. ADR holders or persons depositing
shares also may be charged cable, telex, facsimile, delivery and foreign
currency conversion charges of the depositary. We pay all other charges and
expenses of the depositary and any agent of the depositary other than the
custodian.

   We may amend the deposit agreement without the consent of the ADR holders

   We and the depositary may amend the deposit agreement without the
consent of the ADR holders. No amendment may impair the rights of ADR holders
to surrender the ADRs and receive the underlying securities. ADR holders must
be given 30 days notice of any amendment that affects any substantial existing
right or imposes or increases any fees or charges, except for taxes and other
charges specified in the deposit agreement.


                                      11
<PAGE>


ITEM 4.  INFORMATION ON THE COMPANY

                      HISTORY AND DEVELOPMENT OF REGUS PLC

History

     Our business was founded in 1989 by Mark Dixon, our Chief Executive,
shortly before we opened our first business center in Brussels. Our business
growth accelerated after we merged our operations with the slightly larger
organization owned by Reinhold City A.B. in 1990. In 1992, an investment
vehicle owned by Mark Dixon, Maxon Investments BV, bought out the majority
shareholder. By the end of 1992, we operated 11 centers in eight countries
through operating companies owned by Regus Business Centers BV. The following
table shows our expansion since 1992. Due to our rapid expansion, comparisons
with prior periods may not be meaningful.

<TABLE>
                                                      Year ended December 31,
                   -----------------------------------------------------------------------------------------------------
                    1992    1993     1994      1995       1996       1997       1998       1999       2000       2001
                   -------  ------   ------  ---------  ---------  ---------  ---------  ---------  ---------  ---------
<S>                    <C>     <C>      <C>       <C>        <C>        <C>        <C>      <C>        <C>        <C>
Centers(1)........     11      16       24         35         58         97        155        245        335        411(2)
Workstations(3)...    N/A     N/A      N/A      2,884      5,152      9,157     16,293     29,777     50,333     76,540
Countries.........      6       8       14         16         22         23         30         45         48         50
Employees(4)......     42      63       94        207        316        542        923      1,492      2,101      2,656
Revenues (in
(pound) millions).    2.8     6.7     11.3       19.4       32.9       58.8      111.6      200.6      421.1      512.6
</TABLE>

---------

(1)  At period end.  Includes closed centers through the periods up to closure.

(2)  Includes 16 joint ventures.

(3)  Represents weighted average available workstations for the period. The
     number of workstations is not available for 1992, 1993 and 1994 because we
     closed a number of business centers in those years and we cannot
     accurately assess the impact of the closures on the number of
     workstations.

(4)  Average total employees for the period.

     In July 1998, we reorganized our operations by inserting a UK holding
company, Regus Business Centers plc, between Regus Business Centers BV and
Maxon Investments BV. On July 18, 2000, we changed our name from Regus Business
Centers plc to Regus plc. Regus plc was incorporated in England and Wales as a
public limited company under the laws of England and Wales. Our principal
executive offices are located at 3000 Hillswood Drive, Chertsey KT16 0RS,
England and our telephone number is (44) (1932) 895-000. Regus Business Centers
Corp., our US headquarters, is located at Suite 412, 100 Manhattanville Road,
Purchase, NY 10577 and its telephone number is (914) 304-4100.

     Maxon Investments BV owned all of Regus Business Centers plc until August
1998 when a consortium comprising an affiliate of Bankers Trust, now part of
Deutsche Bank, and two affiliates of Apollo acquired 17.5% of our share capital
for cash consideration of $100 million, of which $83 million was paid to us by
way of subscription for new shares and the balance of $17 million was paid to
Maxon Investments BV in consideration for the sale of existing shares. In
October and November 1999, we allotted a further 2.9% of our issued share
capital to two affiliates of Deutsche Bank and two affiliates of Apollo, for a
total consideration to us of (pound)20 million, as part of a wider arrangement
to which Maxon Investments BV was a party. The wider arrangement consisted of
Maxon Investments BV granting to those affiliates of Deutsche Bank and Apollo
options over a further 0.8% of our existing issued share capital (subject to
proportionate adjustment to reflect any reorganization of us) for an aggregate
strike price of (pound)1 in consideration of the waiver of certain rights held
by those parties.


                                      12
<PAGE>


     In October 2000, we completed an initial public offering of 128,829,075
shares, raising (pound)250 million ($373 million) for the Company and (pound)81
million ($121 million) for certain selling shareholders. At that time, we
listed our ordinary shares on the London Stock Exchange and our ADSs were
listed on NASDAQ.

      On April 23, 2001, we acquired Stratis Business Centers, Inc. in the US.
Under the terms of the agreement, we agreed to pay a total purchase price of
$10 million. Of this, $5 million has been paid to the shareholders of Stratis
in cash. The balance of the purchase price was payable in shares of Regus plc,
some of which are restricted.

     On April 25, 2001, we acquired Satellite/Skyport Conference Centers, an
operator of business centers in Belgium and the Netherlands, for NLG8 million
($3 million).

     On June 4, 2001, we announced we were in discussions relating to a
possible transaction with Frontline Capital Group and HQ Global Holdings, Inc.
On June 7, 2001, we announced that such discussion had been terminated. Costs
of $4.7 million relating to the proposed transaction were recognized in the
second quarter of 2001. HQ Global Holdings, Inc. have subsequently entered
bankruptcy reorganization under Chapter 11 of the U.S. Bankruptcy Reform Act of
1978.

     On December 27, 2001, we entered into a subscription agreement pursuant to
which we issued (pound)40 million of non-convertible bonds. Following a
shareholder meeting held on February 13, 2002, these were subsequently
exchanged for (pound)40 million of 5 per cent convertible debentures and
warrants to purchase 5 million ordinary shares.

Capital Expenditures

     Capital expenditures increased to (pound)128.5 million in 2001 from
(pound)86.6 million in 2000, (pound)75.7 million in 1999 and (pound)21.2
million in 1998. These increases in capital expenditures were primarily due to
the purchase of office furniture, fixtures and fitting and telephone and other
office equipment, related to fit-outs of centers opened in each period. Capital
expenditure is depreciated over periods between 2-10 years. See "Item 18.
Financial Statements".

     Notwithstanding our cash flow from operating activities, the rate of
expansion in new center openings since 1997 was only partially financed by
operating cash flow. The average capital expenditure on fixtures and fittings
for a new business center and center expansions fell from approximately
(pound)1.0 million per center in 1999 to approximately (pound)0.8 million per
center opened in 2000 but rose to approximately (pound)1.2 million per new
center opened in 2001. This increase is primarily due to the average size of
centers opened during the year being significantly higher than centers already
opened.

     All start-up costs and maintenance expenditure are charged to the profit
and loss account as incurred. Every seven to nine years, however, a major
refurbishment is expected and such expenditure would be included as capital
expenditure. However, the recent opening of most centers means that, with one
exception funded by the freehold owner of the entire building, no centers to
date have required such a refurbishment.

     We have suspended our new center opening program while we consolidate our
position in difficult economic circumstances. The only new centers being opened
are those in respect of which leases or agreements for lease were signed prior
to July 2001. See "Item 4. Information on the Company - Property and Supplier
Relationships". We expect to incur (pound)15.5 million of capital expenditure
on these new centers in 2002. As at May 31, 2002, we have incurred capital
expenditure of (pound)9.4 million.

                               BUSINESS OVERVIEW

     We are a provider of high quality business services to the global economy.
Our international network of adaptable business centers allows our customers to
outsource completely or in part their workspace requirements. Our business
center offerings include a client driven mix of workstations, conference rooms
and related support


                                      13
<PAGE>


services, such as video conferencing, telecommunications, Internet
connectivity, reception and secretarial services. Customers can use all or part
of our business centers for durations of one hour to over ten years.

     Our serviced business centers represent an alternative to traditional
office space. Located in downtown business districts, suburban office parks and
near transportation gateways, we can tailor our business centers to a variety
of customer requirements. These business services offer advantages of
convenience, flexibility and immediate availability. In addition, our business
services can cost less than traditional office leasing, depending upon
individual circumstances, such as the number of employees in the office and the
term of occupancy.

     We have grown rapidly in recent years. As of December 31, 2001, we
operated a network of 411 business centers in 50 countries.

     We have focused our growth on expanding our international network of
business centers. The following table shows the 50 countries in which we
operated by region and the number of centers in each country as of December 31,
2001.

<TABLE>
<S>                       <C>                           <C>                   <C>
UK and Ireland                       Italy (9)             Ukraine (1)               China (5)
Ireland (2)                         Latvia (1)                                       Egypt (1)
UK (92)                         Luxembourg (1)                Americas              Israel (2)
                          The Netherlands (25)           Argentina (1)               Japan (4)
Rest of Europe                      Norway (3)              Brazil (7)            Malaysia (1)
Austria (4)                         Poland (4)               Chile (2)             Morocco (1)
Belgium (10)                      Portugal (3)              Mexico (7)         Philippines (2)
Czech Republic (3)                 Romania (1)              Panama (1)           Singapore (3)
Denmark (4)                         Russia (2)                Peru (1)        South Africa (6)
Finland (4)                Slovak Republic (1)                 US (99)            Tanzania (1)
France (22)                          Spain (9)              Canada (3)            Thailand (1)
Germany (36)                        Sweden (7)           Rest of World             Tunisia (1)
Greece (2)                     Switzerland (4)           Australia (4)             Vietnam (2)
Hungary (3)                         Turkey (1)          Azerbaijan (1)               Dubai (1)
</TABLE>

     Our growth has enabled us to develop a broad customer base, although a
large proportion of our customers, based on revenue, operate in sectors such as
information technology, financial services, consultancy and telecommunications.

     Our customers increasingly demand technologically sophisticated and
flexible business services, such as ours. The desire of our customers to
capture the benefits offered by business models based upon outsourcing office
and related services, globalization of trade, advances in technology and
changes in work practices drives this demand for our business services. Our
business services assist our customers to compete effectively in an economic
climate increasingly characterized by the speed, flexibility and technology of
the Internet. We believe that new and established companies in varied industry
segments will continue to realize the competitive advantages offered by our
business services.

The Regus Strategy

     Our long term goal is to become the leading provider of high quality
business services to the global economy. In bringing together people, property
and technology, we aim to provide a complete outsourced workspace to our
customers, allowing those customers to focus on their own businesses. The
worldwide economic downturn adversely affected our business in 2001. The
deterioration in trading conditions began in the US in the first quarter and by
the end of the second quarter had spread to most of our European markets. The
speed and severity of the


                                      14
<PAGE>


downturn required us to modify our short term strategy in order to meet the
challenges presented by prevailing economic conditions as follows:

     Suspension of New Center Openings

     In 2001 we spent (pound)128.5 million on capital expenditure most of which
related to new centers. In addition, new centers made a negative contribution
before exceptional items of (pound)25.3 million in 2001. We have decided that
until trading conditions improve we will not commit to any new centers which
require us to incur capital expenditure or start up losses. Accordingly, in the
near term, any new centers will either be management contracts or franchise
centers.


                                      15
<PAGE>


     Maximize Occupancy

     In view of the fixed nature of a large proportion of our cost base, our
strategy is to maximize occupancy in our centers wherever possible. We have
introduced a new pricing policy which offers our customers lower prices in
return for longer term contracts, although this policy limits our ability to
increase prices as conditions improve. In addition, in certain markets we have
introduced additional incentives for limited time periods.

     Improve Customer Value Proposition

     We have restructured our products with a view to making them easier to
understand and, therefore, easier to buy. We have developed a series of
comprehensive packages covering voice and data connectivity and secretarial
services which are all-inclusive and remove the need for any add-on costs. We
have also successfully renegotiated certain elements of our variable costs such
as telephones and have passed these reductions onto customers through lower
prices.

     Continued Focus on the Cost Base

     We continue to look for opportunities to reduce both the variable and
fixed cost base. In particular, we are trying wherever possible to renegotiate
our leases to reduce rent. In addition, tight control over all discretionary
expenditure remains a feature of our near term strategy.

     Over the longer term, our strategy remains unchanged with the following
key elements:

     Further Develop the Regus Brand

     We believe that raising awareness of the benefits of using serviced
offices and building a major international business services brand will further
encourage use of our business centers by important corporate customers. In
addition, we intend to leverage our brand and reputation for providing high
quality fixtures, fittings and infrastructure in our centers.

     Improve the Yield from Existing Centers

     We seek to continue to increase the revenues and profitability of our
existing business centers as they mature. We aim to achieve higher yields in
the following ways: steady elimination of price discounts in line with improved
occupancy, expanding the range and penetration of services offered to customers
within each business center and extracting cost savings through our purchasing
power.

     Actively Manage Risk

     Our business faces, among others, political, economic, liquidity and
capital risks, due to our international growth. We aim to continue to manage
such risks through the following mechanisms.

o    At December 31, 2001, we had approximately 5,800 customers, spread across
     50 countries. For the year ended December 31, 2001, no single customer
     accounted for more than 2% of our total revenue. Our broad customer base
     mitigates our risk of exposure to any one customer or market.

o    We have entered into profit and risk sharing lease agreements with
     building owners, called "turnover leases" and "part-turnover leases", and
     we expect to enter into additional turnover and part-turnover leases.
     Under these arrangements, a property owner agrees to defer base rents
     payable on a new business center in exchange for future profit sharing if
     the business center successfully matures. At December 31, 2001, we had 21
     turnover leases and 62 part-turnover leases which accounted for 5.1% and
     15.2% of the total number of our business centers, respectively, and 4%
     and 13% of the total number of our workstations, respectively, at that
     date.


                                      16
<PAGE>


o    We have established joint ventures and intend to establish additional
     joint ventures or make strategic arrangements with established property
     companies through which we share the costs associated with acquiring prime
     office locations for our business centers.

     Expand Internationally Through Franchising and Management Contracts

     We believe that the international expansion of our global network of
business centers can be accelerated though the selective franchising of our
brand and through the operation of management contracts. We will adopt
franchising in all countries and regions throughout the world to add to our
existing centers, so as to increase our geographic and locational presence. The
adoption of both franchising and management contracts allows the company to
secure income through royalties as well as the intangible benefit of a creating
an expanded global network without additional capital cost.

     Management contracts will also prove an opportunity for us as the current
economic climate may create opportunities for us by the placement of one of our
centers in buildings and our appointment as the manager of that center on
behalf of the building owner or landlord.

     Our franchising efforts are in their second year of operation and as at
May 31, 2002, we have gained commitments for 66 additional Regus and Stratis
centers to open over the next 5 years.

     The Stratis brand is intended to appeal to customers on a tighter budget
than the traditional Regus customer. Hence, Stratis maintains an emphasis on
serving local or regional businesses rather than multinational ones. Stratis
was acquired in April 2001. See "Item 4. Information on the Company - History
and Development of Regus plc.".

     We had 4 management contracts at December 31, 2001.

     Focus on Long Term Contracts.

     We believe that the impact of the economic downturn is making more
organizations consider outsourcing their office requirements. For example, the
following long term contracts have been signed in 2002: Damovo, the global
communications solutions provider, has contracted with us for the provision of
workstations over 5 years in the UK, Brazil and Slovakia; Compaq has taken
space in the UK for more than 450 people in a contract worth over $34 million;
Nokia agreed to transfer up to one fifth of its worldwide office locations to
us within the next 3 to 5 years.

     We continue to discount our prices in order to win this business and
increase the average length of our contracts. As a result our average contract
length has increased 74% from 7.3 months in January 2001 to 12.7 months in May
2002. In the same period, the average price per workstation has fallen by 33%
from (pound)722 to (pound)489.

Products and Services

     Our business centers are the core of our offering of high quality global
business services. We design our business centers around a flexible arrangement
of workstations, conference rooms and reception areas. We staff all of our
business centers with employees trained to provide our customers with a high
level of service. We assure our customers of a uniform level of staff
professionalism through our training courses offered through Regus Academy, our
training and development program. Our global network of business centers offers
high standards of office design, fixtures, fittings, technology and staff. The
flexibility of our business centers has allowed us to develop a suite of
additional products and services that meet the requirements of all sizes of
corporate customers.

     These products and services are designed to work as "components" that
integrate well into a customer's existing office infrastructure and with
emerging trends of outsourcing non-core activities and globalizing business
models. We market and sell these products and services together as complete
solutions and separately as components of a customer's existing office
infrastructure, depending on customer requirements.


                                      17
<PAGE>


     In 2001, we opened 71 centers and 16 franchised centers worldwide. As of
December 31, 2001, we had 411 centers or 92,232 workstations worldwide.

     The products and services that we offer in our business centers include
the following:

     Workstations

     Our principal business service, currently accounting for a substantial
proportion of our revenues, involves agreeing to use one or a number of our
workstations. Each workstation is in a fully equipped office with
telecommunications systems, data transmission services, reception areas and
supported, as needed, by trained receptionists and secretaries. A customer can
use a flexible number of workstations that vary in size from a private office
for a single individual to a large open plan office with multiple workstations.
All our workstations are furnished to uniformly high standards. Customers can
use workstations for any duration between one hour to ten years and beyond.
Customers are billed monthly on an itemized invoice.

     Conference Rooms

     Our conference rooms vary in size from small interview rooms to large
conference rooms accommodating up to 100 people. While we generally provide our
customers with conference rooms along with workstations, conference rooms are
also separately available at short notice for periods of one hour to one day or
longer to our customers who do not also require workstations.

     Link

     We offer a professional and confidential telephone answering and mail
handling service that allows small and medium sized business customers to
operate a virtual office with a business address at one of our business
centers. We have invested heavily in telecommunications technologies so that
our operators can answer each call with personalized greetings for each of our
customers. If desired, we can transfer calls to forwarding numbers or provide
callers with messages from our customer.

     Video Conferencing

     Most of our business centers maintain high quality video conferencing
facilities, bookable by the hour. These facilities are available to those
customers who use workstations at our business centers and to those customers
who only require video conference capability.

     Touchdown

     We offer a membership program which, upon completion of simple
registration procedures, provides customers with preferential, instant, easy
access to our international network of business centers. Membership allows a
customer enhanced flexibility to use our products and services at short notice
anywhere in our global network to suit our customers' business needs.

     Netspace

     We provide Netspace to companies that want to outsource the management of
their own office space. With Netspace, we provide all or a substantial amount
of the office services and manage the office without disturbing the customer's
existing office lease arrangements.

     Related Services

     We also offer, in most business centers, access to our global wide area
network which provides software and data transmission services as part of the
standard services available to our customers. In addition, we provide customers
using our workstations, conference rooms, Link and video conferencing products
with related services


                                      18
<PAGE>


and facilities. These services, for which we charge separately, include
telephones, fax, photocopying, secretarial services, catering, storage and
parking.

     We believe that businesses that are initially attracted to one of our
particular products, for example, a short term need for a single workstation,
may become convinced by our business center concept and use us as a solution to
their requirements for longer term workspace and related value added services.

Sales and Marketing

      Our sales and marketing strategy, which involves a constant appraisal and
improvement of product mix, investment in local advertising and a continuing
focus on service quality, has been key to developing the Regus brand during
2001. During November 2001 we capitalized on the opportunity to increase brand
awareness and grow concept understanding in key markets through the UK, via the
second year of our title sponsorship of the Regus London Film Festival and
Regus London Film Festival On Tour.

      Due to the events of September 11 and the subsequent postponement of the
Ryder Cup, we were unable to further develop our brand awareness using this
event. However, we will continue to sponsor the Ryder Cup in 2002.

     We market and sell our products and services around the world. As of
December 31, 2001, we had approximately 285 employees engaged in sales and
marketing across the globe. Our sales and marketing team aims to attract new
customers, to develop and expand relationships with existing customers and to
build a major business services brand. Our direct sales force includes 200
field sales executives assigned to individual business centers, 20 sales
managers to manage the field sales executives, and 39 corporate account
managers responsible for key customer accounts, plus a 6 person global account
team. There are 20 people engaged in marketing.

     These direct sales functions are supported by a team of telesales
representatives and analysts. As an indirect sales channel, we have established
relationships with real estate brokers and other agents to refer us business.

     We have consistently invested in marketing activity. We use a wide range
of approaches, depending upon the market and specific sales objectives, in
order to provide sales leads. Our marketing campaign includes commercial radio
and television, brochures, newspaper and magazine advertising and direct
marketing mailings. We measure the efficiency of marketing activity on a cost
per enquiry and cost per sale basis.

Customers

     We sell our products and services to a broad base of customers in many
different industries around the world.

      At December 31, 2001, we had approximately 5,800 customers, spread across
50 countries. Many of our customers are major international corporations. For
the year ended December 31, 2001, no single customer accounted for more than 2%
of our total revenue. Our customers are drawn from a wide range of industry
sectors, including consulting, energy, financial services, information
technology, media, pharmaceuticals and telecommunications.

Property and Supplier Relationships

      We consider the location of business centers to be of paramount
importance and have generally positioned them in city centers, at important
transportation hubs, such as major airports, and in business parks.

      In 2001, we continued to develop our global network by adding a further
87 centers including 16 franchises and by expanding 23 existing centers. We
closed 11 centers. As a result of opening centers that are generally larger, we
increased the number of workstations available at the end of the year by 44%,
to 92,232, compared with 64,070 at the end of 2000. This rate of growth will
not continue. We have signed no new leases since July 31, 2001, other than 7
leases as a result of existing contractual commitments, and 3 as a result of
new Netspace contracts and we


                                      19
<PAGE>


expect to open 25 (excluding franchised centers) new centers in 2002. To
reflect this change of strategic direction, our international corporate
development team has been reduced from 42 people at the end of 2000 to 8 people
at the end of 2001.

      The corporate development team actively manages our relationships with
major property owners throughout the world. Once we have decided to lease a
property, our team of designers, contractors and suppliers works to build out
the workstations and conference rooms to our consistently high standards.

      We continue to undertake renegotiations of the rental costs under our
leases wherever commercially possible. We have had some success in this
strategy, particularly in the US, where we expect to make cash savings of
approximately $20 million (on an annualized basis) on total rental costs
existing prior to these negotiations.

      We work closely with the owners of our buildings and with our partners
who are involved in new products and initiatives. As the business has grown and
matured, we have strengthened our relationships with our principal suppliers,
on a mutually beneficial basis, and have achieved significant purchasing
discounts on certain products. We continue to develop non-exclusive
partnerships with "best-in-class" companies to facilitate entry into new and/or
existing markets. These enable us to introduce new products more efficiently
and quickly and to reduce the risk of doing so.

Competition

     The serviced office market is new and fragmented. Many participants are
local entrepreneurs operating a small number of business centers. In the UK,
for example, the Business Center Association Limited comprises over 160 members
who operate business centers. Some market participants, however, have emerged
to compete on a broader geographic basis.

     Principal Competitors

     We believe that our principal competitors fall into the following
categories:

     Traditional Office Space

     In deciding how to meet their workspace requirements, our potential
customers will have the choice of either using a provider of serviced offices
such as ours or of leasing, building out and staffing traditional office space
themselves. As most businesses have historically relied on the internal
provision of office infrastructure, traditional office space remains the first
choice for many of our potential customers. Nevertheless, we believe that the
benefits of serviced offices will continue to persuade potential customers to
outsource their workspace requirements and rely on our expertise in providing
high quality business services.

     In these difficult economic circumstances, we are seeing that traditional
office space is a major competitive threat as landlords are more willing to
offer incentives such as rent free periods or shorter leases. In addition, many
companies have found themselves with surplus office space which they are
seeking to sublet, at rates which are often below their own rent.

     Global Serviced Office Competitors

     HQ Global Workplaces, Inc. or HQ and, to a more limited extent, WWBCN, an
association of independent business center operators based mainly in Europe and
North America, are the only other serviced office providers with significant
presences on more than one continent.

     HQ filed for bankruptcy reorganization under Chapter 11 of the US
Bankruptcy Reform Act of 1978 on March 13, 2002. We expect that HQ's financial
difficulties will result in the substantial reduction of the number of its
centers.


                                      20
<PAGE>


     Regional Serviced Office Competitors

     Two companies have established a large international presence in a single
region. Servcorp operates business centers in 16 cities principally in
Australia and the rest of the Asia Pacific region. Servcorp believes it is the
market leader in Australia, Japan, Singapore, Thailand, Malaysia and New
Zealand. Ihr Buro operates business centers mainly in Europe.

     National Serviced Office Competitors

     In addition to regional competitors, several businesses operate in the
serviced office market on a national level. Significant national competitors
include Marylebone Warwick Balfour, Citibase and FirstBase plc in the UK and
Your Office in the US. Many of these companies do not operate national networks
on the same scale as us and target products to different segments of the market
than we do.

     Local Serviced Office Competitors

     Within many countries where we operate, a large number of small,
entrepreneurial businesses operate serviced offices. These local businesses
tend to target smaller and less established companies and typically offer
business centers with fewer services than we do. As a result, we do not
generally regard these providers as a competitive threat for the near term.
However, we anticipate that as the market consolidates or as alliances emerge
in the longer term, some of these local businesses may represent more serious
competition.

     Market Entry by Property Owners

     Our experience has been that property owners are attracted to the higher
yields that serviced offices can provide, but recognize their lack of
operational infrastructure to manage a business providing serviced offices. As
a consequence, we believe that property owners will continue to enter the
serviced office market through joint ventures and other partnerships but not as
independent competitors. Nonetheless, we anticipate that in the future some
property owners may enter the serviced office market on a standalone basis and
could provide us with new competition.

Intellectual Property and Other Proprietary Rights

     We regard the protection of our intellectual property as critical to our
future success, and we rely on a combination of copyright, trademark, and trade
secret and contractual restrictions to establish and protect our proprietary
rights in products and services.

     We have acquired trademark registration of the name "Regus" and the
"Regus" logo in the countries in which we have more established operations such
as the UK and other countries in Europe. We have made applications to register
the name "Regus" and the "Regus" logo as trade marks in a number of countries
in which we have recently begun to operate, or propose to franchise. In the US,
we have acquired trademark registrations of "Regus" and the "Regus" logo and we
have made applications to register "Touchdown" and "Netspace".

     To date, we have not received any material notifications of trademark
infringement.


                            ORGANIZATIONAL STRUCTURE

     Regus plc is the holding company for a number of subsidiaries which are
our operating companies. The following is a list of our significant
subsidiaries at May 31, 2002. Save where stated otherwise, each subsidiary is
wholly owned by us.


                                      21
<PAGE>


<TABLE>
                                                       Jurisdiction of              % of equity
Company                                                Incorporation             and votes held
-------                                                -------------             --------------
<S>                                                    <C>                                  <C>
Regus Business Center SA                               Argentina                            100
Regus Centers Pty Ltd                                  Australia                            100
Regus Business Center GmbH                             Austria                              100
Skyport Brussels NV                                    Belgium                              100
Regus Business Center SA                               Belgium                              100
Regus Belgium NV                                       Belgium                              100
Regus do Brasil Ltda                                   Brazil                               100
Regus Business Center Ltd                              Canada                               100
Regus Business Centers Canada LP +++                   Canada                                60
Regus Business Center Chile Ltda                       Chile                                100
Regus Business Service Co Ltd                          China                                 95
Regus Business Services (Shanghai) Ltd                 China                                100
Regus Colombia Ltda                                    Colombia                             100
Regus Business Center sro                              Czech Republic                       100
Regus Copenhagen ApS                                   Denmark                              100
Regus Business Center (Egypt)                          Egypt                                100
Host Regus Ltd                                         England                              100
Regus Business Centres (Holdings) Ltd*                 England                              100
Regus Business Center Trading Ltd +                    England                              100
Regus Business Centers (UK) Ltd                        England                              100
Regus City Ltd                                         England                              100
Regus Management Limited                               England                              100
Regus (UK) Limited                                     England                              100
Park Business Centers Ltd +++                          England                               50
Regus Investments Ltd                                  England                              100
Regus Finland Oy                                       Finland                              100
Regus Paris SA                                         France                               100
Regus Roissy SA                                        France                               100
Regus Business Center GmbH                             Germany                              100
Regus Hellas SA                                        Greece                               100
Regus Business Center Ltd                              Hong Kong                            100
Regus Central Europe Trading and Servicing Ltd         Hungary                              100
Regus Kft                                              Hungary                              100
Europa Business Center Ltd                             Ireland                              100
Regus Ireland Ltd                                      Ireland                              100
Regus Finance                                          Ireland                              100
Regus Franchise International Limited                  Ireland                              100
Regus Business Centers Ltd                             Israel                               100
Regus Business Center Srl                              Italy                                100
Regus Business Center Italia SpA +++                   Italy                                 65
Regus Japan KK                                         Japan                                100
Regus Korea Limited                                    Korea                                100
SIA Regus Business Center                              Latvia                               100
Regus Luxembourg SA                                    Luxembourg                           100
Regus Centers Sdn Bhd                                  Malaysia                             100
Regus Business Center SA de CV                         Mexico                               100
Regus Services SA de CV                                Mexico                               100
Regus Maroc SARL                                       Morocco                              100
Regus Amsterdam BV                                     Netherlands                          100
Skyport International BV                               Netherlands                          100
Regus Business Center BV                               Netherlands                          100
Regus International Holdings BV ++                     Netherlands                           60


                                      22
<PAGE>


<CAPTION>
                                                       Jurisdiction of              % of equity
Company                                                Incorporation             and votes held
-------                                                -------------             --------------
<S>                                                    <C>                                  <C>
Satellite Business Center Schiphol BV                  Netherlands                          100
Skyport Business Services NV                           Netherlands                          100
Regus Business Services Ltd                            Northern Ireland                     100
Regus Business Center Oslo AS                          Norway                               100
Regus Business Center (Panama) SA                      Panama                               100
Regus Business Center (Peru) SA                        Peru                                 100
Regus Centers Inc                                      Philippines                          100
Regus Business Center SP zoo                           Poland                               100
Regus Business Center Ltda                             Portugal                             100
Regus Business Center (Romania) SRL                    Romania                              100
LLC Regus Business Center                              Russia                               100
Regus Centers Pte Ltd                                  Singapore                            100
Regus Business Services Marina Pte Ltd                 Singapore                            100
Regus Singapore Business Centre Pte Ltd                Singapore                            100
Regus Business Center Bratislava sro                   Slovakia                             100
Regus Business Center SA                               Spain                                100
Business Center Gothenburg AB                          Sweden                               100
Business Center Stockholm AB                           Sweden                               100
Regus Business Center (S) SA                           Switzerland                          100
Regus Business Center (Tanzania) Ltd                   Tanzania                             100
Regus Center (Thailand) Ltd                            Thailand                             100
Regus Tunisie SARL                                     Tunisia                              100
Regus Is Merkezi Isletmeciligi Ltd Sirketi             Turkey                               100
Regus Business Centers (Ukraine)                       Ukraine                              100
Regus Business Center Corp                             USA                                  100
Regus Crescent Business Centers LLC +++                USA                                   50
Regus Duke-Weeks Business Centers LLC +++              USA                                   50
Regus Equity Business Centers LLC +++                  USA                                   50
Stratis Business Centers, Inc                          USA                                  100
Regus Venezuela C.A.                                   Venezuela                            100
Regus Center (Vietnam) Ltd                             Vietnam                              100
</TABLE>

*   Regus plc owns these subsidiaries directly.
+   Our Azerbaijan business operates as a branch of this company.
++  Our South Africa business operates as a branch of this company.
+++ Joint ventures.


                                   PROPERTIES

     We consider the location of our business centers to be of paramount
importance and we have generally restricted the placement of our business
centers to city centers, important transportation hubs, such as major airports,
and business parks. We have an international property team, which actively
manages our relationships with major property owners worldwide. Once we have
decided to lease a property, our team of designers, contractors and suppliers
work to build out the workstations and conference rooms to the consistently
high quality expected from our business centers.

   Leasing

     We lease substantially all of our property portfolio. Across the
portfolio, there are variations in lease durations and lease termination
provisions, due to differences in leasing practices in the different
jurisdictions of our


                                      23
<PAGE>


operations. Accordingly, our ability to mitigate our obligations in the event
of a downturn in the performance of our business centers, by terminating or
renegotiating our leases, differs with the geographic variations.

     As at December 31, 2001, of our total number of leases, including
commitments, 22.9% were located in the UK and Ireland, 42.7% were located in
the Rest of Europe, 26.3% were located in the Americas and 8.1% were located in
the Rest of World.

     A majority of our leases are on conventional rental terms and as such
provide for regular payments of agreed rent and for periodic reviews of rent
levels. Rent reviews are normally on terms in accordance with local market
practice. For example, UK leases provide for regular upward only rent
adjustment to the prevailing market rate, if higher than the agreed rent, while
other jurisdictions may have regular fixed rent increases or rent increases
linked to market indices. Upward only rent reviews mean that in a declining
market, rents can never be lowered.

     Notwithstanding the difficulty in negotiating reductions in rent on
conventional leases, we have undertaken a large number of renegotiations of
lease terms. These renegotiations have been most successful in the US, where we
have seen a reduction in rent of approximately $20 million (on an annualized
basis) during the course of 2002. This success reflects the fact that we have
expanded our US business more rapidly than in any other region in the last two
years, which has resulted in a higher proportion of leases in this region which
are at or above market rent.

     In order to mitigate our exposure on long-term lease commitments as well
as aligning our interests with those of the building owner, we have entered
into some profit and risk sharing lease arrangements called "turnover leases".
In a typical turnover lease, we will only pay rent when and to the extent that
the center is cumulatively profitable after deducting operating costs and our
management fee. To the extent that there are sufficient cumulative profits, we
will pay the rent and also any accumulated rent unpaid since the start of the
lease. Once, and if, we have paid all the rent due, any remaining surplus
profit is paid out to us and the building owner annually on a pre-agreed basis
which is normally 50/50.

     As a variant of this, we have also entered into "part-turnover leases",
whereby a portion of the rent which is the guaranteed rent is paid every
quarter to the landlord whether or not there is any profit. In these leases,
usually a smaller element of the rent paid to the landlord is dependent upon
profit than under a turnover lease.

     Building owners will generally have a right to convert turnover and
part-turnover leases to conventional rent terms on a specified date, being no
earlier than the end of the fifth year of the lease term which, if exercised,
would normally give rise to right for us to terminate the lease.

     Where we enter into formal joint ventures with property owners, the
economic result in respect of each property within the arrangement is very
similar to a turnover lease. In a typical joint venture, we share with our
partners the start-up costs of opening business centers, including the
fitting-out of the business centers. We receive a management fee for each
center which is deducted from the customer revenue which we collect. The rent
is paid by the joint venture vehicle to the property owner out of the remaining
funds. Finally, after all expenses, any profits in the joint vehicle are
distributed usually on a 50/50 basis. These joint ventures help us to mitigate
the risk we face in leasing properties for our business centers.

As at December 31, 2001, Regus operated 411 business centers, operated under
various methods as follows:

     o    We had 293 conventional leases which accounted for 71% of the total
          number of our business centers. A further 64 business centers were
          held on part turnover leases or 16% of the total, while full turnover
          leases accounted for 18 business centers or 4% of the total. Joint
          venture centers accounted for a further 18 centers (4% of the total),
          management contracts accounted for 4 centers (1%) and franchise
          agreements accounted for 16 centers (4%).

     o    If measured by workstations, conventional leases accounted for 78% of
          the total, part turnover leases 14%, full turnover leases 2%, joint
          ventures 5% and management agreements 1%.


                                      24
<PAGE>


     o    If measured by rent payable for accounting purposes, conventional
          leases account for 78% of the total, whilst part turnover leases and
          full turnover leases are 14% and 1%, respectively. Joint ventures
          account for 7% of the total. Regus does not pay rent in respect of
          management contracts or franchises.

     o    If measured on the basis of our revenue, conventional leases account
          for 77% of the total, part turnover leases 17%, full turnover leases
          2% and joint ventures 4%. Management contracts and franchising
          agreements account for 1% of our revenue.


                                      25
<PAGE>


ITEM 5.  OPERATING AND FINANCIAL REVIEW AND PROSPECTS.

                               OPERATING RESULTS

     The following discussion of our financial condition and results of
operation should be read in conjunction with the consolidated financial
statements and notes, included elsewhere in this document. Our consolidated
financial statement are prepared in accordance with UK GAAP which differs from
US GAAP as discussed in note 28 to the consolidated financial statements. This
discussion contains forward looking statements based upon current expectations
which involve risks and uncertainties. Actual results and timing of events may
differ significantly from those projected in these forward looking statements
due to a number of factors, including those set forth in this document in the
section "Risk Factors" and elsewhere in this document.

Overview

     We are a provider of high quality, business services to the global
economy. Our international network of adaptable business centers allows our
customers to outsource completely or in part their workspace requirements. Our
business center offerings include a client driven mix of workstations,
conference rooms and related support services, such as video conferencing,
telecommunications, Internet connectivity and reception and secretarial
services. Customers can use all or part of our business centers for durations
of one hour to over ten years.

     Our serviced business centers represent an alternative to traditional
office space. Located in downtown business districts, suburban office parks and
near transportation gateways, we can tailor our business centers to a variety
of customer requirements. These business services offer advantages of
convenience, flexibility, immediate availability and cost over traditional
office leasing.

     The following table sets forth, for the periods indicated, the number of
our centers, workstations, countries in which we have centers and employees.

                                     Year ended December 31,
                          -----------------------------------------------
                              1999             2000             2001
                          --------------   --------------    ------------
Centers(1)...............        245(2)           335(3)          411(4)
Workstations(5)..........     29,777           50,333          76,540
Countries................         45               48              50
Employees(6).............      1,492            2,101           2,656


(1)  At period end.  Including closed centers through the periods up to closure.

(2)  Includes 91 centers opened, including 2 centers owned by our joint venture
     with Equity Office Properties Trust, 3 centers closed and 18 centers
     expanded during 1999.

(3)  Includes 3 centers closed and 17 centers expanded during 2000.

(4)  Includes 11 centers closed and 23 centers expanded during 2001.

(5)  Represents weighted average available workstations for the period.

(6)  Average total employees for the period.

     Due to our rapid expansion during the four years ended December 31, 2001,
comparisons with prior periods may not be meaningful.

     Our network of centers includes franchises, joint ventures and management
contracts in line with our new growth strategy.


                                      26
<PAGE>


   Income Statement Items

     Revenue and Center Contribution

     Our revenue consists of revenue from our products, including office or
workstation revenue and related service revenue, including principally
telephone, information technology and data services, fax, photocopying,
secretarial services, catering, storage and parking.

     Gross profit or center contribution is revenue less cost of sales. Cost of
sales consists of costs from the individual business centers, including
property lease costs, employee costs, start-up costs, including formation
costs, costs related to finding properties and any other opening costs,
telephone costs, equipment rental and depreciation. Initial start-up costs,
including those incurred in connection with the setting up of the legal and
financial control infrastructure, are typically higher for the establishment of
the first center in a new country. Thereafter, new centers in the same country
benefit from this initial investment by us. We charge start-up costs to the
income statement as they are incurred. Tangible fixed assets are capitalized
and depreciated on a straight line basis over the estimated useful life of each
type of asset, including office furniture, fixtures and fittings and telephones
and other office equipment. The center contribution margin is calculated by
dividing center contribution by revenue.

     Our revenue is largely dependent upon the number of workstations (as
defined below), the price per workstation paid by our customers, occupancy
rates and any additional services used by our customers. Our prices are subject
to any regional differences as described under "--Geographic Region". During
2001 we implemented a new global pricing model that discounts prices for
long-term contracts. This policy has resulted in an increase in average
contract length (in months) of 74% from 7.3 in January 2001 to 12.7 in May 2002
with prices decreasing 33% from (pound)722 to (pound)489 for the same period.
This had the effect of increasing the number of occupied workstations and
strengthening our forward order book but reducing our margins.

     The actual timing of new center openings in a period can have a
significant effect and result in fluctuations in occupancy and average prices
achieved and therefore in revenue and center contribution. For example, new
centers opened in the second half of any year may adversely affect average
occupancy levels and average prices achieved for all centers opened during that
year because these new centers will not have matured by the end of that year.

     The principal cost of sales is the leasing of the property. We lease
office space either through conventional leases or turnover leases. The rent
payable by us on turnover leases is wholly or partially conditional on the
profitability of the center. For a description of turnover and part-turnover
leases, see "Item 4. Information on the Company -- Properties". For turnover
leases, we estimate the likely base rent payable based on performance in the
period up to the first break point in the lease for the tenant and, for
accounting purposes, this estimated base rent is spread on a straight line
basis over that period. Any subsequent changes in estimates are spread over the
remaining period to the same break point in the lease. In the case of full
turnover leases, rent is due and payable based upon the profitability of the
center. The lease specifies a base rent, which is due and payable once a
cumulative operating surplus has been achieved. In the case of partial turnover
leases, the specified base rent is due and payable on a guaranteed basis, with
the remainder due and payable once a cumulative surplus has been achieved.
Amounts payable in respect of profit shares are accrued once a sufficient net
surplus has been made which would result in a profit share being paid. Any
incentives or rent free periods on conventional leases and the conventional
element of part-turnover leases are spread on a straight line basis over the
period to the first market rent review or first break point in the lease,
whichever is shorter, so that the amounts charged to the income statement are
the same each year over that period. Of the total rent expense for the year
ended December 31, 1999, 2000 and 2001 of (pound)71.8 million, (pound)125.1
million and (pound)187.1 million, respectively, the profit share element was
(pound)2,473,000, (pound)6,434,000 and (pound)5,612,000, respectively. The
decrease of the profit share element from 2000 to 2001 is due to the adverse
economic conditions.

     Operating Result

     Our operating result is our center contribution after sales and marketing
costs and regional and central overheads. Sales and marketing costs are closely
related to the


                                      27
<PAGE>


aggregate number of centers and, in part, to the opening of new centers.
Regional and central overheads include salary and other compensation costs from
our corporate headquarters in the UK, our regional office network and the team
of employees sent temporarily to new centers to open those new centers.

Method of Analysis

     Workstations

     To describe the trends in our results in this discussion and analysis, we
have broken down our results by workstation, established vs. new centers and
geographic region. The number of "workstations" in a center is determined by
the number of persons who could be supported in the available space based on
management's assessment, taking into account local business customs. This
determination is made for available space at its opening and does not change
over time. The number of workstations in centers of the same size varies
considerably based on differences in local work practices and can vary over
time as existing centers are expanded by taking additional space in the same
building. Whenever we use the term "workstations" in this Annual Report, we are
referring to weighted average available workstations within a period regardless
of whether these workstations are occupied. Weighted average available
workstations for any period is calculated by adding the number of available
workstations at the end of each month of the period and dividing that number by
the total number of months in the period.

     We believe that the analysis of our results by available workstation
capacity for our customers is more meaningful than any analysis by number of
centers open due to the effect of expansions, relocations and closures of
centers and the variation in the size of centers.

     Established vs. New Centers

     We operate our business by closely monitoring our center contribution.
Although there are material variances on a center by center basis, our
experience is that, within 18 months, a center has reached a relatively stable
level of center contribution margin. On this basis, we have analyzed our
results between established centers and new centers. "Established centers"
refer to centers that have been open for a period of at least eighteen months
as at the end of the relevant period and "new centers" refer to those centers
that have been open for less than eighteen months as at the end of the relevant
period. Due to the incurrence of significant new center start-up costs and the
offering of initial discounts to new customers to fill the center faster during
the first 18 months of a new center's operation, we believe that this breakdown
is meaningful in order to segregate these effects into the new centers
category.

     Geographic Region

     We break down our revenue, center contribution and operating result in
this section by geographic region in order to highlight the different drivers
of our growth and the status of our development based on geographic region. The
prices we charge for our centers depend, among other things, on the region
where the center is located and the location of the center within a region.
Generally, within a given country, the price per workstation has been higher in
major cities than in smaller cities and has been higher in developed countries
than in emerging market countries.

     Occupancy

     The following table sets forth, for the periods indicated, the weighted
average occupancy of our business centers on an established vs. new center
basis. We calculate occupancy of each business center on a month-end basis. The
weighted average occupancy percentage is calculated by dividing the total
number of occupied workstations by the total number of available workstations.
A workstation is deemed to be occupied if it has income in the month, unless
such income is in respect of contracts of less than one month in duration.


                                      28
<PAGE>


                                         Year ended December 31,
                              ----------------------------------------------
                                 1999              2000              2001
                              -----------       -----------       ----------
                                  %                  %                 %
Established centers..........     78                 83                69
New centers..................     51                 60                40

     The weighted average occupancy of our new and established centers
     decreased in 2001 as a result of the sharp economic downturn in the US at
     the start of the year which subsequently deepened and spread to other
     markets during the year.

     The concept of weighted average occupancy needs to be treated with care
for three reasons:

o    The weighted average occupancy of our new centers is substantially
     affected by the opening of business centers as occupancy in new centers
     generally builds over the first 12 months. Within a particular period, the
     timing of openings of business centers has a distorting effect on weighted
     average occupancy levels. This is particularly the case for centers opened
     in the second half of the year.

o    Expansions of existing business centers have an equivalent distorting
     effect on weighted average occupancy levels of established centers.

o    The opening of new centers in areas where there are existing centers also
     distorts the weighted average occupancy levels of our business centers
     because there are cases where our customers migrate from established
     centers to new centers in the same area, causing occupancy to increase in
     the new center and occupancy to decrease in the established center. Over
     time, the occupancy levels of the two centers generally even out, but in
     the initial period, there will be a distortion in weighted average
     occupancy.

     Currency Fluctuations

     As we conducted business in 50 countries as at December 31, 2001, a
substantial portion of our revenue and costs is derived from countries outside
the UK and therefore in currencies other than pounds sterling. In 2001,
approximately 58% of our revenue was denominated in currencies other than
pounds sterling. For a more detailed description of our exposure to currency
fluctuations, see "Item 11. Quantitative and Qualitative Disclosures about
Market Risk--Foreign Currency Exchange Rate Risk".

Results of Operations

     Year ended December 31, 2001 vs. Year ended December 31, 2000

     The following table sets forth, for the periods indicated, our revenue,
center contribution before exceptionals and workstations (i.e., weighted
average number of available workstations) by geographic region.

<TABLE>
<CAPTION>
                                                        Year ended December 31,
                     ------------------------------------------------------------------------------------------------
                                         2000                                             2001
                     ----------------------------------------------  ------------------------------------------------
                                      Center                                           Center
                      Revenue      Contribution      Workstations     Revenue       Contribution      Workstations
                     -----------  ----------------  ---------------  -----------   ---------------  -----------------
                                                 (in (pound)millions except workstations)

<S>                       <C>                <C>            <C>           <C>                <C>              <C>
    UK & Ireland...       188.6              59.6           17,568        213.6              59.4             23,524
    Rest of Europe.       118.9              29.2           17,565        151.9              24.9             26,089
    Americas.......        86.5              13.9           10,900        113.7             (10.0)            21,494


                                                         29
<PAGE>


<CAPTION>
                                                        Year ended December 31,
                     ------------------------------------------------------------------------------------------------
                                         2000                                             2001
                     ----------------------------------------------  ------------------------------------------------
                                      Center                                           Center
                      Revenue      Contribution      Workstations     Revenue       Contribution      Workstations
                     -----------  ----------------  ---------------  -----------   ---------------  -----------------
                                                 (in (pound)millions except workstations)

<S>                       <C>                <C>            <C>           <C>                <C>              <C>
    Rest of World..        27.1              (2.4)           4,300         33.4               3.5              5,433
                     -----------  ----------------  ---------------  -----------   ---------------  -----------------
    Total..........       421.1             100.3           50,333        512.6              77.8             76,540
                     -----------  ----------------  ---------------  -----------   ---------------  -----------------
</TABLE>

     The following table sets forth, for the periods indicated, our revenue,
center contribution before exceptionals and workstations by established centers
vs. new centers.

<TABLE>
<CAPTION>
                                                        Year ended December 31,
                     ------------------------------------------------------------------------------------------------
                                         2000                                             2001
                     ----------------------------------------------  ------------------------------------------------
                                      Center                                           Center
                      Revenue      Contribution      Workstations     Revenue       Contribution      Workstations
                     -----------  ----------------  ---------------  -----------   ---------------  -----------------
                                                 (in (pound)millions except workstations)

<S>                       <C>                <C>            <C>           <C>                <C>              <C>
    Established
    centers..........     293.6              92.3           30,941        410.8             103.1             51,932
    New centers......     127.5               8.0           19,392        101.8            (25.3)             24,608
                     -----------  ----------------  ---------------  -----------   ---------------  -----------------
    Total............     421.1             100.3           50,333        512.6              77.8             76,540
                     -----------  ----------------  ---------------  -----------   ---------------  -----------------
</TABLE>

      Revenue

      Revenue on a global basis increased 22% to (pound)512.6 million (2000:
(pound)421.1 million), with weighted average workstations increasing 52% to
76,540 (2000: 50,333). As a result, total revenue per available workstation
("REVPAW") decreased 20% to (pound)6,697 (2000: (pound)8,366). In 2001, we
opened 71 new centers and our first 16 franchised centers, expanded 23 existing
centers and closed 11 centers.

      Revenue from established centers increased 40% to (pound)410.8 million in
2001 from (pound)293.6 million in 2000 and weighted average workstations in our
established centers increased 68% to 51,932 in 2001 from 30,941 in 2000. REVPAW
in established centers decreased by 17% to (pound)7,910 (2000: (pound)9,489),
principally due to the decrease in occupancy in 2001. Revenue from new centers
decreased 20% to (pound)101.8 million while workstations in new centers
increased 27% to 24,608 in 2001 from 19,392 in 2000. REVPAW in our new centers
decreased to (pound)4,137 in 2001 from (pound)6,575 in 2000, primarily due to
the drop in occupancy in new centers to 40% in 2001 from 60% in 2000. Included
in revenues in 2001 is (pound)0.9 million (2000: (pound)nil) of franchise
income, derived from royalties and franchise fees.

      Revenue in the UK and Ireland increased 13% to (pound)213.6 million
(2000: (pound)188.6 million), with workstations increasing 34% to 23,524.
REVPAW decreased to (pound)9,080 (2000: (pound)10,736) principally due to the
drop in occupancy during 2001. In 2001, we opened 13 new centers, one of which
was part of a joint venture.

     Revenue in the rest of Europe increased 28% to (pound)151.9 million (2000:
(pound)118.9 million), with workstations increasing 49% to 26,089 in 2001. In
2001, we opened 26 centers in the Rest of Europe, including seven in Benelux,
six in France, 3 in Germany and 3 in Italy.

     Revenue in the Americas increased 31% to (pound)113.7 million in 2001 from
(pound)86.5 million in 2000 with workstations increasing 97% to 21,494 in 2001.
In 2001, we opened 28 new centers in the Americas, including 21 in the US, 1 in
Brazil and 2 in Mexico.


                                      30
<PAGE>


     Revenue in the Rest of World increased 23% to (pound)33.4 million in 2001
from (pound)27.1 million in 2000, with workstations increasing 26% to 5,433. In
2001, we opened 4 centers in Singapore, the Philippines, Israel and for the
first time a center in Dubai.

      Center Contribution

      Center contribution on a global basis decreased 22% to (pound)77.8
million (2000: (pound)100.3 million). This decrease reflects the increasing
trend towards price discounted, longer term contracts with the average contract
increasing from 6.5 months in 2000 to 11.1 months in 2001.

      Contribution from established centers increased 12% to (pound)103.1
million, primarily as a result of a the 68% increase in workstations to 51,932.
The contribution margin (contribution as a percentage of revenue) from
established centers fell by 6% to 25% between 2000 and 2001. Contribution from
new centers decreased to negative (pound)25.3 million in 2001 from positive
(pound)8.0 million in 2000.

     Center contribution in the UK and Ireland remained constant at(pound)59.4
million (2000: (pound)59.6 million). Contribution margin in the UK and Ireland
decreased to 28% (2000: 32%), primarily as a result of the increase in average
contract lengths.

      Center contribution in mainland Europe decreased 15% to (pound)24.9
million, with contribution margin decreasing to 16% (2000: 25%). The decreases
were principally due to the increase in average contract lengths.

      Contribution in the Americas decreased to a loss of (pound)10.0 million
(2000: contribution of (pound)13.9 million). This decrease was as a result of
the significant economic downturn in the region during 2001.

      A contribution of (pound)3.5 million was recorded in the Rest of the
World for 2001 from a loss in 2000 of (pound)2.4 million. This was principally
attributable to the maturing of existing centers.

     Administrative Expenses

     The following table sets forth, for the periods indicated, our
administrative expenses.

                                                 Year ended December 31,
                                             ---------------------------------
                                                 2000                  2001
                                             -----------          ------------
                                                     (in(pound)millions)
     Sales and marketing costs..............        43.5                  48.2
     Regional and central overheads.........        43.3                  43.1
                                             -----------          ------------
     Total administrative expenses..........        86.8                  91.3


      Total administrative expenses before exceptional items increased 5% to
(pound)91.3 million in 2001. As a percentage of revenues, however,
administrative expenses decreased from 21% in 2000 to 18% in 2001, reflecting
increased efficiencies arising from the restructuring and our strategy of
focusing on countries and markets in which we had existing centers. Sales and
marketing costs increased 11% to (pound)48.2 million in 2001 (or 53% of total
administrative expenses) from (pound)43.5 million in 2000 (or 50% of total
administrative expenses). Regional and central overheads decreased 1% to
(pound)43.1 million in 2001 (or 47% of total administrative expenses) from
(pound)43.3 million in 2000 (or 50% of total administrative expenses).


                                      31
<PAGE>


Exceptional Item

      Included in the results for 2001 are the exceptional charges totalling
(pound)90.5 million (2000: (pound)9.5 million). The exceptional charges fall
into the following categories:

      Restructuring and redundancy costs ((pound)5.4 million) - As part of an
aggressive attack on its cost base, we have reviewed staffing levels across all
regions and all functions. We have reduced headcount by 800, representing
approximately 24% of the total workforce.

      Reduction in workstation capacity ((pound)37.4 million) - We have has
reviewed the prospects for each of our centers in light of current market
conditions. We have decided to reduce capacity by 9,700 workstations,
representing 11% of the network. The exceptional charge includes costs
associated with provisions for the onerous (i.e. loss making) element of our
leasehold obligations and asset impairments.

      Write-down of investment in own shares ((pound)32.6 million) - As
mentioned in the second quarter results, the Directors have determined that, in
the circumstances, the carrying value of the investment in our own shares
should be written down to 21p a share, which was the market value on September
30, 2001. This was offset by a writeback of (pound)8.8 million for the reduced
cost of granting reward options.

      Write-down of software development assets ((pound)4.6 million) - The
Directors have reviewed the estimated useful life of external development costs
and determined to write off the remainder of these costs.

      Fees in respect of aborted merger with HQ Global Workplaces ((pound)3.3
million) - These are the costs associated with the aborted merger of Frontline
Capital Group and HG Global Workplaces.

      Write-down of acquisition goodwill ((pound)4.9 million) - The Directors
have determined that there has been an impairment to the value of goodwill
arising from acquisitions and, accordingly, that the goodwill be written down.

      Non-recoverable Ryder Cup expenditure ((pound)2.3 million) - These costs
relate to the postponement of the 2001 Ryder Cup, for which we were a principal
sponsor.

     Operating (Loss) Profit

     The following table sets forth, for the periods indicated, our operating
profit (loss) by geographic region.

                                         Year ended December 31,
                                 -------------------------------------
                                      2000                    2001
                                 -------------           -------------
                                          (in (pound)millions)
UK & Ireland....................          33.7                    32.4
Rest of Europe..................           1.1                    (7.7)
Americas........................         (16.2)                  (58.3)
Rest of World...................         (11.8)                   (1.2)
Other office costs..............          (3.9)                  (74.7)
                                 -------------           -------------
Total...........................           2.9                  (109.5)
                                 -------------           -------------

     Our operating loss on a global basis was (pound)109.5 million in 2001, a
decrease from an operating profit of (pound)2.9 million in 2000. The loss for
the year is principally due to the (pound)90.5 million exceptional item and a
decrease of 22% in center contribution.

     Net Interest Payable

     The following table sets forth, for the periods indicated, our net
interest payable.


                                      32
<PAGE>


                                                        Year ended December 31,
                                                     ---------------------------
                                                         2000           2001
                                                     ----------      -----------
                                                        (in (pound) millions)
Interest expense on overdrafts and loans...........         7.7             0.8
Interest expense on finance leases.................         2.9             3.3
Interest income....................................        (3.9)           (3.9)
Share of joint venture net interest payable........         0.1             0.3
                                                     ----------      -----------
Net interest payable                                        6.8             0.5
                                                     ----------      -----------

      Interest payable decreased substantially in 2001 compared to 2000
primarily due to the decrease in the interest payable on our (pound)100 million
senior secured multi-currency secured loan facility which was repaid from the
proceeds of our initial public offering in October 2000.

     Tax on Loss on Ordinary Activities

     The following table sets forth, for the periods indicated, our tax on loss
on ordinary activities.

                                                 Year ended December 31,
                                            ----------------------------------
                                                2000                  2001
                                            ------------         -------------
                                                 (in (pound) millions)
UK tax......................................        5.2                   5.7
Overseas tax................................        4.7                   4.4
                                            -----------          ------------
Tax on loss on ordinary activities..........        9.9                  10.1
                                            -----------          ------------

     Despite our overall loss making position in 2000 and 2001, we provided for
tax liabilities in both periods, primarily because tax liabilities arose on
profits arising in the UK, Ireland and seven continental European countries.
However, these taxable profits could not be offset by tax losses in all other
countries where we operate. The majority of our operating companies have tax
losses available to carry forward against future profits. In some countries,
there are time restrictions on the carry forward of such losses. We expect to
adopt the UK Financial Reporting Standard FRS 19 (Deferred Tax) with effect
from January 1, 2002.

   Year ended December 31, 2000 vs. Year ended December 31, 1999

     The following table sets forth, for the periods indicated, our revenue,
center contribution and workstations (i.e., weighted average number of
available workstations) by geographic region.

<TABLE>
                                                        Year ended December 31,
                     ------------------------------------------------------------------------------------------------
                                          1999                                             2000
                     -----------------------------------------------  -----------------------------------------------
                                      Center                                           Center
                      Revenue      Contribution      Workstations      Revenue      Contribution      Workstations
                     -----------  ----------------  ---------------   -----------  ---------------  -----------------
                                                   (in (pound)millions except workstations)
<S>                       <C>                <C>            <C>            <C>               <C>              <C>
    UK & Ireland....      102.9              20.2           12,324         188.6             59.6             17,568
    Rest of Europe..       73.7              10.8           12,276         118.9             29.2             17,565
    Americas........       15.6              (6.0)           3,218          86.5             13.9             10,900
    Rest of World...        8.4              (7.9)           1,959          27.1             (2.4)             4,300
                     -----------  ----------------  ---------------   -----------  ---------------  -----------------
    Total...........      200.6              17.1           29,777         421.1            100.3             50,333
                     -----------  ----------------  ---------------   -----------  ---------------  -----------------
</TABLE>

     The following table sets forth, for the periods indicated, our revenue,
center contribution and workstations by established centers vs. new centers.


                                      33
<PAGE>


<TABLE>
                                                     Year ended December 31,
                     ------------------------------------------------------------------------------------------------
                                               1999                                          2000
                     ----------------------------------------------  ------------------------------------------------
                                      Center                                           Center
                      Revenue      Contribution      Workstations      Revenue      Contribution      Workstations
                     -----------  ----------------  ---------------   -----------  ---------------  -----------------
                                                   (in (pound)millions except workstations)
<S>                       <C>                <C>            <C>            <C>               <C>              <C>
    Established
    centers..........      134.0            41.7            16,772         293.6             92.3             30,941
    New centers......       66.6           (24.6)           13,005         127.5              8.0             19,392
                     -----------  ----------------  ---------------   -----------  ---------------  -----------------
    Total............      200.6            17.1            29,777         421.1            100.3             50,333
                     -----------  ----------------  ---------------   -----------  ---------------  -----------------
</TABLE>

      Revenue

      Revenue on a global basis increased 110% to (pound)421.1 million (1999:
(pound)200.6 million), with weighted average workstations increasing 69% to
50,333 (1999: 29,777). As a result, total revenue per available workstation
("REVPAW") increased 24% to (pound)8,367 (1999: (pound)6,737). In 2000, we
opened 93 new centers, including 12 centers in joint ventures, expanded 17
existing centers and closed three centers.

      Revenue from established centers increased 119% to (pound)293.6 million
in 2000 from (pound)134.0 million in 1999 while weighted average workstations
in our established centers increased 84% to 30,941 in 2000 from 16,772 in 1999.
Accordingly, REVPAW in established centers increased to (pound)9,489 (1999:
(pound)7,990), principally due to an increase in both pricing and occupancy.
Revenue from new centers increased 92% to (pound)127.5 million and workstations
in new centers increased 49% to 19,392 in 2000 from 13,005 in 1999. REVPAW in
our new centers increased to (pound)6,578 in 2000 from (pound)5,121 in 1999
because we opened new centers in higher-priced markets and achieved faster fill
rates.

     Revenue in the UK and Ireland increased 83% to (pound)188.6 million (1999:
(pound)102.9 million), with workstations increasing 43% to 17,568. REVPAW
increased to (pound)10,736 (1999: (pound)8,350). In 2000, we opened 17 new
centers, one of which was part of a joint venture, in the UK and Ireland,
including four in central London.

     Revenue in the rest of Europe increased 61% to (pound)118.9 million in
2000 from (pound)73.7 million in 1999 and workstations in the Rest of Europe
increased 43% to 17,565 in 2000 from 12,276 in the same period. REVPAW
increased to (pound)6,769 in 2000 from (pound)6,004 in 1999. In 2000, we opened
27 centers in the Rest of Europe, including eight in Benelux, two in France,
eight in Germany and three in Spain.

     Revenue in the Americas increased 455% to (pound)86.5 million in 2000 from
(pound)15.6 million in 1999 primarily due to a 239% increase in workstations in
2000. In 2000, we opened 31 new centers in the Americas, including 26 in the
US, 1 in Brazil and 3 in Mexico. We also opened 11 additional centers in the US
in joint ventures.

     Revenue in the Rest of World increased 223% to (pound)27.1 million in 2000
from (pound)8.4 million in 1999 primarily due to a 119% increase in
workstations in 2000. In 2000, we opened 10 centers including three centers in
Australia, two in Japan and, for the first time, a center in each of
Azerbaijan, Egypt and Tunisia.

     Center Contribution

     Center contribution on a global basis increased 486% to (pound)100.3
million (1999: (pound)17.1 million). This increase is principally as a result
of a 110% increase in revenue, offset in part by a 75% increase in cost of
sales to (pound)320.8 million (1999: (pound)183.5 million). In our most
important markets, particularly the UK, western Europe and the US, there was
strong demand which resulted in new centers filling more quickly, in
opportunities for price increases and in comparatively high levels of
occupancy.

      Contribution from established centers increased 122% to (pound)92.3
million, primarily as a result of an 84% increase in workstations, to 30,941.
The contribution margin (contribution as a percentage of revenue) from
established centers remained stable at 31%. Contribution from new centers
increased to (pound)8.0 million (1999: loss of (pound)24.6 million), reflecting
our strategy of focusing our new center opening program on countries in which
we already operate. As a result, start-up costs of new centers were
substantially reduced.


                                      34
<PAGE>


     Center contribution in the UK and Ireland increased 195% to (pound)59.6
million (1999: (pound)20.2 million). The contribution margin in the UK and
Ireland increased to 32% (1999: 20%), primarily as a result of higher occupancy
and prices. The UK and Ireland continue to benefit from favourable economic
conditions and a comparative shortage of office space, particularly in central
London.

     Center contribution in mainland Europe increased 170% to (pound)29.2
million, with margin increasing to 25% (1999: 15%). By focusing on opening new
centers only in countries where we had existing centers, the region benefited
from reduced start-up costs compared with the previous year, as well as from
particularly strong markets in western European capital cities.

     Contribution in the Americas increased to(pound)13.9 million (1999: loss
of(pound)6.0 million). This was principally attributable to the maturing of
existing centers.

     Losses in the Rest of the World decreased to (pound)2.4 million (1999:
loss of (pound)7.9 million), primarily as a result of reducing the number of
new center openings from 13 in 1999 to nine in 2000.

     Administrative Expenses and Exceptional Item

     The following table sets forth, for the periods indicated, our
administrative expenses.

                                               Year ended December 31,
                                          ----------------------------------
                                             1999                    2000
                                          ----------              ----------
                                                 (in (pound)millions)
Sales and marketing costs...............     34.0                    43.5
Regional and central overheads..........     26.1                    43.4
Total administrative expenses...........     60.1                    86.9
Exceptional item........................      5.1                     9.5

      Total administrative expenses increased 45% to (pound)86.9 million,
largely as a result of our substantial investment in sales, marketing and
administrative infrastructure needed to support our expanding network. As a
percentage of revenues, however, administrative expenses decreased to 21% for
the year (1999: 30%), reflecting increased efficiencies arising from our
strategy of focusing on countries and markets in which we had existing
operations. Sales and marketing costs increased 28% to (pound)43.5 million
(1999: (pound)34.0 million). Regional and central overheads increased 66% to
(pound)43.4 million (1999: (pound)26.1 million). This was principally
attributable to an increase in the number of employees in our headquarters and
regional network, from 258 in 1999 to 292 in 2000.

      The (pound)9.5 million exceptional item in 2000 relates to the costs
associated with the reduction of the exercise price of the Reward Options
granted in the Team Member Share Plan. The original exercise price was
(pound)1.455 per share, which was written down to (pound)0.05 per share
following the successful Initial Public Offering. The (pound)5.1 million
exceptional item in 1999 related to costs in connection with the postponed
flotation.

     Operating (Loss) Profit

     The following table sets forth, for the periods indicated, our operating
(loss) profit by geographic region.

                                                      Year ended December 31,
                                                    ----------------------------
                                                       1999            2000
                                                    ---------       ---------
                                                       (in (pound)millions)
UK & Ireland ........................................    4.8            36.7
Rest of Europe ......................................  (10.5)            3.8


                                      35
<PAGE>



Americas.............................................  (19.8)          (14.6)
Rest of World .......................................  (15.7)          (11.6)
Other Office Costs ..................................   (1.8)           (1.9)
Exceptional item.....................................   (5.1)           (9.5)
                                                     --------        --------
Total................................................  (48.1)            2.9
                                                     --------        --------

     Our operating profit on a global basis increased to (pound)2.9 million in
2000 from negative (pound)48.1 million in 1999. This increase is principally
due to the 486% increase in center contribution, offset in part by the 45%
increase in administrative expenses in 2000 compared to 1999. Exchange rate
movements caused a (pound)1.1million decrease in operating profit in 2000.

     Net Interest Payable

     The following table sets forth, for the periods indicated, our net
interest payable.


                                      36
<PAGE>


                                                 Year ended December 31,
                                                 -----------------------
                                                   1999           2000
                                                  ------         ------
                                                   (in (pound)millions)
Interest expense on overdrafts and loans.........   7.5            7.8
Interest Expense on finance leases...............   3.0            2.9
Interest income..................................  (3.7)          (3.9)
                                                  ------         ------
Net Interest payable.............................   6.8            6.8
                                                  ------         ------

     Interest payable is principally affected by (pound)100 million senior
multi-currency secured loan facility. This facility was repaid from the
proceeds of the initial public offering. Interest income comprised interest on
cash held in deposits generated from organic growth of our business and the
excess portion of debt drawn down from our multi-currency secured loan
facility.

     Tax on Loss on Ordinary Activities

     The following table sets forth, for the periods indicated, our tax on loss
on ordinary activities.

                                                 Year ended December 31,
                                                 -----------------------
                                                   1999           2000
                                                  ------         ------
                                                   (in (pound)millions)
UK tax...........................................   0.2            5.2
Overseas tax.....................................   1.3            4.7
                                                  -----          -----
Tax on loss on ordinary activities...............   1.5            9.9
                                                  -----          -----

     Despite our overall loss making position in 1999 and 2000, we provided for
tax liabilities in both periods. The principal reason for this was that tax
liabilities were incurred on profits arising in the UK, Ireland, Italy,
Luxembourg, The Netherlands, Belgium, France, Switzerland and Spain. However,
these taxable profits could not be offset by tax losses in all other countries
where we operate. The majority of our operating companies have tax losses
available to carry forward against future profits. In some countries, there are
time restrictions on the carry forward of such losses.

Contractual Obligations

     The following sets out our contractual obligations as at December 31,
2001:

<TABLE>
                                          Total      Within 1       Between 1       After 5
                                                        year       and 5 years       years
                                        -----------  -----------  --------------  ------------
                                                           (in(pound)millions)
<S>                                      <C>            <C>             <C>           <C>
Operating lease commitments............  1,749,979      221,354         780,224       748,401
Unconditional purchase obligations.....      5,246        5,246               -             -
Obligations under finance leases.......     37,973       17,370          20,111           492
</TABLE>

     The operating lease commitments are in respect of properties, vehicles,
plant and equipment, for which the payments extend over a number of years. The
unconditional purchase obligations represent contracts placed for future
capital expenditure in respect of new centers openings in 2002. The obligations
under finance leases are in respect of office equipment.


                                      37
<PAGE>


Recently Issued Accounting Announcements

UK GAAP

Accounting Policies

     Following the application of Financial Reporting Standard 18 (FRS 18), an
entity is required to adopt accounting policies appropriate to its particular
circumstances in order to give a true and fair view, to review these policies
regularly to ensure they remain appropriate and sufficient information is
disclosed in the financial statements to ensure users to understand the
accounting policies and how they are implemented. The adoption of FRS 18 has
not resulted in any changes in disclosure nor to the reported profits and
shareholders' funds in either the 2000 or 2001 financial years.

Deferred Tax Asset

     Following the application of Financial Reporting Standard 19 (FRS 19), an
entity is required to recognize deferred tax in respect of all timing
differences that result in an obligation to pay more tax, or a right to pay
less tax, in the future as a result of past events. FRS 19 will be implemented
in the year ended December 31, 2002 and preliminary investigation indicates
that it will not have a material effect on our results.

US GAAP

Goodwill and Intangible Assets

     In July 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard (SFAS) No. 141, Business
Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets. SFAS No.
141 requires that the purchase method of accounting be used for all business
combinations initiated after June 30, 2001. SFAS No. 141 also specifies
criteria intangible assets acquired in a purchase method business combination
must meet to be recognized and reported apart from goodwill, noting that any
purchase price allocable to an assembled workforce may not be accounted for
separately. SFAS No. 142 will require that goodwill and intangible assets with
indefinite useful lives no longer be amortized, but instead tested for
impairment at least annually in accordance with the provisions of SFAS No. 142.
SFAS No. 142 will also require that intangible assets with definite useful
lives be amortized over their respective estimated useful lives to their
estimated residual values, and reviewed for impairment in accordance with SFAS
No. 144, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of.

     We were required to adopt the provisions of SFAS No. 141 immediately and
SFAS No. 142 is effective for fiscal years beginning after December 15, 2001.
Furthermore, any goodwill and any intangible asset determined to have an
indefinite useful life that are acquired in a purchase business combination
completed after June 30, 2001 will not be amortized, but will continue to be
evaluated for impairment in accordance with the appropriate pre-SFAS No. 142
accounting literature. Goodwill and intangible assets acquired in business
combinations completed before July 1, 2001 will continue to be amortized prior
to the adoption of SFAS No. 142.

     SFAS No. 141 will require upon adoption of SFAS No. 142, that we evaluate
our existing intangible assets and goodwill that were acquired in a prior
purchase business combination, and to make any necessary reclassifications in
order to conform with the new criteria in SFAS No. 141 for recognition apart
from goodwill. Upon adoption of SFAS No. 142, we will be required to reassess
the useful lives and residual values of all intangible assets acquired in
purchase business combinations, and make any necessary amortization period
adjustments by the end of the first interim period after adoption. In addition,
to the extent an intangible asset is identified as having an indefinite useful
life, we will be required to test the intangible asset for impairment in
accordance with the provisions of SFAS No. 142 within the first interim period.
Any impairment loss will be measured as of the date of adoption and recognized
as the cumulative effect of a change in accounting principle.

     In connection with the transitional goodwill impairment evaluation, SFAS
No. 142 will require us to perform an assessment of whether there is an
indication that goodwill and equity-method goodwill is impaired as of the date
of adoption. To accomplish this we must identify our reporting units and
determine the carrying value of each


                                      38
<PAGE>


reporting unit by assigning the assets and liabilities, including the existing
goodwill and intangible assets, to those reporting units as of the date of
adoption. We will then have up to six months from the date of adoption to
determine the fair value of each reporting unit and compare it to the reporting
unit's carrying amount. To the extent that a reporting unit's carrying amount
exceeds its fair value, an indication exists that the reporting unit's goodwill
may be impaired and we must perform the second step of the transitional
impairment test. In the second step, we must compare the implied fair value of
the reporting unit's goodwill, determined by allocating the reporting unit's
fair value to all of it assets (recognized and unrecognized) and liabilities in
a manner similar to a purchase price allocation in accordance with SFAS No.
141, to its carrying amount, both of which would be measured as of the date of
adoption. This second step is required to be completed as soon as possible, but
no later than the end of the year of adoption. Any transitional impairment loss
will be recognized as the cumulative effect of a change in accounting principle
in our statement of earnings.

     Any unamortized negative goodwill and negative equity-method goodwill
existing at the date SFAS No. 142 is adopted must be written off as the
cumulative effect of a change in accounting principle.

     At March 31, 2002, we were required to segregate and specifically identify
intangible assets into goodwill and other intangible assets. Intangible assets
recorded in our consolidated financial statements comprise only goodwill. In
addition, because of the extensive effort required to comply with SFAS No. 141
and 142, it is not practicable to reasonably estimate the impact of any
transitional impairment losses required to be recognized as the cumulative
effect of a change in accounting principle at the date of this document.

Asset Retirement Obligations

     Statement of Financial Accounting Standard No. 143, Accounting for Asset
Retirement Obligations (SFAS No. 143), addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and for the associated asset retirement costs.

     The FASB began this project in 1994 to address the accounting for the
costs of nuclear decommissioning. The FASB subsequently expanded the scope of
the project to include closure or removal-type costs in other industries. As a
result, SFAS No. 143 applies to all entities.

     SFAS No. 143 requires an enterprise to record the fair value of an asset
retirement obligation as a liability in the period in which it incurs a legal
obligation associated with the retirement of tangible long-lived assets that
result from the acquisition, construction, development and or normal use of the
assets. The enterprise also is to record a corresponding increase to the
carrying amount of the related long-lived asset (i.e., the associated asset
retirement costs) and to depreciate that cost over the life of the asset. The
liability is changed at the end of each period to reflect the passage of time
(i.e., accretion expense) and changes in the estimated future cash flows
underlying the initial fair value measurement. Because of the extensive use of
estimates, most enterprises will record a gain or loss when they settle the
obligation. Enterprises are required to adopt Statement No. 143 for fiscal
years beginning after June 15, 2002. We have not evaluated the impact on the
consolidated financial statements of adopting this standard.

Impairment or Disposal of Long-Lived Assets

     SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets, addresses financial accounting and reporting for the impairment or
disposal of long lived assets. While SFAS No. 144 supersedes SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of, it retains many of the fundamental provisions of that
Statement. SFAS No. 144 also supersedes the accounting and reporting provisions
of APB Opinion No. 30, Reporting the Results of Operations-Reporting the
Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions, for the disposal of a segment
and extends that reporting to a component of an entity that either has been
disposed of (by sale, abandonment, or in a distribution to owners) or is
classified as held for sale.


                                      39
<PAGE>


     SFAS No. 144 is effective for fiscal years beginning after December 15,
2001 and interim periods within those fiscal years. The Statement is to be
applied prospectively. Early adoption is permitted. We have has not yet
determined the impact, if any, the adoption of this standard will have on our
financial position or results of operations.

Accounting for Stock Compensation

     EITF 00-23: issues related to the accounting for stock compensation under
Accounting Principles Board Opinion No. 25 and FASB Interpretation No. 44
determined that option terms of greater than 27 months is not "limited to a
reasonable period" as contemplated by paragraph 7(c) of Accounting Principles
Board Opinion No. 25 and, therefore, any plans with terms greater than 27
months should be accounted for as compensatory. This accounting treatment
should be applied prospectively to new grants as of January 2002.

     In addition, EITF 00-23 determined that the employer's offer to enter into
a new Save-as-you-earn (SAYE) contract at a lower price causes variable
accounting for all existing awards subject to the offer. Variable accounting
commences for all existing awards when the offer is made and, for those awards
that are retained by employees because the offer is declined, variable
accounting continues until the awards are exercised, forfeited, or expire
unexercised. This consensus should be applied prospectively to new offers as of
January 2002.

     Thus any new grants under the existing SAYE schemes will be considered
variable plans under US GAAP and will result in compensation expense.

Other

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

US GAAP Reconciliation

     Under US GAAP, net losses for the years ended December 31, 1999, 2000 and
2001 would have been (pound)70.6 million, (pound)16.8 million and (pound)51.5
million, respectively. Total shareholders' (deficit) funds as of December 31,
1999, 2000 and 2001 would have been (pound)(29.9) million, (pound)169 million
and (pound)119 million, respectively. The principal differences between UK and
US GAAP applicable to our consolidated financial statements relate to
compensation expense associated with share options, the recognition of interest
expense associated with warrants issued in connection with subordinated loans
and changes in the fair value of those warrants, the treatment of our shares
held by the employee share trust, deferred taxes, including those arising from
US GAAP adjustments, the deferral of the one-off franchise fees and the
provision for onerous lease commitments. The effect of these differences and
other items identified have been discussed in the notes to the consolidated
financial statements along with reconcilations of retained loss and total
shareholders'funds (deficit) under UK GAAP to similar measures under US GAAP.
See note 28 to the consolidated financial statements.

Critical Accounting Policies

     To understand our financial statements, it is important to understand our
accounting policies. In preparing our financial statements in accordance with
accounting principles generally accepted in the United Kingdom and the United
States, management must make estimates and assumptions that impact the reported
amount of revenues, expenses, assets, liabilities and related disclosures at
the date of the financial statements and during the reporting period. Such
judgments are subjective and can be complex. Actual results could differ from
those estimates. Our critical accounting policies are as follows:


                                      40
<PAGE>


Onerous Lease Obligations

     In accordance with Financial Reporting Standard 12, we made a provision
for potential future losses arising from onerous (i.e. loss making) leases in
2001. Following a review of our entire property portfolio, the provision was
(pound)37.4 million.

Building leases

     Building leases are all accounted for as operating leases because
substantially all the risks and rewards of ownership remain with the lessor.

     The rental on certain leases is wholly or partly conditional on the
profitability of the center and therefore the risk to the business, in terms of
rent, is reduced. Once all outstanding rent has been paid, landlords receive a
share of the profits of the center.

     For leases which are wholly or partly conditional on the profitability of
the center, an estimate is made on the likely rent payable based on
profitability in respect of the period up to the date of the first market rent
review or first break point in the lease, whichever is sooner, and this is
spread on a straight line basis over that period. Any subsequent changes in
estimates are spread over the remaining period to the date of the first market
rent review of first break point in the lease, whichever is sooner. Amounts
payable in respect of profit shares are accrued once a sufficient net surplus
has been made which would resulting a profit share being paid.

     Any incentives or rent free period on conventional leases and the
conventional element of leases which are partly conventional and partly
conditional on profitability, are spread on a straight line basis over the
period to the date of the first market rent review or first break point in the
lease, whichever is sooner, so that the amounts charged to the profit and loss
account are the same each year over that period.

Investment in Regus Employee Trust

     During 1999, we established the Regus Employee Trust. The Regus Employee
Trust provides for the issue of options and the payment of bonuses to our
employees (including directors) at the discretion of the Company. At December
31, 2001 the Regus Employee Trust held 18,120,670 shares in Regus plc.

     During 2001, the directors determined that, in the circumstances, the
carrying value of the investments in our own shares should be written down to
21p a share which was the market value at September 30, 2001. The investment in
own shares have not been revalued for any subsequent increases in market value
since September 30, 2001. On May 31, 2002, the market value of shares was 41p
per share.


                        LIQUIDITY AND CAPITAL RESOURCES
Liquidity

     Our liquidity requirements arise primarily from the need to fund our lease
commitments for our centers and capital expenditures for the fit-out of new
centers and the refurbishment of older established centers. To date, these
requirements have been funded largely through cash flow from operations, the
(pound)40 million convertible bond issued December 2001, bank borrowings and
equity funding from our existing shareholders. Albeit at much lower levels to
previous years, we continue to incur additional property leasing costs and
capital expenditures in order to maintain and improve the quality of our
centers. Management believes that the large majority of these requirements will
be met by cash flow from operations.

     Generally, after the first six months of operation, our centers operate
with negative working capital, i.e., creditors, or accounts payable, exceed
debtors, or accounts receivable (on a quarterly basis). This is principally
caused by our standard terms and conditions of our agreements with our
customers, which typically require our


                                      41
<PAGE>


customers upon signing their agreement with us to pay a service retainer equal
to two months workstation income and to pay monthly rental payments in advance.
The service retainers and the advance rental payments are recorded as
creditors.

     The following table sets forth, for the periods indicated, information
about our cash flows under US GAAP.

<TABLE>
                                                                      Year ended December 31,
                                                            ---------------------------------------------
                                                                   1999              2000           2001
                                                            ------------       -----------     ----------
                                                                           (US GAAP)
                                                                        (in (pound) millions)
<S>                                                                <C>               <C>           <C>
Cash and cash equivalents at beginning of year........             39.8              50.1          128.9
Cash from operating activities........................              6.7             108.7           38.0
Cash used in investing activities.....................            (90.8)           (109.3)        (104.6)
Cash from financing activities........................            103.9              68.4           24.3
Effect of exchange rate changes on cash...............             (1.4)              1.5           (1.1)
Other non-cash movement...............................             (8.1)              9.5              -
                                                            ------------       -----------     ----------
Cash and cash equivalents at end of year..............             50.1             128.9           85.5
                                                            ------------       -----------     ----------
</TABLE>

     Cash from operating activities was (pound)38.0 million in 2001 compared to
(pound)108.7 million in 2000 and (pound)6.7 million in 1999. Cash from
operating activities increased substantially in 2000, primarily due to the
overall expansion of our business, including the increase in the number of
workstations from 29,777 to 50,333, causing our operating loss to decrease by
(pound)51.0 million, our depreciation to increase by (pound)20.5 million and
our creditors (known as accounts payable under US terminology) to increase by
(pound)55.3 million, partly offset by the increase in debtors (known as
accounts receivable under US terminology) of (pound)25.7 million. Cash from
operating activities decreased in 2001 to (pound)38.0 million due to the sharp
economic downturn in the US in the first quarter, which subsequently deepened
and spread to other markets and the cash part of the (pound)90.5 million
exceptional charge of (pound)12.3 million.

     Cash used in investing activities, including principally capital
expenditure but also financial investments, acquisitions and disposals,
decreased to (pound)104.6 million in 2001 from (pound)151.8 million (including
a loan to our the Regus Employee Trust of (pound)42.5 million for the purchase
of our own shares) in 2000 and (pound)90.8 million in 1999. The (pound)42.5
million loan to the Regus Employee Trust is not included in cash (used in)
investing activities under US GAAP Taking the figure for 2000 net of the loan
((pound)109.3 million), the increases in each period were primarily due to a
significant increase in capital expenditure resulting from the purchase of
tangible fixed assets related to fit-outs of centers opened in each period. In
addition, in 1999, 2000 and 2001, we invested (pound)1.3 million, (pound)3.8
million and (pound)5.6 million respectively, in our joint venture entities in
the form of capital contributions.

     Cash from financing activities was (pound)24.3 million in 2001, including
the (pound)40 million convertible bond, compared to (pound)68.4 million in 2000
and (pound)103.9 million in 1999. The high cash figure in 1999 is primarily due
to a new loan ((pound)105.1 million) and the issuance of equity shares of
(pound)20.0 million. In 2000 (pound)116.3 million was paid in respect of the
loan and (pound)235.8 million was received from the initial public offering
after issue costs of (pound)18.0 million. The decrease in cash from financing
activities in 2001 was principally because no capital was raised through the
issuance of shares during the year (2000: (pound)235.8 million).

     The sum of cash and cash equivalents for any period does not include any
reduction for the cash that is collateralized to match bank guarantees. See "-
Capital Resources".

Capital Resources

     Significant sources of financing during the periods under discussion
included the following items:

     o    Taking into account the uncertain economic outlook for the global
          economy in 2002, we decided to strengthen our financial position by
          issuing(pound)40 million of five per cent non-convertible bonds in
          December 2001. In February 2002, following an extraordinary general
          meeting, the bonds were exchanged for(pound)40


                                      42
<PAGE>


          million of five per cent unsecured senior convertible debentures. The
          convertible debentures are to be repaid in cash in ten equal
          instalments from March 2002 to December 2002, or, at our option, may
          be converted (subject to some conditions) into ordinary shares at 95
          per cent of the average price of the ordinary shares on certain
          trading days during the relevant instalment month, subject to any
          floor price that we specify. If the average share price in the
          relevant period falls below our specified floor price, the conversion
          may be terminated at our option and the instalment due must be paid
          in cash. Any exercise of our option to convert the convertible
          debenture into ordinary shares may be disproportionately dilutive to
          shareholders, since our share price may fall during the instalment
          month, which is measured subsequent to our notice that we wish to
          exercise our option to convert. The convertible debentures may be
          converted at the option of the holders at a fixed price of 86.32
          pence per share. As at June 21, 2002,(pound)16 million had been
          repaid in cash. The Directors have and will continue to closely
          monitor the trading performance and projected cash flows in order to
          make an early decision to convert the bond if conditions so require.
          Holders of the convertible debentures also received warrants in over
          5 million ordinary shares with an exercise price of five pence per
          share. Any remaining unexercised warrants will lapse three years
          after issue.

     o    As at December 31, 2001, we had commitments through bank guarantees
          to property owners, suppliers and to overseas banks totalling
          (pound)31.6 million compared to (pound)42.2 million at December 31,
          2000. These bank guarantees are collateralized by placing funds on
          deposit with the bank issuing the guarantees. We earn interest on
          these deposits and, in a number of cases, the bank has security over
          the deposit. We cannot use these funds for any other purpose. Under
          the terms of our set-off arrangements with our principal UK bank,
          Royal Bank of Scotland, no one legal entity is allowed to be
          overdrawn greater than (pound)10 million.

     o    In October 2000, we and certain selling shareholders offered and sold
          128,829,075 of our shares, nominal value 5p per share, and ADSs, each
          ADS representing five shares, at a public offering price of
          (pound)2.60 per share and $18.79 per ADS. We received net proceeds of
          $353.1 million after deducting the underwriting discount and actual
          offering expenses paid by us of $26.8 million.

     o    In June 1999, we entered into a (pound)100 million senior secured
          multicurrency revolving facility led by Merrill Lynch, which
          subsequently was partially syndicated to Deutsche Bank and
          Commerzbank, with Commerzbank as the lead arranger. As required by
          this facility, we repaid the outstanding balance under this facility
          from the proceeds of the October 2000 offering and cancelled this
          facility in October 2000.

     As of December 31, 2001, we had bond and bank indebtedness of
approximately (pound)46.0 million, consisting of the (pound)40 million
non-convertible debenture and (pound)6 million of overdraft facilities. The
latter obligations are a series of minor facilities in a number of different
jurisdictions designed to optimize cash management. These facilities are all
cash collateralized and form part of the (pound)31.6 million in aggregate
commitments to property owners, suppliers and overseas banks as at December 31,
2001 described in the second bullet above.

     On a quarterly basis thus far in 2002, operating cash flow remains
positive despite reported operating losses. However, within each quarter,
monthly cash flows may be positive or negative depending upon rent payment
dates. For example, in the UK rents are paid quarterly and in advance.

     In the five months to May 31, 2002, our monthly revenues have stabilized.
Should revenues remain at current levels, we would expect operating cash flows
to remain positive on a quarterly basis. In line with reduced new center
openings, capital expenditure is expected to continue to fall for the rest of
2002.

     To the extent that current trading conditions continue to prevail and our
revenues remain at current levels, we believe we will be able to fund the
ongoing business, including rent payments, the remaining repayments of the
convertible debenture totalling (pound)24 million (as at June 21, 2002) and
capital expenditure, from existing cash resources and from cash flows from
operations. To the extent that trading conditions deteriorate we will need to
seek external sources of finance, in particular to manage the quarterly rent
cycle. Currently, we have no committed bank or other facilities which are not
cash collateralized, although we have the option of converting the remainder


                                      43
<PAGE>


of the (pound)40 million convertible debenture ((pound)24 million at June 21,
2002) into equity. As of May 31, 2002 we had cash in hand or in the bank of
(pound)70.6 million, including (pound)37.7 million of restricted cash.

                                   PROSPECTS

     Trading conditions remained challenging in the first quarter of 2002 and
the first two months of the second quarter.

     Our strategy of growth through franchising and management contracts has
led to new business in Europe and the Middle East with management contracts
being signed for the UK and Dubai in the first quarter of 2002.

     Our policy of discounting price for term is yielding longer contract terms
to strengthen our contracted forward order book but owing to smaller margins on
this business, this is not resulting in an increase in revenues quarter on
quarter.











                                      44
<PAGE>


ITEM 6.   DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

                        DIRECTORS AND SENIOR MANAGEMENT

     The following table sets forth our directors and executive officers and
their ages and positions.

Name (1)                 Position                                          Age
---------                --------                                          ---
Directors
      George Gray*       Non-Executive Chairman                             63
      Mark Dixon         Director                                           42
      Rudolf Lobo        Director and Company Secretary                     45
      Stephen Stamp      Director                                           40
      John Matthews#     Non-Executive Director                             56
      Roger Orf          Non-Executive Director                             48
Executive Officers
      Mark Dixon         Chief Executive                                    42
      Rudolf Lobo        Executive Director and Company Secretary           45
      Stephen Stamp      Group Finance Director                             40
      Robert Gaudreau    Executive Vice President, North America            40
      Steve Jude         International  Sales and Marketing Director        39
      John Mlynski       Chief Operating Officer                            44

* To retire on June 30, 2002

# To be appointed as Non-Executive Chairman on June 30, 2002.
----------------

(1)  The address for each listed director and officer is c/o Regus plc, 3000
     Hillswood Drive, Chertsey KT16 0RS, England.


     Dr. Gray was appointed as a Non-Executive Director in August 1999 and
became non-executive chairman in October 2000. He was executive chairman of
Serco Group plc, a provider of business services. He is also a non-executive
director of Misys plc, a software company. He will resign as Chairman and as a
director with effect from June 30, 2002. Until June 30, 2002, he will continue
as a member of the audit committee and remuneration committee and Chairman of
the nomination committee.

     Mr. Dixon is the founder of Regus. His vision of the future coupled with
his entrepreneurial skill and drive have been primarily responsible for our
dynamic growth over the past ten years. He is recognized as a major contributor
to the growth of the serviced office industry. He is a member of the nomination
committee.

     Mr. Lobo joined us nine years ago and was previously Group Finance
Director. He is responsible for commercial issues, risk management and legal
services. Previously, Mr. Lobo was the group company secretary of Medicom
International Ltd, a publisher of medical journals, and a director of several
of its subsidiaries.

     Mr. Stamp joined us in January 2000 from Shire Pharmaceuticals Group plc,
a pharmaceuticals company, where he was Group Finance Director. Prior to
joining Shire in 1994, he was an assistant director of corporate finance at
Lazard Brothers and before that spent four years at KPMG London, qualifying as
a chartered accountant in 1987. He is also a non-executive director of Enact
Pharma plc, a pharmaceuticals company.

     Mr. Matthews was appointed as non-executive director in 1995. He is also
chairman of Crest Nicholson plc, a property and construction company, and a
director of Rotork plc (which sells value actuators) and SDL plc, a


                                      45
<PAGE>


software and computer services company. He is chairman of the audit committee
and remuneration committee, and a member of the nomination committee and will
become non-executive chairman on Dr. Gray's retirement on June 30, 2002. A
chartered accountant, he has held senior positions in investment banking and in
industry, having been a managing director of County NatWest Ltd. and chief
executive of Indosuez Capital Ltd., both of which are financial services
organizations. He was also deputy chairman and deputy chief executive of Beazer
plc, a company involved in aggregates and construction.

     Mr. Orf was appointed as non-executive director in August 1998. Since
1995, he has been managing director and founding partner of Pelham Partners, a
property investment and advisory company. Pelham Partners, working closely with
Apollo Real Estate Advisors, has invested more than $600 million of equity in
14 European countries. Prior to 1995, Mr. Orf was in charge of European real
estate investment banking at Goldman Sachs where he was employed from April
1982 to 1995. He is a member of the audit committee.

     Mr. Gaudreau has more than 15 years of experience in the serviced office
industry and more than nine years of experience with us as Group Sales
Director. Since 1998, he has been responsible for the growth and development of
our operations in North America.

     Mr. Jude joined us in September 1999 and is responsible for setting all
non-American sales strategy, managing the direct sales force and managing
global marketing strategy. Prior to joining us, he was director of
international sales for Avis Europe plc, part of Avis Rent-A-Car Company, from
1993 to 1999.

     Mr. Mlynski joined us in January 2001 and is responsible for the
operations of all of our centers worldwide. Prior to joining us, he was Chief
Executive Officer of tacticity.com, an internet retailer, and prior to that he
was President of Gateway Country Stores, a seller of information technology
equipment.

     Except as set out below, none of the directors and executive officers
identified above has:

     o    any unspent convictions in relation to indictable offenses;

     o    been the subject of bankruptcy proceedings or an individual voluntary
          arrangement;

     o    been a director of any company at the time of or within 12 months
          preceding its receivership, compulsory liquidation, creditors'
          voluntary liquidation, administration, entry into company voluntary
          arrangements or entry into composition or arrangement with its
          creditors generally or any class of creditors;

     o    been a partner in a partnership at the time of or within 12 months
          preceding such partnership's compulsory liquidation, administration
          or entry into a partnership voluntary arrangement or the appointment
          of a receiver over any such partnership's assets;

     o    had a receiver appointed with respect to any assets belonging to him;

     o    been the subject of public criticism by any statutory or regulatory
          authority, including recognized professional bodies; or

     o    been disqualified by a court from acting as a director of a company
          or from acting in the management or conduct of the affairs of any
          company.

     In December 1998, our Chief Executive, Mark Dixon, was convicted by a
Magistrates Court of causing actual bodily harm. This plea related to a 1998
incident in which Mr. Dixon was involved in a fracas that led to an individual
sustaining minor injuries. The court sentenced Mr. Dixon to serve 50 hours of
community service and ordered him to pay (pound)815 in compensation. Mr. Dixon
has satisfied the court's sentence. Our board of directors has considered this
matter and has noted that Mr. Dixon has no other convictions and that the
offense did not involve dishonesty or business impropriety. The board of
directors has taken the view that the conviction has no material bearing on Mr.
Dixon's fitness to be a director and our Chief Executive.


                                      46
<PAGE>


                                  COMPENSATION

     The aggregate compensation paid by us to all persons who served in the
capacity as director or executive officer for the year ended December 31, 2001
(11 persons) was approximately (pound)1,108,000 in salaries, (pound)140,000 in
bonuses, nothing in severance payments, (pound)55,000 for benefits in kind and
(pound)58,000 in pension contributions. Benefits in kind include car allowance,
reimbursement of gasoline costs and private medical insurance. Of these
figures, an aggregate of approximately (pound)562,000 was paid to directors,
excluding pension contributions of (pound)47,000. These figures do not include
expenses reimbursed to executive officers, including business travel,
professional and business association dues.

     We have not made any currently outstanding loans to any of our directors.
In addition, we do not have any outstanding guarantees for the benefit of any
of our directors.

                                BOARD PRACTICES

      The Board of Directors is committed to maintaining the highest standards
of corporate governance in line with the Combined Code, issued by the London
Stock Exchange in 1998, which sets out the Principles of Good Governance and
the Code of Best Practice.

     Board composition

     The Board currently comprises three executive directors and three
independent non-executive directors, including a non-executive chairman. The
Chairman of the audit committee, currently John Matthews, has acted as senior
independent director since 1995. The Board schedules seven meetings each year,
but arranges to meet at other times, as appropriate. It has a formal schedule
of matters specifically reserved for its decision and approval. The Board is
supplied with appropriate and timely information to enable it to discharge its
duties and requests additional information or variations to regular reporting
as it requires. A procedure exists for directors to seek independent
professional advice at our expense in the furtherance of their duties, if
necessary. In addition, appropriate training is made available for all new
directors to assist them in the discharge of their responsibilities. All
directors have access to the advice and services of the Company Secretary, who
is responsible for ensuring that Board procedures are followed and that
applicable rules and regulations are complied with. While all directors are
expected to bring an independent judgment to bear on strategy, performance,
resources (including key appointments) and standards of conduct, the
independent non-executive directors were selected and appointed for this
purpose. All directors submit themselves for re-election at least every three
years and directors appointed during the period are required to seek
re-election at the next Annual General Meeting. The independent non-executive
directors understand that the Board will not automatically recommend their
re-election.

     Following the retirement of Dr. Gray, it is likely that we will have only
two non-executive directors for a period. We are seeking to appoint at least
one more non-executive director, but as at June 10, 2002, no one has been
identified.

     Board committees

     The Board has a number of standing committees, which all have written
terms of reference setting out their authority and duties:

      Audit committee - the members of this committee are John Matthews
(Chairman), George Gray and Roger Orf (all independent non-executive
directors). The audit committee meets as required, but not less than four times
a year. Its responsibilities, in addition to those referred to under Internal
Control, include a critical review of the annual and


                                      47
<PAGE>


interim financial statements (including the Board's statement on internal
control in the annual report) prior to their submission to the Board for
approval, when a report from the committee is also given. The committee also
reviews the scope and results of the external audit and its cost effectiveness
and the independence and objectivity of the auditors. Although other directors,
including the Group Finance Director, attend audit committee meetings, the
committee can meet for private discussions with the internal and external
auditors.

     Nomination committee - the members of this committee are George Gray
(Chairman) and John Matthews, both independent non-executive directors and Mark
Dixon. The committee meets as required but not less than once a year. Its
responsibilities include reviewing the Board structure, size and composition,
nominating candidates to the Board to fill Board vacancies when they arise and
recommending directors who are retiring by rotation to be put forward for
re-election.

     Remuneration committee - the members of this committee are John Matthews
(Chairman) and George Gray (both are independent non-executive directors). For
a statement setting out the role and responsibility of this committee and our
remuneration policy, see "- Remuneration Policy".

Going concern

     After making appropriate enquiries, the directors consider that we have
adequate resources to continue in operational existence for the foreseeable
future. For this reason, the directors continue to adopt the going-concern
basis in preparing the financial statements.

Internal control

     The Board acknowledges its overall responsibility for the Group's system
of internal control and for reviewing its effectiveness on a timely basis. The
internal control processes have been designed to identify, evaluate and manage
the key risks that we encounter in pursuing our objectives. Internal control
processes encompass all controls, including financial, operational and
compliance controls and risk management. Such a system is, however, designed to
manage rather than eliminate the risk of failure to achieve business
objectives, and cannot provide absolute assurance against material
misstatement.

     The Board conducts regular reviews of the Group's strategic direction.
Country and regional strategic objectives, quarterly plans and performance
targets for 2002 and beyond have been set by the executive directors and are
regularly reviewed by the Board in the context of our overall objectives.

     The control framework and key procedures in place throughout the year
ended December 31, 2001 are:

     o    The executive directors ("the Group executive") normally meet monthly
          together with certain other senior executives to consider our
          financial performance, business development and our management
          issues. Directors of key operating companies meet regularly.

     o    Major business risks and their financial implications are appraised
          by the executives responsible as part of the budget process and these
          are endorsed by regional management. Key risks are reported to the
          Board and the audit committee. The appropriateness of controls is
          considered by the executives, having regard to cost/benefit,
          materiality and the likelihood of risks crystallizing.

     o    Country and regional budgets, containing financial and operating
          targets, capital expenditure proposals and performance indicators,
          are reviewed by the Group executive and must support regional
          business strategies.

     o    Monthly reports on Group and regional performances are provided to
          the Group executive. Quarterly summaries and forecasts are presented
          to the Board and discussed at Board meetings. Performance against
          budgets and objectives is reviewed with regional management, as are
          forecasts and material sensitivities.


                                      48
<PAGE>


          The Board regularly receives reports from key executives and
          functional heads on matters such as forecasts, business development,
          strategic planning, legal matters and corporate affairs.

     o    Appropriate delegated authority levels are in force which prescribe
          the limits to which it can be committed.

     o    A policy governs appraisal and approval of investment expenditure and
          asset disposals. Post-investment reviews are undertaken.

     o    Other key policies and control procedures (including finance,
          operations and health and safety) are available to all staff on
          web-based systems.

      Our internal audit function reports to management on our worldwide
operations. Its program of work and its findings, including any material
control issues and resultant actions, are reviewed by the audit committee. To
underpin the effectiveness of controls, it is our policy to recruit and develop
appropriately skilled management and staff of high caliber and integrity. High
standards of business ethics and compliance with laws, regulations and internal
policies are demanded from staff at all levels.

      The directors have conducted a review of the effectiveness of system of
internal controls. This review covered all controls, including financial,
operational and compliance controls and risk management. The key mechanisms
available to the Board in the conduct of its review are:

o    An ongoing process, through Board meetings, senior management meetings and
     divisional reviews, as well as other management meetings, for the formal
     identification of the Company's significant operational risks and
     mitigating control processes;

o    The Treasury Risk Committee comprising the Group Finance Director, Company
     Secretary, Group Tax Manager and Group Treasurer, which meets to consider
     the specific risks associated with Treasury transactions, including the
     approval of all transactions in financial derivatives;

o    Since the third quarter of 2001, there has been an embedded system of
     reporting the effectiveness of key financial, operational and compliance
     controls. This is a comprehensive self-assessment system built up from
     center-level using our intranet. Results and action plans are then
     reviewed by senior management and summarized for the main Board; and

o    A multi-disciplinary Group Risk forum, chaired by the company secretary,
     reports to the Board on a quarterly basis. This forum considers all
     aspects of risk identification and management and its reports represent a
     key feature of the process by which the Board assesses the overall
     effectiveness of our system of internal control.

Communications with shareholders

     We have a policy of maintaining an active dialogue with institutional
shareholders through individual meetings with senior management. A regular
program of meetings with major institutional shareholders is held in order to
discuss matters affecting our performance. In addition, presentations are made
four times a year after the announcement of results, the details of which,
together with our financial reports and announcements, are accessible via our
Internet site. We correspond regularly on a range of subjects with our
individual shareholders who have an opportunity to question the Board, as well
as the Chairman of the audit and remuneration committees, at the Annual General
Meeting.

Compliance statement

     We have complied with the provisions set out in Section 1 of the Code of
Best Practice prepared by the Committee on Corporate Governance and published
in June 1998 ("the Combined Code") throughout the year ended December 31, 2001.


                                      49
<PAGE>


The remuneration committee

     The remuneration committee is chaired by John Matthews and its other
members are George Gray and Roger Orf. All members of this committee are
independent non-executive directors. Mark Dixon and/or other directors may be
invited to attend some meetings of the committee in an advisory capacity as the
committee considers appropriate. The committee will consider all material
elements of remuneration policy, remuneration and incentives of executive
directors and senior management with reference to independent remuneration
research and professional advice in accordance with the Combined Code on
Corporate Governance, and will make recommendations to the Board of Directors
on the framework for executive remuneration and its cost. The Board of
Directors is then responsible for implementing the recommendations and agreeing
the remuneration package of individual directors. Directors are not permitted,
under our Articles of Association, to vote on their own terms and conditions of
remuneration. The committee does not make recommendations on the remuneration
of non-executive directors, which is a matter solely for the full Board. The
members of the remuneration committee attend our Annual General Meeting and are
available to answer shareholders' questions about directors' remuneration.

Remuneration policy

     Remuneration policy centers on ensuring that remuneration packages are
sufficiently competitive to attract, retain and motivate the right caliber of
executive directors and senior management. Incentive payments are conditional
upon demanding performance criteria so as to align incentive awards paid to
directors directly with the interest of shareholders. The remuneration
committee uses the services of external consultants to help it agree
appropriate packages reflecting the remuneration policy. The constituent parts
of those packages are set out in the following paragraphs.

Basic salary and benefits

     Salaries are reviewed annually and determined by the committee, taking
into account the performance of the individual directors over the previous 12
months and the pay and employment conditions elsewhere. The committee also uses
information provided by external consultants relating to the rates of pay for
similar positions in comparable companies. Any increases in basic salary are
effective from January 1 in each year. The remuneration table included within
this report also shows benefits received in 2001. The main benefits relate to
the provision of company cars and the provision of private medical insurance
for the director and his immediate family.

Annual performance bonus

     Under the annual bonus scheme, the executive directors are entitled to an
annual bonus of up to 40% of their basic salary, which is payable provided the
budget targets for the relevant financial year are achieved.

Long-term incentive plan

     Other than share options, the executive directors do not participate in
any of the long-term incentive plans offered to senior management.

Share options

     We believe that share ownership by employees, including the executive
directors, strengthens the link between their personal interests and those of
ordinary shareholders. We have established a number of employee share plans,
including the Regus Team Member Share Plan, a replacement plan known as the
Regus Global Share Plan and the Regus International Sharesave Plan. As at May
31, 2002, no options had been granted to executive directors, other than those
detailed in the table of directors' interests at the end of this report. During
1999, we established the Regus Employee Trust. The Trust is a discretionary
trust for the benefit of employees, including executive directors. The Trust
may issue shares to our employees (including directors) at the discretion of
the


                                      50
<PAGE>


Company. The Trust has purchased some of the shares in the Company which
would be required if participants were entitled to exercise the maximum number
of options outstanding under the share option plans.

Pensions

     The executive directors participate in our Money Purchase (Personal
Pension) Scheme. We match employee contributions up to a maximum of 10% of
basic salary. The main benefits to executive directors, who contribute a
percentage of their gross salaries to the scheme, are:

     o    A pension, based on the value of fund built up from personal
          contributions, at any age between 50 and the normal pension age of
          65;

     o    A tax-free cash sum, payable when taking the benefits;

     o    Life assurance cover based on the level of contributions with the
          opportunity to purchase additional cover, subject to Inland Revenue
          limit of 5% of net relevant earnings; and

     o    Pension to spouse payable on death.

     All executive directors are subject to the Inland Revenue cap on the
amount of salary which may be treated as pensionable.

Service contracts

     On July 1, 2000, Mark Dixon, Rudolf Lobo and Stephen Stamp entered into
full-time rolling service agreements with Regus Management Limited. These are
terminable by either party giving not less than 12 months' notice to the other
party or automatically on the respective directors reaching the age of 65.
George Gray, John Matthews and Roger Orf, as non-executive directors, have been
appointed pursuant to letters of appointment dated September 2, 1999 (as
amended by letters of amendment dated November 30, 1999 and September 21,
2000), October 26, 1999 and August 29, 2000 respectively. These appointments
are for three years, terminable on three months' notice by either party.

Directors' and Executive Officers' remuneration table

<TABLE>
                       Salary     Bonus   Benefits             Total              Total    Pension scheme      Pension scheme
                        /fees                           remuneration       remuneration     contributions       contributions
                      (pound)   (pound)    (pound)              2001               2000              2001                2000
                        '000      '000       '000        (pound)'000        (pound)'000       (pound)'000         (pound)'000
-----------------------------------------------------------------------------------------------------------------------------
<S>                     <C>       <C>         <C>             <C>                 <C>              <C>                 <C>
Executive
Directors

Mark Dixon              206.7        -       21.9             228.6              448.0              22.7                28.0

Peter Jenkins(1)            -        -          -                 -                4.8                 -                   -

Stephen Stamp            99.5        -        9.8             109.3              225.3              12.5                10.5

Rudolf Lobo             143.3        -       17.2             160.5              223.8              11.6                 9.6


                                                                 51
<PAGE>


<CAPTION>
                       Salary     Bonus   Benefits             Total              Total    Pension scheme      Pension scheme
                        /fees                           remuneration       remuneration     contributions       contributions
                      (pound)   (pound)    (pound)              2001               2000              2001                2000
                        '000      '000       '000        (pound)'000        (pound)'000       (pound)'000         (pound)'000
-----------------------------------------------------------------------------------------------------------------------------
<S>                     <C>       <C>         <C>             <C>                 <C>              <C>                 <C>
Non-executive
Directors

George Gray              37.5        -          -              37.5               34.5                 -                   -

Robert Kuijpers(1)        6.3        -          -               6.3               25.0                 -                   -

Roger Orf                 5.0        -          -               5.0                1.7                 -                   -

John Matthews            14.6        -          -              14.6               25.0                 -                   -

Executive Officers

Robert Gaudreau         210.6     89.3        6.1             306.0               269.5                -                   -

Steve Jude              135.0     50.4          -             185.4               145.2              7.3                 8.2

John Mlynski            249.4      0.0          -             249.4                   -              3.5                   -
                    ---------- -------- ---------- ----------------- ------------------- ---------------- -------------------
Total                 1,107.9    139.7       55.0           1,302.6             1,402.8             57.6                56.3
                    ---------- -------- ---------- ----------------- ------------------- ---------------- -------------------
</TABLE>


(1) former director

     During 2001, the following contractual emoluments were irrevocably waived
by the directors:

              Director                            Amount Waived (pound)
              --------                            ---------------------
              Mark Dixon                                 193,320
              Stephen Stamp                               85,908
              Rudolf Lobo                                 21,667
              George Gray                                 42,500
              John Matthews                               10,417

                                   EMPLOYEES

     We are is a service business and the directors recognize that our success
depends to a large extent on the caliber and motivation of the individuals we
employ. We have actively encouraged and promoted a dynamic, high work ethic
environment. All employees are regarded as "team members", irrespective of
functional title or status. Team members are kept informed of developments in
the business through a bi-weekly electronic newsletter and through RegusSmart,
our intranet.

     As of December 31, 2001, we employed a total of approximately 2,466
people: 642 in the UK and Ireland; 972 in the rest of Europe; 529 in the
Americas; 235 in the rest of the world and 88 at our UK headquarters. The


                                      52
<PAGE>


employees in each region perform management, business center staffing, sales,
marketing, and customer support functions. At December 31, 1999 and 2000 we had
1,761 and 2,615 employees, respectively.

     A key element of remuneration is performance related. Currently, staff are
able to earn bonuses of up to 25% of salary and managers are able to earn
bonuses of up to 40%. An employee share scheme was introduced in December 1999
under which grants had been made to the majority of our employees as at
December 31, 2001. Details of the scheme are set out under "-- Employee Share
Plans".

                                SHARE OWNERSHIP

     The table below sets forth information regarding the beneficial ownership,
(excluding share options) of our directors and executive officers of our shares
as of May 31, 2002 (the most recent practicable date). Mark Dixon has increased
his shareholding by 10,000,000 ordinary shares since our initial public
offering.


     Beneficial Ownership

Name of Beneficial                  Number          Percentage
Owner
-----------------------      --------------     ---------------
Directors and
Executive Officers:
George Gray...........              38,462                   *
Mark Dixon (1)........         365,329,286              62.34%
Rudolf Lobo...........              38,462                   *
Stephen Stamp.........             384,615               0.06%
John Matthews.........             359,724               0.06%
Roger Orf (2).........             300,000               0.05%
Robert Gaudreau.......                   -                   -
Steve Jude............                   -                   -
John Mlynski..........                   -                   -
* less than 0.01% holding

(1) Mr. Dixon's beneficial ownership of shares is calculated by attributing to
him all shares owned by Maxon Investments BV, an entity in which Mr. Dixon
holds a 100% beneficial ownership interest. (2) Mr. Orf's beneficial ownership
of shares is calculated by attributing to him all shares owned by Theatre
Acquisitions LLC, an entity in which Mr. Orf holds a 100% beneficial interest.


                                       53
<PAGE>


Directors' and executive officers share options

<TABLE>
                   Option     December 31,         Granted     December 31,      Exercise     Date from which      Expiry
                     type             2000     during 2001             2001         price         exercisable        date
                ---------- ---------------- --------------- ---------------- ------------- ------------------- -----------
<S>                    <C>            <C>            <C>         <C>              <C>                <C>         <C>
Rudolf Lobo             A          266,179               -          266,179          5.0p               01/03       12/09
                        A          283,503               -          283,503        145.5p               01/03       12/09
                        B       11,570,000               -       11,570,000        0.375p               12/03           -
                        C            4,003               -            4,003        242.0p               01/04       07/04
Stephen Stamp           A        2,790,203               -        2,790,203        145.5p               01/03       01/10
                        C            4,003               -            4,003        242.0p               01/04       07/04

Robert Gaudreau        A           348,113               -          348,113          5.0p               01/03       12/09
                       A           318,073               -          318,073        145.5p               01/03       12/09
                       D        11,570,000               -       11,570,000        0.375p               12/03           -
Steve Jude             A              5039               -             5039          5.0p               01/03       12/09
                       A           269,872               -          269,872        145.5p               01/03       12/09
                       A            48,307               -           48,307        260.0p               01/04       08/10
                       C             4,003               -            4,003        242.0p               01/04       07/04
</TABLE>


                                      54
<PAGE>


A        Awarded under the Regus Team Member Share Plan for nil consideration.
         The grant to Mr. Stamp is subject to higher performance targets.
B        Awarded to Mr. Lobo by Maxon pursuant to an agreement dated September
         17, 1999 recording the terms of an agreement entered into on November
         11, 1992 between Mr. Lobo and Maxon, as amended on June 30, 2000.
         These shares are currently held by HSBC Trustees (Jersey) Limited and
         will not be capable of exercise before 31 December 2003 other than in
         defined circumstances (which include the discretion of Maxon). The
         shares subject to the option are transferable to Mr. Lobo upon payment
         to Maxon of an exercise price of (pound)45,000, which is equivalent to
         the market value of the relevant shares at the time the parties
         entered into the option arrangements.
C        Awarded under the Regus International Sharesave Plan, the maximum
         monthly contribution for which may not exceed the amount permitted by
         the Income and Corporation Taxes Act 1988.
D        Awarded to Mr. Gaudreau by Maxon pursuant to an agreement dated
         September 17, 1999 recording the terms of an agreement entered into on
         November 11, 1992, as supplemented by an agreement dated September 17,
         1999 recording the terms of an agreement entered into on February 12,
         1999. The shares subject to the option are transferable to Mr.
         Gaudreau upon payment to Maxon of an exercise price of (pound)45,000,
         which is equivalent to the market value of the relevant shares at the
         time the parties entered into the option arrangements.

Employee Share Plans

     We have established a number of employee share plans as described below.
In addition, our board of directors has authority to establish further plans
provided that the number of shares that may be issued under those plans count
against the limits described below, that those plans do not confer benefits on
employees that are substantially greater than the benefits which an employee
could receive from participating in the plans described below and that, once
established, such plans may not be amended without the approval of the
shareholders at a general meeting if such approval would be required to amend
the comparable provisions of the plans summarized below.

   The Regus Team Member Share Plan

     Our team member share plan is a share option plan administered by our
board of directors or a duly authorized committee. It is divided into a number
of subplans designed to allow employees who work abroad to be granted tax
efficient options wherever possible. There is also a subplan which allows our
board of directors to grant participants awards that entitle them to a cash
payment calculated by reference to the increase in the market value of our
shares between grant and exercise. Options entitle the holder to acquire our
shares. Options may either be options to subscribe for new shares or options to
purchase existing shares from an employee trust. Options are granted under this
plan for no consideration. Three types of options have been granted:
performance, premier and reward options. Options were granted to substantially
all employees as of December 1, 1999. Further issues were made during 2000.


                                      55
<PAGE>


Performance options are subject to performance targets that must normally be
satisfied before the options may be exercised. Our board of directors has the
discretion to waive some or all of the exercise price of the reward options.
Options are personal to the option holder and may not be transferred.

     Premier and, subject to meeting the performance targets, performance
options become exercisable in five installments no earlier than January 1 of
each of 2003, 2004, 2005, 2006 and 2007 for grants up to May 2000 and grants
made after this date are exercisable in five installments one year later than
each of the above. Reward options become exercisable in four tranches on
January 1 of each of 2003, 2004, 2005, and 2006. If the participant's
employment ends, the options lapse unless the employment ends in specified
circumstances, such as disability or redundancy.

     As at March 31, 2002, options under this plan were outstanding over
19,461,052 shares. No further options may be granted under this plan.

     The following table sets forth, as of March 31, 2002, by date of grant,
the number and type of options granted, the number of shares over which options
were granted, the exercise price of the options and the end of the exercise
period of the options.

<TABLE>
                                                                    Total No. of                                    End of
                        No. of        No. of          No. of         Shares Over                                  Exercise
Date of Grant           Reward        Premier       Performance     which Options           Exercise Price       Period of
                       Options        Options         Options          Granted               of Options(2)         Options
------------------   ------------  -------------   -------------  ---------------     ------------------------  ----------
<S>                     <C>            <C>             <C>            <C>                    <C>                   <C>
December 10, 1999.      3,896,472      9,582,328       7,492,834      20,971,634      (pound)0.05/(pound)1.455     12/9/09
January 7, 2000(1)              -        128,866       2,661,337       2,790,203                  (pound)1.455      1/6/10
February 2, 2000..        100,000              -               -         100,000      (pound)0.05/(pound)1.455      2/1/10

May 17, 2000......         50,633         30,085          30,343         111,061      (pound)0.05/(pound)1.455     5/16/10
August 21, 2000...              -      2,587,245       1,061,013       3,648,258                   (pound)2.60     8/20/10
September 18, 2000              -        164,516         261,779         426,295                   (pound)2.60     9/17/10
Lapsed Options....      (932,887)    (5,158,278)     (2,386,812)     (8,477,977)                           n/a         n/a
Exercised Options       (108,422)              -               -       (108,422)                           n/a         n/a
Total.............   3,005,796(2)      7,334,762       9,120,494      19,461,052                           n/a         n/a
</TABLE>

     (1)  The grant on January 7, 2000 was to Mr. Stephen Stamp and is subject
          to higher performance targets.

     (2)  We elected to waive partially the exercise price of all of the reward
          options and reduce the exercise price from (pound)1.455 to
          (pound)0.05 during 2000.

   The Regus High Performance Bonus Plan

     Our bonus plan is administered by our board of directors or a duly
authorized committee. There are two elements to our bonus plan: a cash plan and
a share plan.

     Participation in our bonus plan is discretionary but is limited to our key
employees, directors and executive officers. At the beginning of each financial
year, the selected participants are notified of the amount of bonus that may be
earned under the cash plan over the financial year and of the appropriate
performance targets. Payment of the bonus at the end of the financial year is
deferred for two years and is normally contingent on the participant remaining
employed by us throughout that two-year deferral period.


                                      56
<PAGE>


     At the end of the two-year deferral period, the participant may be invited
to invest some or all of his after-tax bonus in buying our shares to be
retained for three years. In return, the participant is granted an award under
the share plan over an equal number of shares. An award is a deferred right to
acquire shares at no cost. All awards are satisfied by the transfer of shares
from an employee trust.

     An award may be exercised normally in the six months following the third
anniversary of the date of grant. An award will normally lapse if a
participant's employment ends. A participant is free to withdraw his shares at
any time but, if he does so, the corresponding award lapses.

     As at December 31, 2001, no options under our bonus plan were outstanding.

   The Regus Global Share Plan

     Our global share plan is administered by the remuneration committee of our
board of directors, all of whose members are non-executive directors.

     This option plan is divided into a number of subplans which have been
designed to allow employees to be granted tax efficient options wherever
possible. Our board of directors may from time to time create additional
subplans. There is also a subplan which allows the remuneration committee to
grant participants awards that entitle them to a cash payment calculated by
reference to the increase in the market value of our shares between grant and
exercise.

     Options entitle the holder to acquire our shares or ADSs. Options may
either be options to subscribe for new shares or options to purchase existing
shares from an employee trust. There are two types of option: A options and B
options. The terms of the two options are similar except that B options must be
subject to performance targets whereas performance targets are optional for A
options.

     Options are personal to the option holder and may not be transferred. No
payment is required for the grant of an option.

     A person is eligible for an A option if he has been employed by us or a
participating subsidiary of ours for at least 12 months, or for such shorter
period, if any, as the remuneration committee may decide. The remuneration
committee may from time to time impose additional eligibility conditions
provided that the purpose or effect of those conditions is not to restrict
eligibility for A options to higher paid employees.

     All employees, including executive directors, are eligible to receive B
options at the discretion of the remuneration committee. An employee who is a
director of any member of our group companies is not, however, eligible to
receive a B option unless he is required to devote substantially the whole of
his working time to his duties to us.

     No options may be granted more than 10 years after the date on which
options are first granted under our global share option plan.

     The exercise price may not be less than the market value of a share,
determined in accordance with the Taxation of Chargeable Gains Act 1992, for
the dealing day immediately preceding the date of grant or, where options are
granted pursuant to an invitation, the date of the invitation.

     Except in relation to the first grant of options to an individual or in
circumstances determined by the remuneration committee to be exceptional, the
number of shares over which an employee may be granted a B option to subscribe
on any date, when added to the number of shares in respect of which he has been
granted B options to subscribe in the previous 12 months under this option
plan, is limited so that the total cost of exercise does not exceed once times
his annual remuneration.


                                      57
<PAGE>


     All B options must, and A options may, be granted subject to a performance
target, the achievement of which is normally a condition precedent to the right
of exercise. The remuneration committee has the right to set different targets
from year to year. The remuneration committee also has the discretion to change
the performance target from time to time if events happen which make it fair
and reasonable to do so but not so as to make the performance target materially
easier or more difficult to satisfy. The remuneration committee may also waive
the performance target if it considers that it is fair and reasonable to do so.
The performance targets for any options granted to our executive directors will
be disclosed in our annual report each year.

     Options are exercisable normally only during such period as the
remuneration committee may decide beginning not earlier than the third
anniversary and ending not later than the tenth anniversary of grant and only
if the performance target, if any, has been met. Special rules apply, however,
on termination of employment.

     Options, other than those granted under the Inland Revenue approved part,
may be satisfied by the payment of a cash sum, or shares of an equivalent
value, representing the difference between the exercise price and the market
value of the shares at the date of exercise.

   The following table sets forth, as of March 31, 2002, by date of grants; the
number of shares or ADSs over which options were granted, the exercise price of
the options and the end of exercise period of the options.

<TABLE>
Date of Grant        Total No. of shares       Total No. of ADSs      Exercise price of        End of Exercise
                      over which options      over which options                options      period of options
                                 granted                 granted
------------------   -------------------      ------------------      -----------------      -----------------
<S>                            <C>                   <C>                   <C>                         <C>
December 11, 2000                    n/a                 120,000                 $25.00                  12/10
March 26,  2001                1,942,441                     n/a            (pound)2.56                   3/11
March 26, 2001                       n/a                 185,636                $18 3/16                  3/11
June 8, 2001                     351,388                     n/a            (pound)2.56                   6/11
June 8, 2001                         n/a                 124,439                $18 3/16                  6/11
June 8, 2001                      84,876                     n/a           (pound)2.275                   6/11
June 8, 2001                         n/a                  83,949                 $16.20                   6/11
August 29, 2001                1,051,250                     n/a           (pound)0.475                   8/11
August 29, 2001                      n/a                 143,000                  $3.29                   8/11
November 12, 2001              3,287,398                     n/a           (pound)0.335                  11/11
November 12, 2001                    n/a                 203,602                  $2.30                  11/11
February 28, 2002                300,000                     n/a          (pound)0.2475                   2/12
February 28, 2002                    n/a                   1,000                  $2.00                   2/12
March 28, 2002                    88,052                     n/a            (pound)0.44                   3/12
May 30, 2002                     136,280                     n/a           (pound)0.385                   5/12
May 30, 2002                         n/a                 200,000                  $2.81                   5/09
Lapsed Options               (1,717,498)               (260,489)                    n/a                    n/a
Total                          5,524,187                 801,137                    n/a                    n/a
</TABLE>


                                      58
<PAGE>


   The Regus International Sharesave Plan (UK Part)

     This savings-related share option plan, which is operated and administered
by our board of directors or a duly appointed committee, has been designed to
be approved by the Inland Revenue under the Income and Corporation Taxes Act
1988. All UK employees who have one or more years of continuous service with us
or any subsidiary nominated to join in our savings-related share option plan,
are eligible to participate in any invitation. Our board of directors has the
discretion to reduce or eliminate the period of qualifying service and/or to
invite other of our employees to participate.

     Options entitle the holder to acquire our shares. Options may either be
options to subscribe for new shares or options to purchase existing shares from
an employee trust. No payment is required for the grant of an option. Options
are personal to the participant and may not be transferred.

     Whenever invitations to participate in our savings-related share option
plan are issued, each eligible employee may apply for an option, the total
exercise price of which does not exceed the monthly contributions and bonus
repayable under the Save-as-You-Earn (SAYE) contract to be entered into as a
condition of the grant of the option. The aggregate maximum monthly
contribution payable by an employee may not exceed such sum as may from time to
time be permitted by the Income and Corporation Taxes Act 1988.

     The exercise price may not be less than 80% of the market value of a
share, determined in accordance with the Taxation of Chargeable Gains Act 1992,
for the dealing day selected by our board of directors in the period of 30 days
immediately preceding the date of grant.

     In normal circumstances, an option may be exercised only during the period
of six months starting on the bonus date. The bonus date is the date on which
the bonus under the related SAYE contract is payable. This is the third or
fifth anniversary of the starting date of the SAYE contract and will be
determined at the time of grant. Early exercise is allowed in circumstances
where a participant's employment terminates for a specified reason such as
death, redundancy, disability or retirement. Except in such circumstances,
options lapse when the employment ends.

     In all cases of early exercise, an option may be exercised only to the
extent of the amounts then paid under the related SAYE contract and any
interest or bonus payable thereon.

     As of May 31, 2002, an option over 518,051 shares had been granted under
this plan.

   The Regus US Stock Purchase Plan

     Our US plan is operated and administered by our board of directors or a
duly authorized committee. Participation in the US plan is limited to employees
of our US subsidiaries who have been continuously employed for such period, not
exceeding one year, as our board of directors may decide and who satisfy such
other criteria as our board of directors may from time to time decide. Offers
to participate in our US plan are issued to all eligible employees.

     Options entitles the holder to acquire our shares or ADSs. Options may
either be options to subscribe for new shares or options to purchase existing
shares from an employee trust. Options will be personal to the participant and
may not be transferred. No payment is required for the grant of an option.

     Offers to participate in our US Plan may be issued from time to time at
the discretion of our board of directors. Each employee who wishes to
participate in an offering must agree to save over a two year period.


                                      59
<PAGE>


Savings are made by way of payroll deduction. The minimum monthly contribution
is 1% of the respective employee's salary and the maximum (including any
contributions still being paid) is $400, or such higher amount as our board of
directors may decide and which is the US dollar equivalent of the maximum
contribution permitted at the time under a savings contract linked to an Inland
Revenue approved savings-related share option scheme, which amount shall not
exceed $25,000 per calendar year.

     Each option is over such number of shares as has an aggregate exercise
price equal to the amount which the eligible employee agrees to save over the
two year period to which, if our board of directors so decides, there may be
added additional contributions to represent notional interest on the employee's
savings.

     The exercise price may not be less than 85% of the market value of a
share, determined in accordance with the Taxation of Chargeable Gains Act 1992,
for the dealing day immediately preceding the date of grant.

     Subject to adjustment in the event of a variation of share capital, the
maximum number of shares which may be made available for our US plan will be
10,000,000.

     Unless a participant chooses not to exercise his option prior to the end
of the two-year savings period, it may be exercised in full on the expiry of
the two-year savings period. Generally, options lapse when an employee ceases
to be employed by us but special rules apply when the employment ends for
specified reasons such as injury, redundancy and retirement. In these cases,
the option may be exercised to the extent of the participant's accumulated
savings and interest at the date of termination.

     As of May 31, 2002, an option over 23,786 ADSs had been granted under this
plan.

   The Regus International Sharesave Plan

     The terms of our international sharesave plan are similar in all material
respects to the UK part of our sharesave plan. It is designed, however, for
participants who are not subject to UK tax and does not include, therefore,
those provisions which are necessary to obtain Inland Revenue approval of our
sharesave plan.

     As of May 31, 2002, an option over 216,479 shares had been granted under
this plan.

   The Regus International Sharesave Plan (Irish Part)

     The terms of this plan are similar in all material respects to the UK part
of our sharesave plan except that it has been designed to qualify for approval
by the Irish tax authorities. No grant has been made under this plan.

   The Regus International Sharesave Plan (French Part)

     The terms of this plan are similar in all material respects to the UK part
of our sharesave plan, except there will only be a five year option period and
a longer period of 20 days to establish the exercise price. In addition, the
option may normally only be exercised in respect of 20% of the shares
originally comprised in it on the fifth anniversary of grant and on each of the
following four anniversaries. The plan has been designed to qualify for
approval by the French tax authorities.

     As of May 31, 2002 an option over 59,042 shares had been granted under
this plan.

   The Regus All-Employee Share Ownership Plan

     The ownership plan, which has been designed to be approved by the Inland
Revenue under the Finance Act 2000 is constituted by a trust deed. Save to the
extent required by the terms of the trust deed, the ownership plan is
administrated by our board of directors.

     On any occasion on which our board of directors decides to operate the
ownership plan, it may be operated on one or more of the bases allowed by the
legislation. These are as follows:


                                      60
<PAGE>


      (i)   as a free plan;

     (ii)   as a partnership plan; and

    (iii)   as a matching plan.

     Under the free plan, the employing companies will provide the trustees
with funds to enable them to subscribe for and/or purchase shares which will be
allocated to the eligible employees. The maximum individual allocation of
shares under the free plan in any tax year will be (pound)3,000.

     Any allocation of shares under the free plan must be made on similar terms
but can be linked to such individual, team, divisional or corporate performance
as our board of directors may decide. The performance targets set for each unit
must be broadly comparable and must not contain any features which have the
effect of concentrating the awards on directors or higher-paid employees.

     Shares under the free plan must be held by the trustees for a minimum
period of three years or for such longer period not exceeding five years as our
board of directors may decide. If a participant ceases to be employed by us
before the end of this period, his shares under the free plan must be withdrawn
from the trust. If the participant ceases to be employed within the minimum
three year period, or within such shorter period as our board of directors may
decide, otherwise than in specified circumstances such as redundancy or
disability, the free plan may provide that the shares under the free plan will
be forfeited.

     Under the partnership plan, an eligible employee may enter into an
agreement with us to allocate up to (pound)1,500 of his pre-tax salary each
year to subscribe for and/or purchase shares. The agreement may provide for
these partnership shares to be bought within 30 days of the day on which the
deduction is made. Alternatively, the agreement may provide for the deductions
to be accumulated for a period, not exceeding 12 months, and for the shares to
be bought within 30 days of the end of that period. A participant may withdraw
his shares under this plan at any time.

     If our board of directors decides to operate the partnership plan in any
period, it may also decide to operate the matching plan in the same period.
Under the matching plan, the employing companies will provide the trustees with
funds to enable them to subscribe for and/or purchase shares which will then be
allocated to the eligible employees up to a maximum ratio of two matching
shares for every partnership share. Participation in the matching plan must be
open to all eligible employees on the same basis.

     Matching shares must be held by the trustees for a minimum period of three
years or for such longer period not exceeding five years as our board of
directors may decide. If a participant ceases to be employed by us before the
end of this period, his matching shares must be withdrawn from the trust. If
the participant ceases to be employed within the minimum three year period, or
within such shorter period as our board of directors may decide, other than for
a specified reason such as redundancy or disability or withdraws his
partnership shares from the trust before the end of the minimum three year
period, the matching plan may provide that his matching shares will be
forfeited.

     All of our UK resident employees who have not less than one year's
continuous service, or such shorter period as our board of directors may
decide, must be eligible to participate in the plan. Other employees may be
eligible to participate in the plan at our board of directors' discretion.

     The subscription price of any shares issued for the purposes of the plan
will be determined by our board of directors. Except as required by
legislation, it may not be less than an amount equal to the market value of a
share, determined in accordance with the Taxation of Chargeable Gains Act 1992,
for the dealing day immediately preceding the date of subscription.

     The ownership plan may provide that any dividends paid on the free,
partnership or matching shares will either be paid to the participants or
re-invested in the purchase of additional shares to be held in the ownership
plan for a period of three years.


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<PAGE>


     The ownership plan may provide that the voting rights attributable to the
shares of a participant may not be exercised while the shares are held in the
trust. Alternatively, the participant may be allowed to direct the trustees on
how to exercise those voting rights. The trustees will not, however, exercise
the voting rights attributable to the shares held in the trust except in
accordance with the participant's instructions.

     In the event of a general offer being made to the shareholders or a rights
or capitalization issue, participants will be able to direct the trustees how
to act on their behalf.

     No grant has been made under this plan.

   The Regus International All-Employee Share Ownership Plan

     The terms of this plan are similar in all material respects to the
ownership plan. It is designed, however, for participants who are not subject
to UK tax and does not include those provisions which are necessary to obtain
Inland Revenue approval of the ownership plan.

     No grant has been made under this plan.

   Provisions Common to All Plans

     Except as mentioned below, the following provisions are common to each of
the plans.

     Plan Limit

     On any date, the aggregate nominal amount of new shares which may be
allocated pursuant to a plan may not, when added to the nominal amount of new
shares allocated in the previous 10 years under all of our employee share
schemes but after the date of listing, exceed 10% of our equity share capital.

     For these purposes, shares are allocated under option plans when the
options are granted and under other schemes when the shares are issued. Options
which lapse, by reason of non-exercise or otherwise, cease to count. No account
is taken of shares which are acquired by purchase rather than by subscription
except where such shares were first issued to an employee trust for the purpose
of satisfying a participant's rights. No account is taken of shares which an
employee purchases using his own funds except on the exercise of an option
under an option plan.

     Change of Control

     Subject as set out in the following paragraphs, the exercise of
options/awards under the plans will be permitted in the event of a change of
control, a reorganization, an amalgamation or a voluntary winding up of Regus
plc. Unless the remuneration committee decides otherwise, options under our
team member share plan and our global share option plan may be exercised even
if the performance targets have not been met. In the event of a change of
control of Regus plc, participants may surrender their options in return for
substitute options over shares in the acquiring company.

     If control is obtained by or from a person who, together with persons
connected or associated with him, holds 50% or more of our shares on the
offering date, the exercise of options/awards will not be allowed except in the
case of the Irish Plan. In these circumstances, exercise will only be permitted
if either that person becomes bound or entitled to exercise rights of
compulsory acquisition under sections 429-430F of the Companies Act or our
shares will cease to be traded on a recognized stock exchange.

     If the change of control forms part of a transaction as a result of which
more than 50% of the shareholders in the acquiring company will be the same as
our shareholders and the participants are offered compensation, whether in the
form of options over shares in the acquiring company or otherwise, which our
board of directors or, as the case may be, remuneration committee considers to
be fair and reasonable, our board of directors or remuneration committee may
decide that options/awards (other than those granted under the Irish Plan)
which are not otherwise exercisable apart from the change of control may not be
exercised.


                                      62
<PAGE>


     Listing

     Application will be made to the Financial Services Authority for admission
to the Official List of new shares issued under the plans and to the London
Stock Exchange for shares to be admitted to trading. New shares issued under
the plans will rank equally in all respects with existing shares except for
rights attaching to shares by reference to a record date prior to the date of
allotment.

     Variation of Capital

     In the event of a variation in our share capital or in such other
circumstances as our board of directors considers appropriate, our board of
directors may adjust options/awards in such manner as it determines to be
appropriate.

     Benefits Non-Pensionable

     Benefits under the plans will not form part of a participant's
remuneration.

     Amendments and Termination

     Our board of directors or, as the case may be, our remuneration committee
may make such amendments to the plans either as are necessary or desirable to
obtain or retain the approval, where applicable, of the relevant tax
authorities or to take account of changes to applicable legislation. Our board
of directors or the remuneration committee may also make such amendments to the
plans and to any option/award as may be necessary or desirable to obtain or
maintain favorable tax, exchange control or regulatory treatment for
participants or for any company in our group of companies.

Except as described above or for amendments designed to ease the administration
of the plans or for amendments to our team member share plan or our bonus plan,
no amendment which is to the advantage of employees or participants may be made
to those provisions dealing with eligibility, individual or plan limits, the
terms of options/awards or the adjustment of options/awards without the prior
approval of our shareholders at a general meeting.


                                      63
<PAGE>


ITEM 7.   MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

                               MAJOR SHAREHOLDERS

     The table below sets forth information regarding the beneficial ownership
of our shares on a fully-diluted basis as of May 31, 2002 (except for lapsed
options which are at March 31, 2002), the most recent practicable date prior to
the date of this annual report. Percentage of beneficial ownership is based on
586,028,737 shares outstanding (including outstanding options granted in
respect of 3,842,235 shares).

     Beneficial ownership is determined in accordance with the rules of the US
Securities and Exchange Commission and includes voting or investment power with
respect to the securities. The number of our shares held in the US amounts to
5% of our total outstanding share capital. There are two holders of record of
our shares in the US. The address for each listed director or officer is c/o
Regus plc, 3000 Hillswood Drive, Chertsey KT16 0RS, England. We believe that
the persons named in the table have sole voting and investment power with
respect to all shares shown as beneficially owned by them. The shareholders
listed below have the same voting rights as our other shareholders.

     Save as disclosed below, as of June 10, 2002 which is the most recent
practicable date prior to the date of this annual report, we are not aware of:

     o    any arrangements that might lead to a change in control of our
          business,

     o    any person who is interested in 3% or more of our capital or

     o    any person other than Maxon Investments BV who can, will or could
          directly or indirectly, jointly or severally, exercise control over
          us.

Name of Beneficial Owner                        Number            Percentage
---------------------------------------     ---------------     --------------
Paramount Nominees Limited (1)               365,329,286            62.3%
HSBC Trustee (Jersey) Limited (2)             23,140,000             3.9%
Mourant and Co. Trustees Limited (3)          18,120,670             3.1%

     (1)  The beneficiary is Maxon Investments BV. Mark Dixon owns 100%
          interest in Maxon.

     (2)  The beneficiary of half of this holding is Rudolf Lobo, and half is
          for Robert Gaudreau.

     (3)  These shares are held by Regus Employee Trust.

     There are no ongoing contractual or other arrangements between any of our
shareholders, including Maxon Investments BV, and us or our management other
than those described under "--Related Party Transactions" and the service
agreement of Mark Dixon described under "Item 6. Directors, Senior Management
and Employees--Board Practices--Directors' Service Agreements" and the loan
agreement pursuant to which Maxon Investments BV has lent Rudolf Lobo $500,000
at a rate of interest on the amount outstanding at the standard variable
mortgage rate of the UK's Nationwide Building Society plus a margin of 0.75%,
such amount being repayable on 6th April, 2004, and none of our shareholders
have any special rights to appoint a member to our board. Maxon Investments BV
has confirmed to us that it will not act in a manner which it knows would
prevent us from carrying on our business independently of Maxon Investments BV.
In addition, provisions in our Articles of Association and the relevant
provisions of the Listing Rules regulate Maxon Investment BV's relationship
with us. By virtue of these factors, our directors believe that we are capable
of carrying on our business independently of Maxon Investments BV and that all
transactions and relationships between us and Maxon Investments BV are, and
will be, at arms' length and on a normal commercial basis.


                                      64
<PAGE>


                           RELATED PARTY TRANSACTIONS

Option Agreements with Executive Officers

     Rudolf Lobo, one of our directors and executive officers, and Robert
Gaudreau, one of our executive officers, each has an interest in 11,570,000 of
our existing shares in respect of which options were granted by Maxon
Investments BV pursuant to an agreement dated September 17, 1999, recording the
terms of an agreement entered into on November 11, 1992 between Mr. Lobo and
Maxon Investments BV and an agreement dated September 17, 1999 recording the
terms of an agreement entered into on November 11, 1992, as supplemented by an
agreement dated September 17, 1999 recording the terms of an agreement entered
into on February 12, 1999, between Mr. Gaudreau and Maxon Investments BV. Each
agreement was amended on June 30, 2000. Each interest represents 1.9% of our
issued share capital on a fully diluted basis as at May 31, 2002. These shares
are currently held by HSBC Trustees (Jersey) Limited and will not be capable of
exercise, in the case of Mr. Lobo's interest, before December 31, 2003 and, in
the case of Mr. Gaudreau's interest, until December 31, 2002, other than in
defined circumstances, which include the discretion of Maxon Investments BV.
The shares subject to the options are transferable to Mr. Lobo or Mr. Gaudreau,
as the case may be, upon payment to Maxon Investments BV of an exercise price
of (pound)45,000 by each of Mr. Gaudreau and Mr. Lobo which is equivalent to
the market value of the relevant shares at the time the parties entered into
the option arrangements.

Option Agreement with UBS

     In connection with a revolving credit facility dated November 12, 1997
between UBS, our former lender, and Regus Business Centers BV, an option
agreement dated November 12, 1997, as amended by supplemental agreements dated
August 3, 1998 and September 20, 2000, was entered into among Maxon Investments
BV, the holder of 62.3% of our shares on a fully-diluted basis as of May 31,
2002 that is controlled by Mark Dixon, our Chief Executive, Mr. Dixon, Regus
Business Centers BV, our Dutch subsidiary, UBS, our former lender and a holder
of options to purchase our shares, and us. Pursuant to the agreement, Maxon
Investments BV granted UBS the right to purchase Regus shares from Maxon
Investments BV against payment by UBS of a strike price of (pound)0.01 per
share. The number of shares under option is determined by reference to a
percentage of our issued share capital at the date of exercise of the option.
The percentage shareholding under option is determined by reference to:

     o    the time lapsed since the date of the UBS option agreement and the
          date of exit. The total value which UBS may acquire under the UBS
          option agreement is capped. This cap is determined by reference to
          the time lapsed since the date of the option agreement and the date
          of exercise; and

     o    our net equity value at the time of exit as defined as our total
          market value on the basis of the initial public offering price. UBS
          may exercise the option on the earliest of:

     o    our shares being listed on any stock exchange; or

     o    Mr. Dixon ceasing to control 51% of our voting rights.

     UBS may, within three months from receipt of a notice that an exit is
planned, exercise the option. If not exercised within that period, the option
is exercised automatically. UBS may sell the shares acquired under the UBS
option agreement at any time and has the right and in the event of a trade
sale, the obligation, to sell such shares simultaneously with Maxon Investments
BV on the same terms and conditions as Maxon Investments BV, but without the
obligation to make any representations or warranties in connection with such
sale.

     If an exit has not occurred within five years, UBS may sell the option to
Maxon Investments BV or Mr. Dixon for cash consideration calculated by
reference to our net equity value at the time. Under the UBS option agreement,
Maxon Investments BV agreed:

     o    to notify UBS in writing if any exit is planned;


                                      65
<PAGE>


     o    not to sell or transfer our shares to third parties save for such
          dispositions which do not exceed 20% of our issued share capital;

     o    not to amend the Articles of Association if such amendment would have
          a material adverse effect on the ability of Maxon Investments BV to
          perform its obligations under the UBS option agreement; and

     o    to notify UBS three weeks prior to any proposed amendments to the
          Articles of Association.

     On September 20, 2000, Maxon Investments BV and UBS entered into a deed of
amendment to the UBS option agreement under which UBS agreed to waive its
rights to receive our shares in the offering in consideration for the payment
by Maxon Investments BV of (pound)8.5 million, less (pound)25,500 of expenses
and commissions, if an initial public offering occurred before November 12,
2000. This obligation was satisfied in full and we no longer have any liability
to UBS under these agreements.

Option Agreements with Affiliates of Deutsche Bank and Apollo

     In connection with the fourth and fifth amendments to the shareholder's
agreement, Maxon Investments BV and Serviced Office Investments Limited and DB
Capital Partners Europe LP, the Deutsche Bank affiliates that collectively owns
0.73% of our shares on a fully-diluted basis as of May 31, 2002, and AP Pelham
Partners XI LLC and AP Regus Investors LLC, the Apollo affiliates that
collectively owns none of our shares on a fully-diluted basis as of May 31,
2002, entered into an option agreement dated November 30, 1999 (as amended by a
deed of amendment dated January 4, 2000) (the deed of option and waiver),
pursuant to which Maxon Investments BV granted the Deutsche Bank and Apollo
affiliates the right to purchase from Maxon Investments BV, against payment of
a (pound)1.00 aggregate strike price, 1,963,242 A ordinary shares, as defined
below under shareholder's agreement, in the case of the Deutsche Bank
affiliates and 1,963,242 A ordinary shares in the case of the Apollo
affiliates. The option could have been exercised by the Deutsche Bank and
Apollo affiliates within 12 months (or such shorter period ending on the date
on which an exit, being either an initial public offering or completion of the
disposal of all or substantially all of our shares or assets, occurs) from the
earlier of:

     o    the date on which our board of directors notified the Deutsche Bank
          and Apollo affiliates in writing that an exit was imminent; and

     o    the date we announcd to the public our intention to proceed with an
          initial public offering.

     By deeds dated August and September 2000, the Deutsche Bank and Apollo
affiliates have agreed to exercise the option immediately before the our
initial public offering.

     Under the deed of option and waiver, the Deutsche Bank and Apollo
affiliates waived their right to sell shares held by them into an initial
public offering ahead of us issuing new shares in that initial public offering
and agreed that the Deutsche Bank and Apollo affiliates have the right to sell
$66,275,000 rather than $132,550,000 of their shareholdings to any private
equity investor making an investment into us before Maxon Investments BV may
sell and we may issue shares to such investor.

     In the deed of option and waiver, Maxon Investments BV also undertook to
use reasonable endeavors to procure that the initial public offering was
structured such that the Deutsche Bank and Apollo affiliates could sell shares
into the initial public offering as part of any over-allotment option, but only
to the extent required to ensure that each Deutsche Bank and Apollo affiliate
received its percentage of $132,550,550, taking into account the percentage of
total issued ordinary shares held by each affiliate, prior to Maxon Investments
BV receiving any proceeds from the sale of shares in such over-allotment
option. In addition, if the offer price was less than $1.34, Maxon Investments
BV agreed to pay to each Deutsche Bank and Apollo affiliate, in respect of each
ordinary share held, the difference between the equivalent in US dollars of the
offer price applicable on the initial public offering and $1.34, less any
capital distributions received by that Deutsche Bank or Apollo affiliate.

     These options Agreements are no longer in effect.


                                      66
<PAGE>


Registration Rights Agreement with Affiliates of Deutsche Bank and Apollo

     We have entered into a registration rights agreement with the affiliates
of Deutsche Bank and Apollo to allow them, subject to certain limitations, to
sell all or part of their remaining shares in an SEC-registered public offering
until the release of our financial results for our third quarter 2002 (on or
about November 6, 2002).

Release of Guarantees of Maxon Investments BV

     By a deed of undertaking dated September 11, 2000 between Maxon
Investments BV, the holder of 365,329,286 of our shares on a fully-diluted
basis as of May 31, 2002 that is controlled by our Chief Executive Mark Dixon,
and us, conditional on the completion of the offering, we will agree to take
steps to release Maxon Investments BV from its obligations under guarantees
given in respect of six leases and one finance lease facility and to indemnify
Maxon Investments BV against any liability in connection with such guarantees.
We negotiated the deed of undertaking with Maxon Investments BV on an arms'
length basis.


ITEM 8.   FINANCIAL INFORMATION

            CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

     Consolidated financial statements are set forth under "Item 18. Financial
Statements."

                               LEGAL PROCEEDINGS

     Regus is not a party to any material legal proceedings. We are involved
from time to time in various legal proceedings incidental to the ordinary
course of our business. We are not and have not been involved in any
significant legal or arbitration proceedings and, as far as our directors are
aware, no such proceedings are pending or threatened by or against us which may
have, or have had within the previous 12 months, a material effect of our
financial position and results of operations.

                              SIGNIFICANT CHANGES

     We have not experienced any significant changes since the date of the
annual financial statements.

ITEM 9.   LISTING DETAILS

     The information in this section has been extracted from publicly available
documents from various sources, including officially prepared materials from
the London Stock Exchange and the Nasdaq National Market and has not been
prepared or independently verified by us. This is the latest available
information to our knowledge.

                            MARKET PRICE INFORMATION

                                     Shares

     Our outstanding shares are listed and traded on the London Stock Exchange.
The shares were first listed on the London Stock Exchange in October 2000. The
prices for shares as quoted in the official list of the London Stock Exchange
are in pounds. The following table shows:

     o    the reported high and low closing prices quoted in pounds for the
          shares on the London Stock Exchange; and


                                      67
<PAGE>


     o    the reported high and low closing prices for the shares, translated
          into US dollars, based on the noon buying rate on the last business
          day of each period presented.

<TABLE>
                                                    Price Per Share          Price per Share
                                                    ---------------          ---------------
                                                      High          Low       High         Low
                                                -----------   ----------  ---------  ----------
Annual prices:
<S>                                            <C>           <C>             <C>         <C>
2000........................................   (pound)3.76   (pound)2.60      $5.62       $3.89
2001........................................   (pound)3.92   (pound)0.12      $5.70       $0.17
Quarterly prices:
2000:
Fourth Quarter (from October 17, 2000)......   (pound)3.76   (pound)2.60      $5.62       $3.89
2001:
First Quarter...............................   (pound)3.92   (pound)2.50      $5.56       $3.55
Second Quarter..............................   (pound)3.14   (pound)1.45      $4.42       $2.04
Third Quarter...............................   (pound)1.62   (pound)0.21      $2.37       $0.31
Fourth Quarter .............................   (pound)0.62   (pound)0.12      $0.90       $0.17
2002:
First Quarter...............................   (pound)0.52   (pound)0.26      $0.73       $0.37
Second Quarter (through June 21, 2002)......   (pound)0.58   (pound)0.30      $0.87       $0.45
Monthly prices:
December 2001...............................   (pound)0.62   (pound)0.43      $0.90       $0.62
January 2002................................   (pound)0.52   (pound)0.35      $0.70       $0.49
February 2002...............................   (pound)0.38   (pound)0.26      $0.53       $0.36
March 2002..................................   (pound)0.49   (pound)0.26      $0.70       $0.37
April 2002..................................   (pound)0.58   (pound)0.47      $0.84       $0.69
May 2002....................................   (pound)0.49   (pound)0.41      $0.72       $0.60
June 2002 (through June 21, 2002)...........   (pound)0.41   (pound)0.30      $0.61       $0.45
</TABLE>

     On May 31, 2002, the closing price of shares on the London Stock Exchange
was (pound)0.41 equivalent to $0.60 per share translated at the noon buying
rate of (pound)0.6838 per $1.00 on May 31, 2002.

ADSs

     Our ADSs, each representing five shares, were originally issued in October
2000 in a public offering and are listed and traded on the Nasdaq National
Market.

     The following table sets forth, for the periods indicated, the reported
high and low closing prices on the Nasdaq National Market for the outstanding
ADSs.

                                                      Price per ADS
                                                      -------------
                                                High                      Low
                                            ---------               ----------
Annual prices:
2000........................................  $28.25                   $19.94
2001........................................  $28.13                    $1.10
Quarterly prices:
2000:
Fourth Quarter (from October 17, 2000)......  $28.25                   $19.94
2001:
First Quarter...............................  $28.13                   $19.94
Second Quarter..............................  $21.75                    $9.95
Third Quarter...............................  $10.75                    $1.80
Fourth Quarter..............................   $4.35                    $1.10


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<PAGE>


                                                      Price per ADS
                                                      -------------
                                                High                      Low
                                            ---------               ----------
2002:
First Quarter...............................   $3.50                    $1.65
Second Quarter (through June 21, 2002)......   $3.93                    $2.10
Monthly prices:
December 2001...............................   $4.35                    $3.40
January 2002................................   $3.50                    $2.50
February 2002...............................   $2.80                    $1.65
March 2002..................................   $3.25                    $1.82
April 2002..................................   $3.93                    $3.15
May 2002....................................   $3.50                    $2.81
June 2002 (through June 21, 2002)...........   $2.95                    $2.10

                                    MARKETS

     The ordinary shares have been approved for listing on the London Stock
Exchange under the symbol "RGU" and the ADSs have been approved for listing on
the Nasdaq National Market under the symbol "REGS".

ITEM 10.   ADDITIONAL INFORMATION

                     MEMORANDUM AND ARTICLES OF ASSOCIATION

     We incorporate by reference the information disclosed under "Description
of Share Capital" in our Registration Statement on Form F-1 (File No.
333-12504).

                               MATERIAL CONTRACTS

     None.

                                    TAXATION

     The following is a discussion of the material UK and US federal income tax
consequences of the acquisition, ownership and disposition of shares and ADSs
by US Holders (as defined below). It is based, in part on the US/UK income tax
treaty currently in force. On July 24, 2001, the US and UK signed a new income
tax treaty (the "New Treaty") which, when it becomes effective upon
ratification, might alter the rules described in this discussion.

UK Tax Considerations

     This discussion describes the material UK taxation ownership and
disposition of shares and ADSs by US holders (as defined below). Although it is
not entirely free from doubt, in practice, holders of ADSs should be treated as
holding the beneficial interest in shares represented by the relevant ADSs for
the purposes of UK tax and for the purpose of the US/UK income tax treaty with
respect to income and gains (the "Treaty"). The discussion is intended as a
general guide only and is based on current UK legislation and Inland Revenue
practice as at the date of this document. These comments do not deal with the
position of classes of shareholders subject to special rules, such as dealers
in securities.

     For the purposes of this summary, an "Eligible US Shareholder" means a US
holder (as defined in "--United States Federal Income Tax Considerations") that
is a beneficial owner of a cash dividend and:

     o    is an individual or a corporation resident in the US for the purposes
          of the Treaty and, in the case of a corporation, is not also resident
          in the UK for UK tax purposes;


                                      69
<PAGE>


     o    is not a corporation which, alone or together with one or more
          associated corporations, controls, directly or indirectly, 10% or
          more of our voting stock;

     o    holds shares or ADSs or shares in a manner which is not effectively
          connected with a permanent establishment in the UK through which that
          US Holder carries on business or with a fixed base in the UK from
          which that US Holder performs independent personal services; and

     o    is not otherwise ineligible for benefits under the Treaty in
          connection with the ADSs or shares.

United Kingdom Taxation of Dividends

     Under current UK legislation, we are not required to withhold any amounts
in respect of tax from our dividend payments.

     Eligible US Shareholders

     An Eligible US Shareholder is entitled, in principle, to receive a payment
from the UK Inland Revenue in respect of a dividend from us in an amount equal
to the tax credit (the "Tax Credit Amount") to which a UK resident individual
is generally entitled in respect of the dividend generally equal to one-ninth
of the dividend received. However, that entitlement is subject to a deduction
of tax withheld under the Treaty (the "UK Withholding Tax"). In this case, the
amount of such deduction will equal the Tax Credit Amount, i.e., one-ninth of
the dividend; therefore, an Eligible US Shareholder will not be able to claim
any payment from the UK Inland Revenue in respect of a dividend from us.

     US Holders should be aware, however, that under the New Treaty, US Holders
(including Eligible US Shareholders) will not be entitled to any payment with
respect to the Tax Credit Amount.

United Kingdom Taxation on Chargeable Gains

     Shareholders who are neither resident nor ordinarily resident for tax
purposes in the UK and Eligible US Shareholders will not be liable to UK tax on
chargeable gains realized on the disposal of their shares or ADSs (as the case
may be) unless the shareholder or Eligible US Shareholder carries on a trade,
profession or vocation in the UK through a branch or agency and has used, held
or acquired the shares or ADSs (as the case may be) for the purposes of such
trade, profession or vocation or such branch or agency.

Stamp Duty and Stamp Duty Reserve Tax

     Subject to some exceptions, a conveyance or transfer on sale of shares
other than to a depositary or clearance service or its nominee or agent may
attract ad valorem UK stamp duty on the instrument of transfer at the rate of
0.5% of the amount or value of the consideration for the transfer, rounded up
if necessary to the nearest multiple of (pound)5. An unconditional agreement to
transfer shares other than to a depositary or clearance service or its nominee
or agent will generally give rise to stamp duty reserve tax at the rate of 0.5%
of the amount or value of the consideration for the transfer. However, if
within six years of the date of the agreement, or, if the agreement was
conditional, the date the agreement became unconditional, an instrument of
transfer is executed pursuant to the agreement and stamp duty is paid on that
instrument, then the charge to stamp duty reserve tax will be cancelled or,
where the stamp duty reserve tax charge has been paid, the stamp duty reserve
tax will, provided that a claim for repayment is made, be repaid.

     A charge to stamp duty or stamp duty reserve tax may arise on the issue or
transfer of shares to an issuer of depositary receipts, to its nominee or agent
or to particular persons providing a clearance service, their nominees or their
agents. The rate of stamp duty or stamp duty reserve tax will generally be 1.5%
of either (a) in the case of an issue of shares, the issue price of the shares
concerned, or (b) in the case of a transfer of shares, the value of the
consideration or, in some circumstances, the value of the shares concerned. In
the case of stamp duty, the amount will be rounded up if necessary to the
nearest multiple of (pound)5.


                                      70
<PAGE>


     No stamp duty reserve tax will be payable on an agreement to transfer an
ADR and provided that the ADR (and any instrument or written agreement of
transfer) is executed and retained at all times outside the UK it should not in
practice be necessary to pay stamp duty in respect of such transfer. On a
transfer of shares from the custodian of a depositary to a holder of an ADS
upon cancellation of the ADS where there is no transfer of beneficial
ownership, a fixed stamp duty of (pound)5 per instrument of transfer will be
payable by such holder.

     Paperless transfers of shares within CREST are generally liable to stamp
duty reserve tax, rather than stamp duty. CREST is obliged to collect stamp
duty reserve tax on relevant transactions settled within the system. Deposits
of shares into CREST generally will not be subject to stamp duty or, unless the
transfer into CREST itself is for consideration, to stamp duty reserve tax.

     Stamp duty reserve tax is generally the liability of the purchaser and
stamp duty is normally paid by the purchaser.

     Special rules apply to market intermediaries and to some sale and
repurchase and stock borrowing arrangements.

     Agreements to transfer shares to charities will not give rise to stamp
duty or stamp duty reserve tax.

     If you are in any doubt as to your tax position or if you require more
detailed information than that outlined above you should consult an appropriate
professional adviser immediately.

United States Federal Income Tax Considerations

     This discussion describes the material US federal income tax consequences
of the acquisition, ownership and disposition of shares and ADSs. This
discussion of US federal income tax consequences applies to you only if you are
a US holder. For purposes of this discussion, you are a "US holder" if you are
a beneficial owner of shares or ADSs and you are, for US federal income tax
purposes:

     o    an individual citizen or resident of the US;

     o    a corporation, or an entity treated as a corporation, organized under
          the laws of the US or any state thereof or the District of Columbia;
          or

     o    otherwise subject to US federal income tax on a net income basis in
          respect of the shares or ADSs.

This discussion applies only to holders who will hold shares or ADSs as capital
assets. This discussion is based:

     o    upon current US law, US Internal Revenue Service practice, US
          judicial decisions, administrative pronouncements and US Treasury
          Regulations, changes to any of which after the date hereof could
          apply on a retroactive basis and affect the tax consequences
          described herein; and

     o    in part upon representations of the Depositary and assumes that each
          obligation provided for in or otherwise contemplated by the Deposit
          Agreement and any related agreement will be performed in accordance
          with its respective terms.

     The US Treasury has expressed concerns that parties to whom depositary
receipts such as the ADSs are released may be taking actions that are
inconsistent with the claiming of foreign tax credits by United States holders.
Accordingly, the analysis of the creditability of UK Withholding Tax described
below could be affected by future actions that may be taken by the US Treasury.

     Please note that the US and the UK have signed the New Treaty, although it
is still not effective. The following discussion does not address all of the
tax consequences that may be relevant to you in light of your particular
situation. For example, this discussion does not address the treatment of
insurance companies, regulated investment


                                      71
<PAGE>


companies, tax-exempt organizations, financial institutions, holders subject to
the alternative minimum tax, securities broker-dealers, persons holding through
foreign partnerships or other pass-through entities, holders who hold shares or
ADSs as part of hedging or conversion transactions or holders who own directly,
indirectly or by attribution 10% or more of the voting power of Regus and
holders whose functional currency for US tax purposes is not the US dollar.

     You should consult your own tax advisers as to the particular tax
consequences to you under US federal, state and local and other laws, of the
acquisition, ownership and disposition of shares or ADSs. Holders of ADSs will
be treated as owners of the underlying shares attributable thereto.

Taxation of Sales or other Dispositions

     If you sell or otherwise dispose of your shares or ADSs, you will
recognize capital gain or loss for US federal income tax purposes in the same
manner as on the sale or disposition of any other shares held by you as capital
assets. As a result, you will generally recognize capital gain or loss for US
federal income tax purposes equal to the difference between the amount realized
and your adjusted basis in the shares or ADSs. This capital gain or loss will
be long-term capital gain on loss if your holding period in the shares or ADSs
exceeds one year. Any gain or loss will generally be US source.

US Taxation of Dividends

     The gross amount of any distributions (including the UK Withholding Tax if
you elect to claim a foreign tax credit), other than some pro rata
distributions of ordinary shares or rights to acquire ordinary shares, in
respect of ordinary shares or ADSs to US holders will constitute foreign source
dividend income for US federal income tax purposes to the extent such
distributions are made from the current or accumulated earnings and profits of
Regus plc, as determined in accordance with US federal income tax principles.
Such dividends will not be eligible for the dividends received deduction
otherwise allowed to corporations. The amount of any cash distribution paid in
pounds sterling will be equal to the US dollar value of the pounds sterling on
the date of receipt by the Depositary or by you if you hold ordinary shares, as
applicable, regardless of whether the payment is in fact converted into US
dollars. Gain or loss, if any, recognized on the sale or other disposition of
pounds sterling will be US source ordinary income or loss. The amount of any
distribution of property other than cash will be the fair market value of such
property on the date of distribution.

     Subject to certain restrictions and limitations, if you comply with the
applicable filing requirements you may elect to claim a foreign tax credit for
UK Withholding Tax. If you elect to claim the foreign tax credit, the UK
Withholding Tax will constitute foreign source dividend income for US federal
income tax purposes to the extent made from current or accumulated earnings and
profits of Regus plc. The limitation of foreign taxes eligible for credit is
calculated separately with respect to specific classes of income. For this
purpose, any dividends paid by Regus plc on the shares or ADSs will generally
constitute "passive income" or, in the case of US financial service providers,
may be "financial services income".

     US Holders should be aware that under the New Treaty, US Holders will not
eligible for any payment with respect to the Tax Credit Amount and thus will
not be eligible to claim any foreign tax credit with respect to the UK
Withholding Tax.

     We believe that we will not be considered a "passive foreign investment
company" for US federal income tax purposes. However, since our status as a
passive foreign investment company depends on the composition of our income and
assets and the market value of our assets from time to time, there can be no
assurance that we will not be considered a possible foreign investment company
in any taxable year. If we were treated as a passive foreign investment company
in any taxable year during which you held shares or ADSs you may be subject to
certain adverse consequences, including the imposition of tax at higher rates
than would otherwise apply to income derived from the shares or ADSs as well as
additional tax form filing requirements.


                                      72
<PAGE>


                              DOCUMENTS ON DISPLAY

     The documents concerning us which are referred to herein may be inspected
at the Securities and Exchange Commission. You may read and copy any document
filed or furnished by us at the SEC's public reference rooms in Washington
D.C., New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for
further information on the reference rooms.




















                                      73
<PAGE>


     ITEM 11.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Our treasury policy seeks to ensure that adequate financial resources are
available for the development and growth of its operations while managing its
currency, interest rate and counter-party risks. Our treasury strategy and
policy is developed centrally with subsidiary companies operating within a
framework of controls approved by the Board. We do not engage in speculative
transactions. Our policy on the major areas of treasury activity is set out
below.

      Currency translation risk

      The results of our foreign subsidiaries are translated into Sterling at
the average exchange rates for the period concerned. The balance sheets of
foreign subsidiaries are translated into Sterling at the closing exchange
rates. Any gains and losses resulting from the translation are recorded in
reserves where they are matched with the gains and losses on borrowings,
foreign exchange contracts, currency swaps or currency options, used to hedge
the net assets of subsidiaries. Our treasury makes proposals to a committee of
the Board each quarter on hedging its foreign assets in this way. Quantitative
information on fair value of instruments is given in note 21 in the accounts in
this annual report.

      Currency transaction exposure risk

      Currency transaction exposure arises where sales and purchases are
transacted by a business unit in a currency other than its own functional
currency. The majority of the Group's businesses, however, sell to clients and
pay suppliers in their local markets in their own functional currencies and
therefore have limited transaction exposure. Where this is not the case, it is
our policy to cover material transactions as soon as they are committed and to
use forward and/or option currency contracts to do so. Quantitative information
on currency exposure is given in note 21 in the accounts in this annual report.

      Funding and deposits

      Outstanding borrowings comprise office equipment financed through finance
and operating leases and specific loans from certain property owners advanced
on commercial terms. Wherever possible borrowings are matched to the local
currency of the borrower or, in the case of lease finance, to the life of the
asset financed. Surplus funds are deposited in investment grade instruments
that carry low credit risk and which are readily realisable in major
currencies.

      Counter-party risk

      We actively manage our relationships with a panel of high-quality
financial institutions. Cash assets, borrowings and other financial instruments
are distributed against predetermined limits approved by the Board to control
exposure to any particular institution.

     Interest rate risk

     While our current policy is normally to borrow or invest surplus funds on
a floating rate basis, we issued a (pound)40 million convertible bond in
December 2001 with a fixed rate coupon. Group Treasury is, however, currently
undertaking a review of policy in light of our continued holding of surplus
cash. This review will consider the appropriateness of fixing interest rates
using forward rate or interest rate swap agreements. Quantitative information
for interest rate risk is given in note 21 in the accounts of this report.


                                      74
<PAGE>


ITEM 12.    DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

     Not applicable.

     PART II

ITEM 13.    DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

     Not applicable.

ITEM 14.   MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
           PROCEEDS

     Not  applicable.

ITEM 18.   FINANCIAL STATEMENTS

     Independent Auditors' Report

     To the Shareholders and the Board of Directors of REGUS PLC.

     We have audited the accompanying consolidated balance sheets of REGUS PLC
and its subsidiaries (together, the Group), as of 31 December 2001 and 2000 and
the related consolidated profit and loss account, statements of cash flows and
total recognized gains and losses and reconciliation of movements in group
shareholders' funds/(deficit) for each of the years in the three-year period
ended 31 December 2001. These consolidated financial statements are the
responsibility of the Group's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

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

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the Group
as of 31 December 2001 and 2000 and the results of their operations and their
cash flows for each of the years in the three-year period ended 31 December
2001 in conformity with generally accepted accounting principles in the United
Kingdom.

     Accounting principles generally accepted in the United Kingdom vary in
certain significant respects from accounting principles generally accepted in
the United States of America. Application of accounting principles generally
accepted in the United States of America would have affected results of
operations for each of the years in the three-year period ended 31 December
2001 and shareholders' funds as of 31 December 2001 and 2000, to the extent
summarized in Note 28 to the consolidated financial statements.


By:  /s/ KPMG Audit plc.........................................................
London England


March 8, 2002


                                      75
<PAGE>


Regus plc
Consolidated Profit & Loss Account

<TABLE>
                                                                         12 months to       12 months to        12 months to
                                                                          31 Dec 2001        31 Dec 2000         31 Dec 1999
                                                              Note       (pound) '000       (pound) '000        (pound) '000
<S>                                                            <C>           <C>                <C>                 <C>
Turnover (including share of joint ventures)                   1             524,622            429,200             200,610
Less: Share of turnover of joint ventures                      1             (11,989)            (8,075)                 (9)
                                                                    ----------------    ---------------     ---------------
Turnover                                                                     512,633            421,125             200,601
                                                                    ----------------    ---------------     ---------------
Cost of sales (center costs) before exceptional items                       (434,787)          (320,832)           (183,487)
Exceptional items                                              3             (37,955)                 -                   -
                                                                    ----------------    ---------------     ---------------
Cost of sales (centre costs) after exceptional items                        (472,742)          (320,832)           (183,487)
                                                                    ----------------    ---------------     ---------------
Gross profit (centre contribution)                             1              39,891            100,293              17,114
                                                                    ----------------    ---------------     ---------------
Administration expenses before exceptional items                             (91,255)           (86,859)            (60,054)
Exceptional items                                              3             (52,591)            (9,501)             (5,125)
                                                                    ----------------    ---------------     ---------------
Administration expenses after exceptional items                             (143,846)           (96,360)            (65,179)
                                                                    ----------------    ---------------     ---------------
Group operating (loss)/profit                                               (103,955)             3,933             (48,065)
Share of operating loss in joint ventures                      1              (5,572)            (1,027)                (92)
                                                                    ----------------    ---------------     ---------------
Total operating (loss)/profit: Group and share of joint
ventures                                                                    (109,527)             2,906             (48,157)
Net interest payable and other similar charges                 6                (554)            (6,763)             (6,782)
                                                                    ----------------    ---------------     ---------------
Loss on ordinary activities before tax                         2            (110,081)            (3,857)            (54,939)
Tax on loss on ordinary activities                             7             (10,090)            (9,926)             (1,524)
                                                                    ----------------    ---------------     ---------------
Loss on ordinary activities after tax                                       (120,171)           (13,783)            (56,463)

Equity minority interests                                                      1,933                253                  17
                                                                    ----------------    ---------------     ---------------
Retained loss for the financial year                          19            (118,238)           (13,530)            (56,446)
                                                                    ================    ===============     ===============
Loss per ordinary share:                                       8                               Restated
Basic and diluted (p)                                                          (21.0)              (2.7)              (12.0)

Basic and diluted before exceptional items (p)                                  (5.2)              (1.1)              (11.3)


                                 See accompanying notes to consolidated financial statements.
                                        All results arose from continuing operations.
</TABLE>

                                                            76
<PAGE>


Regus plc
Balance Sheets

<TABLE>
                                                                               31 Dec 2001         31 Dec 2000
                                                                 Note          (pound)'000        (pound) `000
<S>                                                               <C>             <C>                 <C>
Fixed assets
Intangible assets                                                  9                4,307                   -
Tangible assets                                                   10              242,299             193,453
Investments
Investments in subsidiaries                                       11                    -                   -
Investment in own shares                                          11                3,805              47,021
Other investments                                                 11                   33                   -
Interest in joint ventures:                                       11
                                                                        -----------------   -----------------
                    Share of gross assets                                          15,656              13,601
                    Share of gross liabilities                                    (14,562)             (9,461)
                                                                        -----------------   -----------------
                                                                                    1,094               4,140
                                                                        -----------------   -----------------
Total investments                                                                   4,932              51,161
                                                                        -----------------   -----------------
                                                                                  251,538             244,614
                                                                        -----------------   -----------------
Current assets
Stocks                                                                                392                 279
Debtors: amounts falling due within one year                      12              114,288             129,677
Debtors: amounts falling due after more than one year             12                3,000                   -
Cash at bank and in hand                                                          117,074             169,821
                                                                        -----------------   -----------------
                                                                                  234,754             299,777
Creditors: amounts falling due within one year                    13             (344,392)           (317,883)
                                                                        -----------------   -----------------
Provisions for liabilities and charges due within one year        16              (19,953)                   -
                                                                        -----------------   -----------------
Net current liabilities                                                          (129,591)            (18,106)
Total assets less current liabilities                                             121,947             226,508
                                                                        -----------------   -----------------
Creditors: amounts falling due after more than one year           14              (24,806)            (23,050)
Provisions for liabilities and charges due after more
   than one year                                                  16               (8,349)               (794)
                                                                        -----------------   -----------------
Net assets                                                                         88,792             202,664
                                                                        =================   =================
Capital and reserves
Called-up share capital                                           17               29,106              29,034
Share premium account                                             18              279,765             279,858
Other reserves                                                    19                4,056                 615
Profit and loss account                                           19             (224,482)           (106,417)
                                                                        -----------------   -----------------
Equity shareholders' funds                                                         88,445             203,090

Equity minority interests                                                             347                (426)
                                                                        -----------------   -----------------
                                                                                   88,792             202,664
                                                                        =================   =================
</TABLE>

          See accompanying notes to consolidated financial statements

                                                             77
<PAGE>



<TABLE>

Regus plc
Consolidated cash flow statements
                                                                             12 months to        12 months to     12 months to
                                                                              31 Dec 2001         31 Dec 2000      31 Dec 1999
                                                                    Note      (pound)'000        (pound) '000     (pound) '000
<S>                                                                                <C>                <C>               <C>
Cash inflow from continuing operating activities
Net cash inflow before exceptional items                                           56,140             117,899           17,731
Outflow related to exceptional items                               20(a)          (12,144)                  -           (3,370)
                                                                             ------------        ------------     ------------
Net cash inflow from continuing operating activities               20(a)           43,996             117,899           14,361
                                                                             ------------        ------------     ------------
Returns on investments and servicing of finance
Interest received                                                                   3,906               3,851            1,287
Interest paid                                                                        (252)             (7,993)          (3,575)
Interest paid on finance leases                                                    (3,351)             (2,861)          (2,943)
Debt arrangement fees paid                                                              -                   -          (1,500)
                                                                             ------------        ------------     ------------
                                                                                      303              (7,003)          (6,731)
                                                                             ------------        ------------     ------------
Taxation
Tax paid                                                                           (6,275)             (2,224)            (969)
                                                                             ------------        ------------     ------------
                                                                                   (6,275)             (2,224)            (969)
                                                                             ------------        ------------     ------------
Capital expenditure and financial investment
Purchase of tangible fixed assets                                                (105,633)            (88,078)         (76,024)
Sale of tangible fixed assets                                                       3,052               1,506              311
Purchase of own shares                                                                  -             (42,500)                -
Purchase of investments                                                               (26)
                                                                             ------------        ------------     ------------
                                                                                 (102,607)           (129,072)         (75,713)
                                                                             ------------        ------------     ------------
Acquisitions and disposals
Purchase of subsidiary undertakings                                                (5,712)                  -                -
Investment in joint ventures                                                       (5,631)             (3,789)          (1,296)
                                                                             ------------        ------------     ------------
                                                                                  (11,343)             (3,789)          (1,296)
                                                                             ------------        ------------     ------------

Cash outflow before management of liquid resources and financing                  (75,926)            (24,189)         (70,348)

Management of liquid resources                                     20(b)           45,643            (78,712)         (16,519)

Financing                                                          20(b)           22,714             118,766           96,979

                                                                             ------------        ------------     ------------
(Decrease)/increase in cash in the year                            20(c)&(d)       (7,569)             15,865           10,112
                                                                             ============        ============     ============


                                 See accompanying notes to consolidated financial statements
</TABLE>


                                                               79
<PAGE>


Regus plc
Consolidated statements of total recognized gains and losses

<TABLE>
                                                                             12 months to        12 months to     12 months to
                                                                              31 Dec 2001         31 Dec 2000      31 Dec 1999
                                                                              (pound)'000         (pound)'000      (pound)'000
<S>                                                                           <C>                  <C>              <C>
Loss for the financial year                                                      (118,238)            (13,530)         (56,446)

Exchange differences                                                                  197               2,675           (1,160)

Tax charge on exchange differences                                                      -               (872)                -
                                                                             ------------        ------------     ------------
Total recognised losses for the year                                             (118,041)            (11,727)         (57,606)
                                                                             ============        ============     ============


Reconciliation of movements in Group shareholders' funds/(deficit)
<CAPTION>

                                                                             12 months to        12 months to     12 months to
                                                                              31 Dec 2001         31 Dec 2000      31 Dec 1999
                                                                              (pound)'000         (pound)'000      (pound)'000

<S>                                                                           <C>                  <C>              <C>
Loss for the financial year                                                      (118,238)            (13,530)         (56,446)

Net proceeds of ordinary shares issued                                              3,396             238,548           20,000

Exchange differences                                                                  197               2,675          (1,160)

Tax charge on exchange differences                                                      -               (872)                -
                                                                             ------------        ------------     ------------
Net (decrease)/increase in shareholders' funds                                   (114,645)            226,821          (37,606)

Shareholders' funds/(deficit) at 1 January                                        203,090             (23,731)          13,875
                                                                             ------------        ------------     ------------
Shareholders' funds/(deficit) at 31 December                                       88,445             203,090         (23,731)
                                                                             ============        ============     ============


                                  See accompanying notes to consolidated financial statements
</TABLE>


                                                               80
<PAGE>


Regus plc

Accounting Policies

1.   Description of business

Regus plc (the "Company"), formerly Regus Business Centres plc, and its
consolidated subsidiaries (the "Group") are engaged in the provision of fully
serviced business centres offering clients a mix of workstations, conference
rooms and related support services. The Group operates an international network
of business centres and is divided into four geographic regions, UK & Ireland,
Rest of Europe, Americas and Rest of World. Maxon Investments BV ("Maxon") is
the ultimate parent company and M L J Dixon, the Chief Executive of the
Company, has an effective controlling interest in the equity shares of the
Company via Maxon.

2.   Basis of preparation

The consolidated financial statements have been prepared in conformity with
accounting principles generally accepted in the United Kingdom ("UK GAAP"),
under the historical cost convention. These principles differ in certain
significant respects from generally accepted accounting principles in the
United States ("US GAAP"). Application of US GAAP would have affected
shareholders' funds and results of operations at and for the years ended 31
December 2000 and 2001, to the extent summarised in note 28.

The preparation of financial statements in conformity with UK GAAP and US GAAP
requires management to make estimates and assumptions that reflect the reported
amounts of assets and liabilities and disclosure of contingent liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses for an accounting period. Such estimates and assumptions could change
in the future as more information becomes known or circumstances change, such
that the Group's results may differ from the amounts reported and disclosed in
the financial statements. The following principal accounting policies have been
applied consistently in dealing with items which are considered material in
relation to the Group's financial statements.

3.   Basis of consolidation

The consolidated financial statements include the accounts of the company and
all its subsidiary undertakings, which have all been prepared to 31 December
2001. Where subsidiary undertakings are acquired or disposed of during the
year, the consolidated profit and loss account includes only the results for
the part of the year during which they are subsidiary undertakings.

4.   Transactions in foreign currencies

Assets and liabilities of foreign subsidiaries and related hedging instruments
are translated into sterling at the closing exchange rate prevailing at the
balance sheet date. Results of overseas undertakings are translated into
sterling at the average rates of exchange for the relevant period. Differences
arising from the re-translation of the results of overseas undertakings are
dealt with through reserves.

Transactions in foreign currency are recorded using the rate of exchange at the
date of the transaction. Monetary assets and liabilities denominated in foreign
currencies are translated using the rate of exchange prevailing at the balance
sheet date and the gains or losses on translation are included in the profit
and loss account.

5.   Goodwill

Goodwill arising on consolidation, representing the difference between the
purchase price and the fair value of the net assets of the subsidiary
undertaking at the date of acquisition, is capitalized as an intangible fixed
asset and charged to the profit and loss account in equal instalments over its
useful economic life.


                                       81
<PAGE>


6.   Joint Ventures

A joint venture is a company in which the Group has an investment for the
longer term and shares control under a contractual arrangement. The appropriate
share of results of joint venture, as disclosed in their financial statements
but after adjustment to conform with the Group's accounting policies, is
included in the consolidated profit and loss account.

7.   Tangible fixed assets and depreciation

Depreciation is provided on a straight line basis at rates calculated to write
off the cost of fixed assets to their estimated residual value over their
estimated useful lives at the following rates:

Furniture                          - 5 years
Fixtures and fittings              - shorter of the lease term, the first break
                                     point of the building
lease or 10 years
Telephones and office equipment     - 5 years
Computer hardware                   - 3 years
Computer software                   - 2 years
Cars                                - 4 years

8.   Fixed asset investments

Fixed asset investments are generally accounted for at cost less provision for
impairment.

9.   Stocks

Stocks are stated at the lower of cost and net realisable value. Stocks relate
to items purchased for resale to customers and to items intended for
distribution within the business such as office supplies and marketing
materials.

10.  Deferred taxation

Provision under the liability method is made for deferred taxation at the
current rate of corporation tax on all timing differences, to the extent that
they are expected to crystallise.

11.  Refurbishment

The terms of most building leases require Regus to make good dilapidation or
other damage occurring during the rental period. Accruals for dilapidations are
only made when it is known that a dilapidation has occurred. However, due to
the nature of the business, centres are maintained to a high standard.

12.  Turnover

Turnover represents the value of services provided to third parties in the year
and is exclusive of VAT and similar taxes.

13.  Cost of sales

Cost of sales consists of costs from the individual business centres, including
property lease costs, employee costs and start-up costs.

14.  Pensions

The Group operates defined contribution schemes. Contributions are charged to
the profit and loss account on an accruals basis.


                                       82
<PAGE>


15.  Leases

     a) Finance leases

Where the Group enters into a lease for furniture, fittings, equipment or cars
which entails taking substantially all the risks and rewards of ownership of an
asset, the lease is treated as a finance lease. This also includes occasions
where the Group takes interest bearing extended credit from suppliers and
certain loans from landlords.

Under all such lease arrangements the asset is recorded in the balance sheet as
a tangible asset and is depreciated over its estimated useful life in
accordance with the policy described above. Future instalments under such
leases, net of finance charges, are included in creditors.

Lease payments are apportioned between the finance element, which is charged to
the profit and loss account on a sum of the digits basis or a post-tax
actuarial basis, and the capital element, which reduces the outstanding
obligation for future instalments.

     b) Building leases

Building leases are all accounted for as operating leases because substantially
all the risks and rewards of ownership remain with the lessor.

The rental on certain leases is wholly or partly conditional on the
profitability of the centre and therefore the risk to the business, in terms of
rent, is reduced. Once all outstanding rent has been paid, landlords receive a
share of the profits of the centre.

For leases which are wholly or partly conditional on the profitability of the
centre, an estimate is made of the likely rent payable based on profitability
in respect of the period up to the date of the first market rent review or
first break point in the lease, whichever is sooner, and this is spread on a
straight line basis over that period. Any subsequent changes in estimates are
spread over the remaining period to the date of the first market rent review or
first break point in the lease, whichever is sooner. Amounts payable in respect
of profit shares are accrued once a sufficient net surplus has been made which
would result in a profit share being paid.

Any incentives or rent free periods on conventional leases and the conventional
element of leases, which are partly conventional and partly conditional on
profitability are spread on a straight line basis over the period to the date
of the first market rent review or first break point in the lease, whichever is
sooner, so that the amounts charged to the profit and loss account are the same
each year over that period.

16.  Financial instruments

The Group uses various derivative financial instruments to hedge its exposures
to fluctuations in foreign exchange risks. These include forward currency
contracts and currency options.

The accounting method used for derivative financial instruments is determined
by whether or not the instrument is designated as a hedge of an existing
exposure and, if so by the accounting method used for the item being hedged.

The Group considers its derivative financial instruments to be hedges when
certain criteria are met.

17.  Forward currency contracts

The Group's criteria to qualify for hedge accounting are:

     o    The instrument must be related to a foreign currency asset or
          liability;

     o    It must involve the same currency as the hedged item;

     o    It must reduce the risk of foreign currency exchange movements on the
          Group's operations.


                                      83
<PAGE>


The group has established policies and procedures for risk assessment and the
approval, reporting and monitoring of derivative financial instruments. The
group does not enter into financial instruments for trading or speculative
purposes.

Forward currency contracts are marked to market at the period end, with the
resulting exchange gains or losses taken to administration expenses in the
profit and loss account, except where the hedged item's exchange difference is
reflected in reserves (such as quasi equity loans). In this situation the gain
or loss is taken to reserves. The gains or losses on the forward contracts are
recognised when the gains or losses on the underlying hedged transactions are
recognised. The net resulting unrealised asset or liability is reflected in
debtors or creditors as appropriate.

Premiums or discounts on derivative financial instruments that hedge an
existing exposure are charged or credited to interest income or cost over the
life of the instrument. The related asset or liability is classified as an
accrual or prepayment.

Derivative financial instruments that are not designated as hedges are marked
to market using period end market rates and gains or losses are taken to the
profit and loss account.

Gains or losses arising on hedging instruments which are cancelled due to the
termination of the underlying exposure are taken to administration expenses
immediately.

18.  Currency options

Under hedge accounting for currency options, the Group defers the instruments
impact on profit until it fully recognises the underlying hedged item in the
profit and loss account.

Option costs are charged to the interest cost over the life of the option
contract. The related asset is classified as prepayments.

At maturity, any realised gain on the option is recognised in the profit and
loss account in administration expenses.


Regus plc

Notes to the financial statements for the year ended 31 December 2001

1    Segmental reporting

The following tables set out the Group's segmental analysis by geographic
region and by established and new centres. Established centres are those that
have been open for a period of at least 18 months as at the end of the relevant
period and new centres are those that have been open for less than 18 months as
at the end of the relevant period. The numbers reported include exceptional
costs.

<TABLE>
                                          Turnover                     Gross profit/(loss) (center contribution)
                        12 months to   12 months to    12 months to    12 months to   12 months to    12 months to
                         31 Dec 2001    31 Dec 2000     31 Dec 1999     31 Dec 2001    31 Dec 2000     31 Dec 1999
                         (pound)'000    (pound)'000     (pound)'000     (pound)'000    (pound)'000     (pound)'000
   Geographical analysis
<S>                          <C>            <C>             <C>              <C>           <C>             <C>
   United Kingdom &          215,188        188,862         102,856          56,916        59,619          20,169
   Ireland
   Rest of Europe            151,879        118,933          73,739           9,132        29,214          10,830
   Americas                  124,096         94,296          15,646        (28,752)        13,850          (6,012)
   Rest of World              33,459         27,109           8,369           2,595        (2,390)         (7,873)
                        ------------   ------------    ------------    ------------   -----------     -----------
                             524,622        429,200         200,610          39,891       100,293          17,114
                        ============   ============    ============    ============   ===========     ===========


                                                                  84
<PAGE>

<CAPTION>

<S>                          <C>            <C>             <C>              <C>           <C>             <C>
   Total Group               512,633        421,125         200,601
   Total joint ventures       11,989          8,075               9
                        ============   ============   =============

   Established               410,829        293,555         134,016          90,859        92,329        41,673
   centers
   New centers               101,829        127,570          66,585        (50,968)         7,964      (24,559)
                        ------------   ------------    ------------    ------------   -----------     -----------
   Total                     512,633        421,125         200,601          39,891       100,293        17,114
                        ============   ============    ============    ============   ===========     ===========


                                  Operating profit/(loss)                                Net
                                                                       assets/(liabilities)
                         31 Dec 2001     31Dec 2000     31 Dec 1999     31 Dec 2001    31 Dec 2000   31 Dec 1999
                         (pound)'000   (pound) '000    (pound) '000     (pound)'000   (pound) '000   (pound)'000
   Geographical
   analysis

   United Kingdom &           32,413         33,720           4,830          46,932        20,852          (5,952)
   Ireland
   Rest of Europe             (7,712)         1,133         (10,527)        (39,183)      (31,622)        (27,073)
   Americas                  (58,289)       (16,262)        (19,812)        (65,110)       (1,924)        (15,189)
   Rest of World              (1,221)       (11,789)        (15,742)        (29,596)      (29,474)        (17,791)
   Other*                    (74,718)        (3,896)         (6,966)        175,749       244,832          42,099
                        ------------   ------------    ------------    ------------   -----------     -----------
                            (109,527)         2,906         (48,157)         88,792       202,664         (23,906)
                        ============   ============    ============    ============   ===========     ===========

   Total Group              (103,955)         3,933         (48,065)         87,698       198,524         (25,112)
   Total joint ventures       (5,572)        (1,027)            (92)          1,094         4,140           1,206
                        ============   ============    ============    ============   ===========     ===========

   * includes non-regional exceptional costs.

     Exceptional charges to the profit and loss account for 2001 by region were: United Kingdom and
     Ireland(pound)1.1 million (2000:(pound)3.0 million); Rest of Europe(pound)13.7 million (2000:(pound)2.7
     million);  Americas(pound)28.0 million (2000:(pound)1.6 million); Rest of World(pound)0.9 million (2000:
     (pound)0.2 million); and, Other(pound)46.8 million (2000:(pound)2.0 million).

     There is no difference between segmental information on an origin basis and on a destination basis.

     The directors are of the opinion that the whole of the turnover is derived from the same class of business.
</TABLE>

2    Loss on ordinary activities before tax
<TABLE>

                                                       12 months to    12 months to  12 months to
                                                        31 Dec 2001     31 Dec 2000    31 Dec1999
                                                        (pound)'000     (pound)'000    pound)'000
<S>                                                     <C>             <C>           <C>

     Loss before tax is stated after charging:
     Depreciation of tangible fixed
     assets:
      - owned assets                                         47,827          27,671        12,459
      - assets under finance leases                          16,060          12,875         7,602
     (Profit)/loss on sale of fixed assets                     (32)           1,520            15
     Provision for impairment of fixed assets                12,166               -             -
     (note3)
     Goodwill amortization                                      196               -             -

<CAPTION>
                                                       12 months to    12 months to  12 months to
                                                        31 Dec 2001     31 Dec 2000    31 Dec1999
                                                        (pound)'000     (pound)'000    pound)'000
<S>                                                     <C>             <C>           <C>

     Operating leases:
      - property                                            191,842         136,969        71,805
      - equipment                                             9,426           6,033         5,466
     Audit fees:
      - company                                                   5               5             5
      - group                                                   782             546           375
     Non audit fees paid to KPMG:
      - UK companies                                            153             204            76
      - group                                                   397             496           306
      - exceptional (note 3)                                  1,100               -           900
     Other exceptional items (note 3)                        77,280           9,501         4,225
</TABLE>

                                      85
<PAGE>


     Non-exceptional non audit fees in 2001 are primarily in respect of tax
     compliance services. In 2000, in addition to the fees above, audit fees
     of (pound)240,000 and non audit fees of (pound)786,000 paid to KPMG were
     offset against the share premium account.

3    Exceptional item

     Included in the results for the year to 31 December 2001 were exceptional
     pre-tax charges totalling (pound)90.5 million as follows:

     Restructuring and redundancy costs ((pound)5.4 million)

     As part of an aggressive attack on its cost base, the Group has reviewed
     staffing levels across all regions and all functions.

     Headcount was reduced by 800, representing approximately 24% of the total
     workforce. (pound)0.5 million of this charge has been included in cost of
     sales.

     Reduction in workstation capacity ((pound)37.4 million)

     The Group reviewed the prospects for each of its centers in light of
     current market conditions. Regus decided to reduce capacity by 9,700
     workstations, representing 11% of the network. The exceptional charge
     includes consequential costs associated with onerous leases and asset
     impairments and has been included in cost of sales.

     Write-down related to ESOP ((pound)32.6 million)

     As mentioned in the second quarter results, the directors have determined
     that, in the circumstances, the carrying value of the investments in own
     shares should be written down to 21p a share, the market value on 30
     September 2001. This is counterbalanced by a writeback for the reduced
     cost of granting reward options of (pound)8.8 million.

     Write-down of software development assets ((pound)4.6 million)

     The directors reviewed the estimated useful life of external development
     costs and determined that it would be prudent, in the circumstances, to
     write off the remainder of these costs.

      Fees in respect of aborted merger with HQ Global Workplaces
     ((pound)3.3 million)

     This exceptional charge had been made in the Group's second quarter
     results. It includes (pound)1.1 million paid to KPMG in respect of due
     diligence and transaction advice.

     Write-down of acquisition goodwill ((pound)4.9 million)

     The Directors have determined that there has been an impairment to the
     value of goodwill arising from acquisitions and, accordingly, it is
     prudent that the goodwill be written down.

     Non-recoverable Ryder Cup expenditure ((pound)2.3 million)

     On the basis that the Group is unlikely to benefit from the expenditure,
     the Directors consider it appropriate to recognise the unrecoverable
     expenditure as an exceptional charge.

     Prior year exceptional items

     The exceptional pre-tax charge of (pound)9.5 million in 2000 relates to
     costs associated with the write down of the Reward share options exercise
     price from (pound)1.455 to (pound)0.05.

     The exceptional pre-tax charge of (pound)5.1 million in 1999 related
     principally to costs associated with the raising of loan finance and the
     postponed flotation work during 1999.

     The impact of exceptional items on the tax charge is given in note 8.

4    Profit and loss account of holding company

     Of the loss attributable to shareholders, a profit of (pound)2,881,000
     (December 2000: loss of (pound)11,922,000, December 1999: loss of
     (pound)11,700,000) is dealt with in the accounts of Regus plc. As permitted
     by Section 230 of the Companies Act 1985, the Company has not presented
     its own profit and loss account.

5    Employees and directors

<TABLE>
                                                       12 months to    12 months to    12 months to
                                                        31 Dec 2001     31 Dec 2000     31 Dec 1999
                                                        (pound)'000    (pound) '000    (pound) '000
<S>                                                    <C>             <C>             <C>
     Staff costs for the Group during the year
     Wages and salaries                                      71,672          61,648          42,126
     Social security costs
     Pension costs
                                                             11,127           7,851           5,465
                                                                360             260             300
                                                       ------------    ------------    ------------
                                                             83,159          69,759          47,891
                                                       ============    ============    ============
</TABLE>


                                                 86
<PAGE>


     The Group contributes to the personal pension schemes of a small number of
     employees. The amount which is included within creditors is (pound)18,000
     (2000: (pound)44,000, 1999: (pound)12,000). Included within the above
     staff costs in December 1999 are (pound)900,000 of exceptional costs in
     relation to the postponed flotation work (see note 3).

<TABLE>
                                                       12 months to    12 months to    12 months to
                                                        31 Dec 2001     31 Dec 2000     31 Dec 1999
                                                             Number          Number          Number
<S>                                                      <C>             <C>               <C>
     Average number of people (including executive
     directors) employed
     Centre staff                                             1,923           1,525             949
     Sales staff                                                363             284             285
     Finance staff                                              170             135             111
     Other staff                                                200             157             147
                                                       ------------    ------------    ------------
                                                              2,656           2,101           1,492
                                                       ============    ============    ============

<CAPTION>
                                                       12 months to    12 months to    12 months to
                                                        31 Dec 2001     31 Dec 2000     31 Dec 1999
                                                       (pound) '000    (pound) '000    (pound) '000
<S>                                                       <C>             <C>               <C>
     Directors
     Aggregate emoluments                                       562             988             787
                                                       ============    ============    ============
     Compensation for loss of office                              -               -              36
                                                       ============    ============    ============
     Company pension payments to money purchase scheme           47              48              65
                                                       ============    ============    ============
     Highest paid director
     Aggregate emoluments                                       229             448             385
                                                       ============    ============    ============
     Company pension payments to money purchase scheme           23              28              56
                                                       ============    ============    ============
</TABLE>

     Retirement benefits are accruing to three directors under a money
     purchase scheme. In 2000, two directors received share options under the
     long term incentive scheme. More detailed information on directors
     emoluments is provided in the report of the Remuneration Committee.

6    Net interest payable and other similar charges

<TABLE>
                                                       12 months to    12 months to    12 months to
                                                        31 Dec 2001     31 Dec 2000     31 Dec 1999
                                                        (pound)'000     (pound)'000     (pound)'000

<S>                                                    <C>             <C>             <C>
     Interest payable on overdrafts and loans                   842           7,749           7,495
     Interest payable on finance leases                       3,339           2,867           2,965
                                                       ------------    ------------    ------------
                                                              4,181          10,616          10,460
     Interest income                                         (3,877)         (3,863)         (3,678)
     Share of joint venture net interest payable                250             10               -
                                                       ------------    ------------    ------------
     Net interest payable and other similar
      charges                                                   554           6,763           6,782
                                                       ============    ============    ============

<CAPTION>
7.   Taxation
                                                    12 months to 31  12 months to 31  12 months to 31
                                                      December 2001    December 2000    December 1999
                                                        (pound)'000      (pound)'000     (pound) '000
<S>                                                  <C>              <C>              <C>
     United Kingdom
     Corporation tax at 30% (2000 & 1999: 30%)                5,588            4,402                -
     Deferred tax                                                62              794                -
     Under provision in respect of prior periods                  -                -              180
                                                    ---------------    -------------  ---------------
                                                              5,650            5,196              180

                                                   87
<PAGE>

<CAPTION>

<S>                                                           <C>              <C>              <C>
     Overseas
     Corporation taxes                                        4,440            4,752            1,322
     (Over) / under provision in respect of                       -              (22)             124
     prior periods
     Deferred tax                                                 -                -             (102)
                                                   ----------------  ---------------  ---------------
                                                             10,090            9,926            1,524
                                                   ================  ===============  ===============
     Approximate gross tax losses to carry                        -                -            5,855
     forward against certain future UK
     corporation tax liabilities
                                                   ================  ===============  ===============
     Approximate gross tax losses to carry
     forward against certain future overseas
     corporation tax liabilities
                                                            126,561           76,910           57,718
                                                   ================  ===============  ===============
</TABLE>

     No deferred tax has been provided on the unremitted accumulated reserves
     of the subsidiary undertakings as accumulated reserves of subsidiary
     undertakings are retained to finance their business.

     At 31 December 2001, the total unremitted accumulated reserves of the
     subsidiary undertakings were(pound)6,168,000 (2000: (pound)2,047,000)

     The tax losses above have the following expiration dates:

                                              As at               As at
                                        31 Dec 2001         31 Dec 2000
                                        (pound)'000        (pound) '000

             2001                                 -                 196
             2002                               727                 757
             2003                             1,682               2,592
             2004                            12,395              15,885
             2005                             8,712               7,574
             2006                             7,848                 397
             2007                             3,479                 482
             2008 and later                  66,248              27,165
                                        -----------        ------------
                                            101,091              55,048
             Available indefinitely          25,470              21,862
                                        -----------        ------------
                                            126,561              76,910
                                        ===========        ============

     A reconciliation of the actual tax charge resulting from applying the UK
     statutory rate to the loss before tax is as follows.


                                      88
<PAGE>



<TABLE>
                                                       12 months to       12 months to   12 months to 31
                                                   31 December 2001   31 December 2000    December 1999
                                                        (pound)'000        (pound)'000      (pound)'000
<S>                                                   <C>                 <C>             <C>
     UK statutory rate applied to result for year          (33,024)            (1,157)         (16,502)
     Adjusted for:
     Permanent differences                                   16,741                451            2,227
     Difference in taxation rates                           (9,375)            (1,721)          (1,732)
     Tax losses utilized                                    (1,028)            (1,133)            (795)
     Deferred tax asset not booked in respect of:
          Tax losses carried forward                         20,467              6,907           16,211
          Start up costs and other reserves                  16,309              6,717            1,905
     Adjustment in respect of prior periods                       -               (22)              304
     Other items                                                  -              (116)             (94)

                                                       ------------      ------------    -------------
     Actual tax charge                                       10,090             9,926            1,524
                                                       ============      ============    =============
</TABLE>

     There was no tax charge arising from joint venture operations.

8    Loss per Share

     Loss per share has been calculated by dividing the retained loss for the
     financial year by the weighted average number of ordinary shares in
     issue excluding those held under the employee share trust.

     There were no adjustments to the retained loss for the year for the
     diluted earnings per share computations.

     The 2001 and 2000 diluted shares were not included in the computation of
     diluted earnings per share due to losses in 2001 and 2000, resulting in
     options being antidilutive. The 2000 diluted loss per share has been
     restated from that reported in the 2000 Annual report because the number
     of diluted shares had been wrongly adjusted by 13,829,065 ordinary shares
     relating to share options.

     The following summarizes the calculation of loss per share for the years
     ended 31 December 1999, 2000 and 2001:

<TABLE>
                                                                     31 Dec 2001        31 Dec 2000    31 Dec 1999
                                                                                           Restated
<S>                                                                   <C>                 <C>            <C>
     Loss for the year                               ((pound)'000)      (118,238)           (13,530)       (56,446)
     Add: exceptional items                          ((pound)'000)        90,546              9,501          5,125
     Less: tax on exceptional items                  ((pound)'000)        (1,614)            (1,508)        (1,500)
                                                                     -----------       ------------    -----------
     Retained profit / (loss) for the year before    ((pound)'000)
       exceptional items                                                 (29,306)            (5,537)       (52,821)
                                                                     ===========       ============    ===========

     Weighted average ordinary shares in             ('000's)            563,528            497,889        469,486
     Issue - basic and diluted
                                                                     ------------      ------------   -------------
     Loss per ordinary share - basic and diluted         (p)               (21.0)              (2.7)         (12.0)
                                                                     ============      ============   ============

     Impact of exceptional items  -basic and diluted     (p)               (15.8)              (1.6)          (0.7)
     Loss per ordinary share before exceptional items
       - basic and diluted                               (p)                (5.2)              (1.1)         (11.3)
                                                                     ============      ============   ============
</TABLE>

9    Goodwill

<TABLE>
<S>                                                                                                   <C>
                                                                                                      (pound) '000
     Cost
     At 1 January 2001                                                                                           -
     Additions                                                                                               9,496
     Exchange differences                                                                                      (77)
                                                                                                      ------------
      At 31 December 2001                                                                                    9,419
                                                                                                      ============
     Amortization
     At 1 January 2001                                                                                           -
     Charge for the period                                                                                     196
</TABLE>

                                                        89
<PAGE>


<TABLE>
<S>                                                                   <C>                 <C>            <C>
     Provision for impairment                                                                                4,916
                                                                                                      ------------
     At 31 December 2001                                                                                    5,112
                                                                                                      ============

                                                                                                      ------------
     Net book value at 31 December 2001                                                                      4,307
                                                                                                      ------------

                                                                                                      ------------
     Net book value at 31 December 2000                                                                         -
                                                                                                      ------------
</TABLE>

     In April the Group acquired three subsidiaries for a total consideration
     of (pound)9.1 million: Stratis Business Centres Inc in the US and
     Satellite and Skyport Business Centres in the Netherlands, consisting of
     (pound)5.7 million cash and shares of (pound)3.4 million. The net
     liabilities of the companies at the date of acquisition were (pound)0.3
     million resulting in goodwill on acquisition of (pound)9.4 million. There
     were no material fair value adjustments. Subsequently the directors have
     determined that there has been an impairment of the value of goodwill
     arising from acquisitions to the value of (pound)4.9 million and,
     accordingly, it is prudent that the goodwill be written down. The useful
     economic life of goodwill is 20 years. The post acquisition results have
     not been shown separately on the face of the profit and loss account as
     they are not material.

10   Tangible fixed assets

<TABLE>
                                        Furniture &       Computers           Motor           Total
                                           fittings                        vehicles
                                        (pound)'000     (pound)'000     (pound)'000     (pound)'000
<S>                                     <C>              <C>             <C>             <C>
     Cost
     At 1 January 2000                      150,667          10,593             578         161,838
     Exchange differences                        96             187               2             285
     Additions                               99,549          12,002             101         111,652
     Disposals                               (5,619)         (1,285)           (259)         (7,163)
                                        -----------    ------------    ------------    ------------
     At 31 December 2000                    244,693          21,497             422         266,612
                                        -----------    ------------    ------------    ------------
     Aggregate depreciation
     At 1 January 2000                       32,921           3,093             253          36,267
     Exchange differences                       280              70             (2)             348
     Charge for the period                   34,759           5,664             123          40,546
     Disposals                               (2,688)         (1,137)           (177)         (4,002)
                                        -----------    ------------    ------------    ------------
     At 31 December 2000                     65,272           7,690             197          73,159
                                        -----------    ------------    ------------    ------------
     Net book value at 31 December 2000     179,421          13,807             225         193,453
                                        ===========    ============    ============    ============
     Cost
     At 1 January 2001                      244,693          21,497             422         266,612
     Exchange differences                   (2,328)           (183)             (2)         (2,513)
     Additions                              115,230          13,248              55         128,533
     Acquisitions                               676             136               -             812
     Disposals                              (3,844)         (2,272)           (187)         (6,303)
                                        ------------   ------------    ------------    ------------
     At 31 December 2001                    354,427          32,426             288         387,141
                                        ------------   ------------    ------------    ------------
     Aggregate depreciation
     At 1 January 2001                       65,272           7,690             197          73,159
     Exchange differences                     (997)            (89)               -         (1,086)
     Charge for the period                   53,091          10,698              98          63,887
     Provision for impairment                 7,600           4,566               -          12,166
     Disposals                                (980)         (2,188)           (116)         (3,284)
                                        -----------    ------------    ------------    ------------
     At 31 December 2001                    123,986          20,677             179         144,842
                                        -----------    ------------    ------------    ------------
     Net book value at 31 December 2001     230,441          11,749             109         242,299
                                        ===========    ============    ============    ============
</TABLE>

     The net book value of tangible fixed assets includes an amounts in
     respect of fixed assets held under finance leases as follows:
<TABLE>

                                                                        31 Dec 2001     31 Dec 2000
                                                                        (pound)'000     (pound)'000
<S>                                     <C>             <C>             <C>             <C>
     Cost                                                                    96,282          74,570
     Depreciation                                                           (43,169)        (28,078)
                                                                         ----------     -----------
     Net book value                                                          53,113          46,492
                                                                         ==========     ===========
</TABLE>

                                                       90
<PAGE>


11   Investments

<TABLE>

                                         Investment        Interest
                                             in own        in joint           Other                  Shares in Group
                                            shares*        ventures     Investments    Group Total      undertakings
                                        (pound)'000     (pound)'000     (pound)'000    (pound)'000       (pound)'000
<S>                                     <C>             <C>            <C>             <C>            <C>
     At 1 January 2000                            -           1,200               6          1,206                 -
     Exchange differences                         -             170               -            170                 -
     Additions                               45,200           3,791               -         48,991                 -
     Revaluation                              1,821               -               -          1,821                 -
     Share of losses retained                     -          (1,027)              -         (1,027)                -
                                        -----------    ------------     -----------     ----------   ---------------
     At 1 January 2001                       47,021           4,134               6         51,161             5,631

     Exchange differences                         -             154               -            154                 -
     Additions                                    -           2,631              27          2,658                 -
     Revaluation                            (1,821)               -               -         (1,821)                -
     Provision for impairment              (41,395)               -               -        (41,395)                -
     Share of loss retained                       -          (5,825)              -         (5,825)                -
                                        -----------    ------------    ------------     ----------    --------------
     At 31 December 2001                      3,805        1,094                 33           4,932            5,631
                                        ===========    ============    ============     ==========    ==============
</TABLE>

*The nominal value of the Group's investment in own shares is (pound)0.9
million. Note 22 provides details of investments in own shares.
Details of investments in subsidiary companies are given in section 30.

12   Debtors

     Amounts falling due within one year
                                                    31 Dec 2001     31 Dec 2000
                                                    (pound)'000     (pound)'000

     Trade debtors                                       45,103          60,990
     Amounts owed by participating interest               4,136           1,862
     Other debtors                                       30,144          29,940
     Prepayments and accrued income                      23,804          26,364
     VAT recoverable                                     11,101          10,521

                                                   -------------   ------------
                                                        114,288         129,677
                                                   ------------    ------------
     Amounts falling due after one year
                                                    31 Dec 2001     31 Dec 2000
                                                    (pound)'000     (pound)'000

     Amounts owed by participating interest               3,000               -
                                                   ------------    ------------
                                                          3,000               -
                                                   ------------    ------------
     Total debtors                                      117,288         129,677
                                                   ============    ============

     As at 31 December 2001 the provision for bad and doubtful debts was
     (pound)2,858,000 (2000: (pound)1,701,000). An allowance for bad and
     doubtful debts is recorded at the end of each period based upon the
     expected collectability of all trade receivables.


                                      91
<PAGE>


     An analysis of the bad and doubtful debt provision is as follows:

                                                    31 Dec 2001     31 Dec 2000
                                                    (pound)'000     (pound)'000
     Opening balance                                      1,701           1,047
     Additional charges to profit and loss account        1,916             842
     Provision utilisation                                 (724)           (190)
     Exchange difference                                    (35)              2
                                                   -----------     ------------
     Closing balance                                     2,858           1,701
                                                   ===========     ============

13   Creditors - Amounts falling due within one year

                                                    31 Dec 2001     31 Dec 2000
                                                    (pound)'000     (pound)'000
     Bank loans and overdrafts                            6,018           5,750
     Non-convertible bond                                40,000               -
     Other loans                                            724             807
     Obligations under finance leases                    14,909          10,614
     Trade creditors                                     44,452          31,207
     Customer deposits                                   72,584          80,024
     Other tax and social security                       12,364          16,128
     Corporation tax                                     13,396           9,849
     Deferred income                                     31,847          43,541
     Deferred landlord contributions                      7,195           3,173
     Rent accruals                                       65,715          56,307
     Other accruals                                      31,818          58,392
     Other creditors                                      3,370           2,091
                                                   ------------    ------------
                                                        344,392         317,883
                                                   ============    ============

     On 28 December 2001, the Company issued (pound)40.0 million nominal of
     five per cent non-convertible bonds. On 14 February 2002, the bonds were
     exchanged for convertible debentures and warrants. The convertible
     debentures incur interest at five per cent and, at the Company's option,
     are either repaid in ten equal installments from March 2002 to December
     2002 or are converted into ordinary shares at 95 per cent of the average
     price during the following month. The convertible bonds may be converted
     at the holders option at a price of 86.32 pence per share. The warrant
     holders have the right to subscribe for up to five million ordinary
     shares at five pence per share. Any remaining unexercised warrants will
     lapse three years after issue. The fair value of the warrants, as at 31
     December, was 49 pence per share.

14   Creditors - Amounts falling due after more than one year

                                                    31 Dec 2001      31 Dec 2000
                                                    (pound)'000      (pound)'000
     Bank loans                                               8               12
     Other loans                                          1,322            1,475
     Obligations under finance leases                    23,064           21,150
     Accruals and deferred income                           365              361
     Other creditors                                         47               52
                                                   ------------    -------------
                                                         24,806           23,050
                                                   ============    =============

     Certain bank loans are secured on the assets of the applicable
     subsidiaries and bear interest at local commercial rates.
     All other creditors are unsecured and non-interest bearing.
     As at 31 December 2001 the Group had no other available credit facilities
     (December 2000: (pound)13,748,000).

15   Maturity of debt

     The maturity profile of the carrying amount of the Group's financial
     liabilities as at 31 December was as follows:

<TABLE>

                                    Non-convertible      Bank loans
                                               bond    & overdrafts     Other Loans     Finance leases          Total
                                        31 Dec 2001     31 Dec 2001     31 Dec 2001        31 Dec 2001    31 Dec 2001
                                        (pound)'000     (pound)'000    (pound) '000        (pound)'000    (pound)'000
<S>                                 <C>                <C>             <C>             <C>                <C>
     Within 1 year                           40,000           6,018             724             14,909         61,651
     Between 1 and 2 years                        -               4             260             11,231         11,495
     Between 2 and 5 years                        -               4             716             11,196         11,916


                                                            92
<PAGE>


<CAPTION>
<S>                                 <C>                <C>             <C>             <C>                <C>
     In 5 years or more                           -               -             346                637            983
                                    ---------------    ------------     -----------     --------------    -----------
                                             40,000           6,026           2,046             37,973         86,045
                                    ===============    ============     ===========     ==============    ===========

                                    Non-convertible      Bank loans
                                               bond    & overdrafts     Other Loans     Finance leases          Total
                                        31 Dec 2000     31 Dec 2000     31 Dec 2000        31 Dec 2000    31 Dec 2000
                                        (pound)'000     (pound)'000     (pound)'000        (pound)'000    (pound)'000
     Within 1 year                                -           5,750             807             10,614         17,171
     Between 1 and 2 years                        -               4             285             10,224         10,513
     Between 2 and 5 years                        -               8             678             10,685         11,371
     In 5 years or more                           -               -             512                241            753
                                    ---------------    ------------    ------------     --------------    -----------
                                                  -           5,762           2,282             31,764         39,808
                                    ===============    ============    ============     ==============    ===========

     The following provides additional disclosure for bank loans and overdrafts and other loans:

                                                        31 Dec 2001     31 Dec 2000
                                                        (pound)'000     (pound)'000
     Within 1 year                                           46,742           6,557
     Between 1 and 2 years                                      264             289
     Between 2 and 3 years                                      221             249
     Between 3 and 4 years                                      383             238
     Between 4 and 5 years                                      116             199
     After 5 years                                              346             512
                                                       ------------    ------------
                                                             48,072           8,044
                                                       ============    =============

     The following provides additional finance lease disclosure including the
     interest components of future minimum lease payments (company nil):

                                                        31 Dec 2001     31 Dec 2000
                                                        (pound)'000     (pound)'000
     Within 1 year                                           17,370          11,966
     Between 1 and 2 years                                   12,597          11,967
     Between 2 and 3 years                                    8,188           7,862
     Between 3 and 4 years                                    3,403           1,970
     Between 4 and 5 years                                      569           1,379
     After 5 years                                              492           1,118
                                                       ------------    ------------
     Total commitment                                        42,619          36,262
     Less amounts representing interest                      (4,646)         (4,498)
                                                       ------------    ------------
     Present value of future minimum lease payments          37,973          31,764
     Within 1 year                                           14,909          10,614
                                                       ------------    ------------
     After 1 year                                            23,064          21,150
                                                       -------------   ------------

16   Provisions for liabilities and charges

                                                      Onerous Lease
                                       Deferred Tax     Obligations           Total
                                       (pound)'000      (pound)'000     (pound)'000
     At 1 January 2001                          794               -             794
     Provided in year                            62          28,165          28,227
     Exchange differences                         -            (719)           (719)
                                       ------------   -------------    ------------
     At 31 December 2001                        856          27,446          28,302
                                       ------------   -------------    ------------

     Amounts falling due within one year          -          19,953          19,953
     Amounts falling due after one year         856           7,493           8,349

     At 1 January 2000                            -               -               -
     Provided in year                           794               -             794
                                       ------------    ------------    ------------
     At 31 December 2000                        794               -             794
                                       ------------    ------------    ------------

     There is no unprovided deferred tax liability (note 7)

</TABLE>

                                       93
<PAGE>


17   Called up share capital

                                                    31 Dec 2001    31 Dec 2000
                                                    (pound)'000    (pound)'000
     Authorised
     800,000,000 (2000: 800,000,000)
     Ordinary shares of 5p each                          40,000         40,000
                                                    -----------    -----------

     Allotted and fully paid
     582,112,320 (2000: 580,676,185)
     Ordinary shares of 5p each                          29,106         29,034
                                                   ------------    -----------

     In April 2001, 1,388,895 new ordinary shares of 5 pence each were issued
     for a total consideration of (pound)3,486,750 in respect of the
     acquisition of Stratis Business Centers Inc.

     During 2001, 47,240 new ordinary shares of 5 pence each were issued in
     respect of exercised share options, see note 22.

     In March 2000 1,855,670 new A ordinary shares of 5 pence each were
     allotted for a total consideration of (pound)2,700,000.

     In October 2000, 97,598,307 ordinary shares of 5 pence each were issued
     in an Initial Public Offering for a total consideration of
     (pound)253,756,000. At the same time, the new A & B ordinary shares of 5
     pence each were re-classified as ordinary shares of 5 pence each.

18   Share premium account (non distributable)

                                                    31 Dec 2001     31 Dec 2000
                                                   (pound) '000    (pound) '000
     At 1 January                                       279,858          46,283
     Premium on issue of shares during period                 -         251,483
     Issue costs*                                          (93)        (17,908)
                                                   ------------    ------------
     At 31 December                                     279,765         279,858
                                                   ============    ============

     * Issue costs for 2001 relate to additional costs associated with the
       Initial Public Offering in 2000.


19   Reserves
                                                    Profit and       Other (non
                                                          loss   distributable)
                                                   (pound)'000      (pound)'000
     At 1 January 2000                                (94,681)             606

     Retained loss for the period                     (13,530)                -
     Transfer to capital reserve                            (9)               9
     Exchange differences                                2,675                -
     Tax on exchange differences                          (872)               -
                                                  ------------   --------------
     At 1 January 2001                                (106,417)             615

     (Loss)/profit for the period                     (118,238)               -
     Premium on shares issued for acquisitions               -            3,417
     Transfer to capital reserve                           (34)              34
     Exchange differences                                  207              (10)
                                                  ------------   --------------
     At 31 December 2001                             (224,482)             4,056
                                                  ============   ==============


                                        94
<PAGE>

<TABLE>
20   Cash flow statement

     (a) Reconciliation of operating profit to
         net cash inflow from operating activities

                                                   12 months to     12 months to    12 months to
                                                    31 Dec 2001      31 Dec 2000     31 Dec 1999
                                                   (pound) '000     (pound) '000    (pound) '000
<S>                                                   <C>                  <C>            <C>
     Continuing operating activities
     Operating (loss)/profit                          (103,955)            3,933          (48,065)
     Depreciation charge                                 63,887           40,546           20,061
     Goodwill amortization                                  196                -                -
     (Profit)/loss on disposal of fixed assets              (32)           1,520               15
     Impairment of goodwill                               4,916                -                -
     Impairment of fixed assets                          12,166                -                -
     Impairment of investment in own shares              41,395                -                -
     Increase in provisions                              28,165                -                -
     (Increase)/Decrease in stocks                         (109)             (33)               22
     Decrease/(Increase) in debtors                      17,208          (58,228)          (32,573)
     (Decrease)/increase in creditors                   (19,841)         130,161            74,901
                                                   ------------     ------------    --------------
     Net cash inflow from continuing
       operating activities                              43,996          117,899            14,361
                                                   ============     ============    ==============

     The cash inflow for December 2001 includes a (pound)12,144,000 outflow
     relating to the exceptional item charged during the year (see note 3).

     (b) Financing and management of liquid resources

                                                   12 months to     12 months to     12 months to
                                                    31 Dec 2001      31 Dec 2000      31 Dec 1999
                                                   (pound) '000     (pound) '000     (pound) '000
    Management of liquid resources
    New cash deposits                                   (50,981)         (95,897)        (105,536)
    Repayment of cash deposits                           96,624           17,185           89,017
                                                   ------------    -------------     ------------
                                                         45,643          (78,712)         (16,519)
                                                   ============    =============     ============

    Financing
    New loans                                            42,180           13,945          105,073
    Repayment of loans                                  (4,566)        (116,325)         (12,298)
    Payment of prinicipal under finance leases         (16,793)         (14,702)         (15,796)
    Issue of equity shares                                1,985          253,756           20,000
    Issue costs                                            (92)         (17,908)                -
                                                   ------------    -------------     ------------
                                                         22,714          118,766           96,979
                                                   ============    =============     ============

     (c) Reconciliation of net cash flow to movement in net funds/(borrowings)

                                                   12 months to     12 months to     12 months to
                                                    31 Dec 2001      31 Dec 2000      31 Dec 1990
                                                   (pound) '000     (pound) `000     (pound) '000
     (Decrease)/increase in cash in the period           (7,569)          15,865           10,112
     Cash (inflow)/outflow/(inflow) from change
       in borrowings and finance leases                 (20,821)         117,082          (76,979)

     Cash (inflow)/outflow from change
       in liquid resources                              (45,643)          78,712           16,519
                                                   ------------    -------------     ------------
     Change in net funds/borrowings
       resulting from cash flows                        (74,033)         211,659          (50,348)
     Acquisitions                                          (783)               -                -


                                                            95
<PAGE>


<CAPTION>
<S>                                                <C>            <C>                <C>
     Other non-cash items:
     New finance leases                                 (22,901)        (23,574)          (17,234)
     Translation difference                              (1,267)           1,830           (1,280)
                                                   ------------    -------------     ------------
     Movement in net funds/borrowings in the period     (98,984)         189,915          (68,862)
     Net funds/(borrowings)/funds at 1 January          130,013        (59,902)             8,960
                                                   ------------    -------------     ------------
     Net funds/(borrowings) at 31 December               31,029         130,013           (59,902)
                                                   =============   =============     ============
</TABLE>

<TABLE>

                                                                                      Other
                                                                                   non-cash       Exchange
                                  At 1 Jan 2001      Cashflow    Acquisitions        changes      movements    At 31 Dec 2001
                                    (pound)'000    (pound)'000    (pound)'000    (pound)'000    (pound)'000       (pound)'000
<S>                                 <C>            <C>           <C>             <C>             <C>            <C>
     Cash at bank and in hand            31,432         (5,983)             -              -         (1,202)           24,247
     Overdrafts                          (1,203)        (1,586)             -              -              8
                                                                                                                       (2,781)
                                 --------------      ---------   ------------    -----------    -----------    --------------
                                         30,229         (7,569)             -              -         (1,194)           21,466
     Debt due after 1 year               (1,487)            91              -             36             30
                                                                                                                       (1,330)
     Debt due within 1 year              (5,354)       (37,705)          (783)           (83)           (36)
                                                                                                                      (43,961)
     Finance leases due after 1         (21,150)        11,430              -        (13,235)          (109)
     year                                                                                                             (23,064)
     Finance leases due within          (10,614)         5,363              -         (9,619)           (39)
     1 year                                                                                                           (14,909)
                                    -----------    -----------   ------------    -----------    -----------    --------------
                                        (38,605)       (20,821)          (783)       (22,901)          (154)          (83,264)

     Liquid resources                   138,389        (45,643)             -              -             81            92,827
                                    -----------    -----------   ------------    -----------    -----------    --------------
                                        130,013        (74,033)          (783)       (22,901)        (1,267)           31,029
                                    ===========    ===========   ============    ===========    ===========    ==============
</TABLE>


     Liquid resources at 31 December 2001 include cash held on deposit of
     which (pound)3.2 million (December 2000: (pound)5.5 million) relates to
     collateral against bank loans and (pound)28.4 million (December 2000:
     (pound)35.4 million) relates to deposits which are held by banks as
     security for the issuance of bank guarantees to support lease
     commitments by Regus operating companies. These amounts are blocked and
     are not available for use by the business.

     There are arrangements in place where cash balances and deposits with
     banks in the UK and Netherlands can be offset against overdrawn accounts
     in the same bank.

     Non-cash changes comprise new finance leases and reclassifications between
     categories.

<TABLE>


                                                                      Other non-cash        Exchange       At 31 Dec
                                      At 1 Jan 2000        Cashflow          changes       movements            2000
                                       (pound) '000    (pound) '000     (pound) '000   (pound) '000     (pound) '000
<S>                                   <C>              <C>              <C>              <C>           <C>
       Cash at bank and in hand              16,426           8,030            6,583            393           31,432
       Overdrafts                           (1.923)           7,835           (7,229)           114           (1,203)
                                       ------------    ------------    -------------   ------------    -------------
                                             14,503          15,865             (646)           507           30,229
       Debt due after 1 year               (82,738)        (10,076)           91,387            (60)          (1,487)
       Debt due within 1 year              (24,353)         112,456          (93,852)           395           (5,354)
       Finance leases due after 1 year     (13,674)           6,534          (14,000)           (10)         (21,150)
       Finance leases due within 1 year     (9,314)           8,168           (9,377)           (91)         (10,614)
                                       ------------    ------------    -------------   ------------    -------------
                                          (130,079)         117,082          (25,842)           234          (38,605)
       Liquid resources                      55,674          78,712            2,914          1,089          138,389
                                       ------------    ------------    -------------   ------------    -------------
                                           (59,902)         211,659          (23,574)         1,830          130,013
                                       ============    ============    =============   ============    =============

</TABLE>

                                                            96
<PAGE>

<TABLE>

                                                                              Other
                                                                           non-cash        Exchange
                                      At 1 Jan 1999        Cashflow         changes       movements   At 31 Dec 1999
                                        (pound)'000     (pound)'000     (pound)'000     (pound)'000      (pound)'000
<S>                                    <C>               <C>             <C>             <C>             <C>
         Cash at bank and in hand             8,137          17,024          (7,733)         (1,002)          16,426
         Overdrafts                            (122)         (6,912)          4,329             782           (1,923)
                                       ------------    ------------    ------------    ------------   --------------
                                              8,015          10,112          (3,404)           (220)          14,503
         Debt due after 1 year              (11,296)        (80,571)          9,811            (682)         (82,738)
         Debt due within 1 year              (5,850)        (12,204)         (5,757)           (542)         (24,353)
         Finance leases due after 1 year    (12,969)          5,751          (6,817)            361          (13,674)
         Finance leases due within 1 year    (8,818)         10,045         (10,686)            145           (9,314)
                                       ------------    ------------    ------------    ------------   --------------
                                            (38,933)        (76,979)        (13,449)           (718)        (130,079)
         Liquid resources                    39,878          16,519            (381)           (342)          55,674
                                       ------------    ------------    ------------    ------------   --------------
                                              8,960         (50,348)        (17,234)         (1,280)         (59,902)
                                       ============    ============    ============    ============   ==============
</TABLE>

     Liquid resources include cash held on deposit of which
     (pound)40,945,000 at 31 December 2000 (1999:(pound)21,970,000) relates
     to deposits which are held by banks as security for the issuance of
     bank guarantees to support lease commitments by Regus operating
     companies. These amounts are blocked and are not available for use by
     the business.

     There are arrangements in place where cash balances with certain banks can
     be offset against overdrawn accounts in the same bank.

     Non-cash changes comprise new finance leases and reclassifications
     between categories.

21   Financial instruments

     Details of the role that financial instruments have had during the year in
     managing the risks that the Group faces are discussed in Item 11 of this
     form 20-F.

     Short term debtors and creditors and intercompany balances.

     Short term debtors and creditors and Intercompany balances have been
     excluded from all the following disclosures other than the currency risk
     disclosure.

     Interest rate risk and currency profile of financial liablities and assets
     The following table analyses the currency and interest rate composition of
     the Group's financial liabilities and assets, comprising gross borrowings,
     and deposits where applicable.


                                      97
<PAGE>

<TABLE>

     31 December 2001

                                                                                                                  Weighted
                                    At                                                         Weighted     average period
                              floating      At fixed    Non-interest                      average fixed     for which rate
                                 rates         rates         bearing            Total     interest rate           is fixed
                           (pound)'000   (pound)'000     (pound)'000      (pound)'000                 %              Years
<S>                             <C>           <C>                              <C>                  <C>                <C>
     Financial liabilities
     Euro                       (3,380)       (5,552)              -           (8,932)              7.7                2.3
     Japanese Yen                    -        (1,067)              -           (1,067)              6.6                1.3
     Sterling                        -       (42,926)              -          (42,926)              5.5                1.0
     US Dollar                       -       (28,428)              -          (28,428)              8.8                2.0
     Others                     (4,692)            -               -           (4,692)             11.0                2.4
                           -----------   -----------    ------------      -----------     =============     ==============
                               (8,072)       (77,973)              -          (86,045)

     Financial assets
     Australian Dollars            812             -               -              812                 -                  -
     Euro                       21,518             -               -           21,518                 -                  -
     Japanese Yen                  511             -               -              511                 -                  -
     Sterling                   80,904             -               -           80,904                 -                  -
     US Dollar                   8,511             -               -            8,511                 -                  -
     Others                      4,818             -               -            4,818                 -                  -
                           -----------   -----------    ------------      -----------     =============     ==============
                               117,074             -               -          117,074
                           -----------   -----------    ------------      -----------
                               109,002       (77,973)              -           31,029
                           ===========   ===========    ============      ===========

     of which:
     liquid resources           92,827             -               -           92,827
     gross borrowings           (8,072)      (77,973)              -         (86,045)
     cash                       24,247             -               -           24,247
                           -----------   ------------   ------------      -----------
                               109,002       (77,973)              -           31,029
                           ===========   ============   ============      ===========
</TABLE>

     The sterling fixed rate liabilities include (pound)40 million five per
     cent non-convertible bonds. Once fair value of the warrants issued in
     February 2002 is considered in accordance with FRS4, the effective annual
     finance charge is 17 per cent.

<TABLE>
     31 December 2000

                                                                                              Weighted     Weighted average
                                                                                               average     period for which
                             At floating      At fixed    Non-interest                           fixed              rate is
                                   rates         rates        bearing            Total   interest rate                fixed
                             (pound)'000   (pound)'000                     (pound)'000               %                Years
<S>                           <C>           <C>                             <C>                 <C>                 <C>
     Financial liabilities
     Euro                         (1,491)       (3,037)              -          (4,528)             8.0                 4.3
     Japanese Yen                      -          (895)              -            (895)             6.8                 3.3
     Sterling                       (500)       (6,078)              -          (6,578)             9.8                 3.8
     US Dollar                         -       (20,996)              -         (20,996)             8.9                 4.7
     Others                       (6,053)         (758)              -          (6,811)            11.3                 3.7
                             -----------   -----------    ------------     -----------    =============    ================
                                  (8,044)      (31,764)              -         (39,808)

     Financial assets
     Australian Dollars            1,961             -               -           1,961               -                    -
     Euro                         32,571             -              39          32,610               -                    -
     Japanese Yen                  2,393             -               2           2,395               -                    -
     Sterling                    102,433             -              95         102,528               -                    -
     US Dollar                    18,407             -              94          18,501               -                    -


                                                                98
<PAGE>


<CAPTION>
<S>                           <C>           <C>                             <C>                 <C>                 <C>
     Others                       11,784             -              42          11,826               -                    -
                             -----------   -----------    ------------     -----------   =============     ================
                                 169,549             -             272         169,821
                             -----------   -----------    ------------     -----------
                                 161,505       (31,764)            272         130,013
                             ===========   ===========    ============     ===========

     of which:
     liquid resources            138,389             -               -         138,389
     gross borrowings             (8,044)      (31,764)              -        (39,808)
     cash                         31,160             -             272          31,432
                             -----------   -----------    ------------     -----------
                                 161,505       (31,764)            272        130,013
                             ===========   ===========    ============     ==========
</TABLE>

     Maturity analysis of undrawn committed borrowing facilities

     The Group has the following undrawn committed borrowing facilities
     available at the 31 December in respect of which all conditions precedent
     had been met at that date:

                                31 Dec 2001   31 Dec 2000     31 Dec 1999
                                (pound)'000   (pound)'000     (pound)'000

     Expiring within:
     One year or less                     -         3,589          10,000
     Between one and two years            -             -               -
     In more than two years               -             -           1,250
                                -----------   -----------     -----------
                                          -         3,589          11,250
                                ===========   ===========    ============

     Currency exposures

     As explained in the Financial review, to mitigate the effect of the
     currency exposures arising from its net investments overseas the Group
     borrows, where appropriate, in the local currencies arising from its
     net investments. Gains and losses arising on net investments overseas
     are recognized in the statement of total recognized gains and losses.

     The tables below show the extent to which Group companies have monetary
     assets and liabilities in currencies other than their local currency.
     Foreign exchange differences on retranslation of these assets and
     liabilities are taken to the profit and loss account of the Group
     companies and the Group.

<TABLE>

     31 December 2001
                                                 Net foreign currency monetary assets/(liabilities)
                                       Euro  Japenese Yen        Sterling     US Dollar          Others         Total
                                (pound)'000   (pound)'000     (pound)'000    (pound)'000    (pound)'000    (pound)'000
<S>                             <C>           <C>             <C>             <C>             <C>           <C>
     Functional currency of
     Group operation
     Euro                                 -        10,976             (56)        66,572          2,053         79,545
     Sterling                           817             -               -         (3,349)         6,458          3,926
     US Dollar                          (43)            -               -              -          1,196          1,153
     Others                          (4,123)             -           (137)        (7,712)        (1,245)       (13,217)
                                -----------   -----------    ------------    -----------    -----------    -----------
                                     (3,349)       10,976            (193)        55,511          8,462         71,407
                                ===========   ===========    ============    ===========    ===========    ===========

     31 December 2000
                                                 Net foreign currency monetary assets/(liabilities)
                                       Euro  Japanese Yen        Sterling      US Dollar         Others          Total
     Functional currency of     (pound)'000   (pound)'000     (pound)'000    (pound)'000    (pound)'000    (pound)'000
     Group operation

     Euro                                  -            -          27,390          6,268            144         33,802
     Sterling                         2,550           104               -          6,607          9,031         18,292
     US Dollar                           12             -             899              -           (110)           801
     Others                              27             5              54          2,023           2,450         4,559
                                -----------   -----------    ------------    -----------    -----------    -----------
                                      2,589           109          28,343         14,898         11,515         57,454
                                ===========   ===========    ============    ===========    ===========    ===========
</TABLE>


                                                                   99
<PAGE>


     Fair value disclosures

     The following table provides a comparison by category of the carrying
     amounts and the fair value of the Group's financial assets and
     liabilities at 31 December.

     Fair value is the amount at which a financial instrument could be
     exchanged in an arm's length transaction between informed and willing
     parties, other than a forced or liquidation sale and excludes acquired
     interest.

     Set out below the table is a summary of the methods and assumptions
     used for each category of financial instrument.

<TABLE>
                                                  Book value     Fair value      Book value      Fair value
                                                 31 Dec 2001    31 Dec 2001     31 Dec 2000     31 Dec 2000
                                                 (pound)'000    (pound)'000     (pound)'000     (pound)'000
<S>                                                 <C>            <C>             <C>             <C>
     Primary financial instruments held or
       issued to finance the Group's operations
     Short-term borrowings                          (61,651)       (60,499)        (17,171)        (15,874)
     Long-term borrowings                           (24,394)       (17,712)        (22,637)        (16,837)
     Short-term deposits                             92,827         92,827         138,389         138,389
     Cash at bank and in hand                        24,247         24,247          31,432          31,432
                                                 ----------     ----------      ----------      ----------

     Derivative financial instruments held
     to hedge the currency exposure on
     expected future results
     Forward foreign currency contracts                   -              -           1,510           1,510
     Currency options                                     -              -               -              45
                                                 ----------     ----------      ----------      ----------
</TABLE>

     Summary of methods and assumptions

     Forward foreign currency contracts and currency options
     Fair value is based on market price of comparable instruments at the
     balance sheet date.

     Short-term deposits and borrowings
     The fair value of short-term deposits, loans and overdrafts
     approximates to the carrying value because of the short maturity of
     these instruments. The fair value of finance leases has been calculated
     by discounting future cash flows at the Group's weighted average cost
     of capital.

     Long-term borrowings
     The fair value of bank loans and other loans approximates to the
     carrying value because the majority are floating rate where payments
     are reset to market rates at intervals of less than one year. The fair
     value of finance leases has been calculated by discounting future cash
     flows at the Group's weighted average cost of capital.

     Hedges
     There were no off-balance sheet (unrecognized) or on-balance sheet
     (deferred) gains or losses in respect of financial instruments used as
     hedges at the end of the year.

22   Employee share ownership plan ("ESOP")

     During 1999 the Group established the Regus Employee Trust. The
     Trustee is Mourant & Co Trustees Limited which is an independent
     professional trust company residing in Jersey. The trust is a
     discretionary trust for the benefit of employees (including
     directors). The ESOP provides for the issue of options and the payment
     of bonuses to the Group's employees (including directors) at the
     discretion of the Company. Regus is not deemed to be the sponsor of
     the ESOP for the purposes of UITF17.


                                      100
<PAGE>


     The Trustee is not entitled to receive dividends.

     At 31 December 2001, the trust held 18,120,670 shares in Regus plc
     (note 11). The market value at 31 December 2001 was (pound)9.3
     million. Costs incurred by the trust are expensed in the profit and
     loss account

     At 31 December 2001, awards over a total of 34,907,406 (December 2000:
     28,047,451) shares had been granted to employees. The awards have been
     issued in 10 tranches and some of the awards had been granted subject
     to the performance of the Group (performance awards).
     Details of the awards are provided below:

<TABLE>
                                                           31 Dec 2000
         Award Type                    Date     Exercise     Number of                               Exercise      31 Dec 2001
                                exercisable  price (pound)      awards    New Awards       Lapses     awards    Number of awards
         -----------------------------------------------------------------------------------------------------------------------
<S>                           <C>            <C>            <C>           <C>          <C>           <C>        <C>
         Performance awards   1 Jan 03 to 1        1.455     9,354,204              -   (1,041,336)          -        8,312,868
                                     Jan 07
                              1 Jan 04 to 1        2.600     1,304,048              -     (333,014)          -          971,034
                                     Jan 08
                             26 March 04 to        2.560             -      1,942,441     (550,904)          -        1,391,537
                                26 March 06
                               8 June 04 to        2.560             -        351,388      (49,897)          -          301,491
                                26 March 06
                               8 June 04 to        2.275             -         84,876             -          -           84,876
                                26 March 06
                                  29 Aug 04        0.475             -        200,000     (150,000)          -           50,000
                                  12 Nov 04        0.335             -        195,000             -          -          195,000
         Non-performance awards    1 Jan 03        1.455     7,309,132              -   (1,392,329)          -        5,916,803
                                to 1 Jan 07
                              1 Jan 03 to 1        0.050     3,610,596              -     (402,801)    (47,240)       3,160,555
                                     Jan 06
                              1 Jan 04 to 1        2.600     2,443,518              -     (714,750)          -        1,728,768
                                     Jan 08
                                  29 Aug 04        0.475             -        851,250     (801,250)          -           50,000
                                  12 Nov 04        0.335             -      3,235,000      (80,000)          -        3,155,000
                                                         ----------------------------------------------------------------------
                                                            24,021,498      6,859,955   (5,516,281)    (47,240)      25,317,932
                                                         ----------------------------------------------------------------------

     In addition at 31 December 2000, awards over 798,024 American
     Depository Shares (December 2000: 120,000) had been granted to an
     employee employed by the Group. The awards have been issued in five
     tranches and some of the awards had been granted subject to the
     performance of the Group (performance awards). Details of the awards
     are provided below:

<CAPTION>
                                                           31 Dec 2000
         Award Type                    Date      Exercise    Number of                               Exercise      31 Dec 2001
                                exercisable     price ($)       awards    New Awards       Lapses     awards    Number of awards
         -----------------------------------------------------------------------------------------------------------------------
<S>                           <C>            <C>            <C>           <C>          <C>           <C>        <C>

         Performance awards    11 Dec 03 to        25.000      120,000              -     (120,000)          -                 -
                                  11 Dec 05
                             26 March 04 to        18.188            -        185,636      (50,895)          -           134,741
                                26 March 06
                               8 June 04 to        18.188            -        124,439      (24,760)          -            99,679
                                26 March 06
                               8 June 04 to        16.200            -         83,949             -          -            83,949
                                26 March 06
                                  29 Aug 04         3.290            -         73,000             -          -            73,000
                                  29 Aug 04         3.290            -         70,000      (50,000)          -            20,000
                                  12 Nov 04         2.300            -        141,000       (5,000)          -           136,000
                                                         -----------------------------------------------------------------------
                                                               120,000        678,024     (250,655)          -           547,369
</TABLE>

     The Group also operates a SAYE share ownership plan however the number of
     shares involved is immaterial.


                                      101
<PAGE>


23   Capital commitments

                                                   31 Dec 2001       31 Dec 2000
                                                   (pound)'000       (pound)'000
     Contracts placed for future capital
     expenditure not provided in the financial           5,246            17,432
     statements

24   Operating lease commitments

     At 31 December the Group has lease agreements in respect of properties,
     vehicles, plant and equipment, for which the payments extend over a number
     of years.

<TABLE>
                                                Vehicles,                                     Vehicles,
                                   Property     plant and                                     plant and
                                     31 Dec     equipment           Total       Property      equipment           Total
                                       2001   31 Dec 2001     31 Dec 2001    31 Dec 2000    31 Dec 2000     31 Dec 2000
                                (pound)'000   (pound)'000     (pound)'000    (pound)'000    (pound)'000     (pound)'000
<S>                              <C>           <C>             <C>            <C>            <C>             <C>
     Annual commitments under
     non-cancellable operating
     leases expiring:

     Within one year                  4,285         1,311           5,596          2,601          1,903           4,504
     Between one and five            54,452         4,012          58,464         78,830          7,527          86,357
     years
     After five years               157,112           182         157,294         59,829             31          59,860
                                -----------   -----------     -----------    -----------    -----------     -----------
                                    215,849         5,505         221,260        141,260          9,461         150,721
                                ===========   ===========     ===========    ===========    ===========     ===========

                                                                                             31 Dec 2001    31 Dec 2000
                                                                                                   Total          Total
                                                                                            (pound)'000     (pound)'000
     Minimum future lease payments under non-cancellable operating leases:
     Amounts due within one year                                                                221,354         150,721
     Amounts due between one and two years                                                      217,154         149,732
     Amounts due between two and three years                                                    202,742         143,571
     Amounts due between three and four years                                                   189,295         114,692
     Amounts due between four and five years                                                    171,033          88,320
     Amounts due after five years                                                               748,401         245,420
                                                                                            ------------    ------------
                                                                                              1,749,979         892,456
                                                                                            ============    ============
</TABLE>

25   Contingent liabilities

     The Group has bank guarantees and letters of credit held with certain
     banks totaling (pound)28,358,000 (December 2000: (pound)42,183,000),
     The Company also acts as a guarantor for certain obligations of other
     subsidiary entities.

26   Related party transactions

     During the year ended 31 December 2001 the Group received management
     fees of (pound)4.2 million (December 2000: (pound)3.0 million) from its
     joint venture entities as listed in note 30. At 31 December 2001,
     (pound)4.1 million (December 2000: (pound)1.9 million) was due to the
     Group from the joint ventures.

27   Ultimate parent company and controlling party

     Maxon Investments BV, a company incorporated in the Netherlands is
     considered as the ultimate parent company. M L J Dixon is considered
     the ultimate controlling party by virtue of his effective controlling
     interest in the equity shares of the Company via Maxon Investments BV.


                                      102
<PAGE>


28   Summary of differences between UK and US GAAP financial statements

     The Group's consolidated financial statements are prepared in
     accordance with UK GAAP, which differs in certain respects from US
     GAAP. Differences which have a significant effect on the consolidated
     net loss and shareholders' funds of the Group are set out below.

     (a) Deferred taxes
     Under UK GAAP, deferred taxes are accounted for using the liability
     method to the extent that it is considered probable that a liability
     or asset will crystallize in the foreseeable future. Under US GAAP,
     income taxes are accounted for under the asset and liability method.
     Deferred tax assets and liabilities are recognized for the future tax
     consequences attributable to differences between the financial
     statement carrying amounts of existing assets and liabilities and
     their respective tax bases and operating loss carryforwards. Deferred
     tax assets and liabilities are measured using the enacted tax rate
     expected to apply to taxable income in the years in which these
     temporary differences are expected to be recovered or settled. The
     effect on deferred tax assets and liabilities of a change in tax rates
     is recognized in income in the period that includes the enactment
     date. Valuation allowances are provided to the extent that the
     realization of deferred tax assets is not more likely than not.

     (b) Share option schemes
     Under UK GAAP, options granted to employees by the Company to
     subscribe in the Company's shares where the exercise price of the
     option is linked to performance do not result in any compensation
     costs being recorded by the Company if the stated exercise price is
     equal to or in excess of the fair value of the underlying ordinary
     shares at the date of grant.

     Under US GAAP, Accounting Principles Board Opinion No. 25, "
     Accounting for Stock Issued to Employees" compensation cost must be
     recognized if the option plan contains performance related criteria
     which results in the option plan being accounted for as a variable
     plan. Expense is recorded in each period to the measurement date or
     vesting date for increases in the fair value of the underlying
     ordinary shares over the stated exercise price of the share options
     with an offsetting credit to the share premium amount. However under
     UK GAAP and US GAAP any cash awards are recorded as a liability at
     each balance sheet date. Under UK GAAP, compensation expense is not
     recorded in relation to options granted to an employee by the primary
     shareholder of the Company.

     In November 1999, Maxon granted an option in favor of affiliates of
     Deutsche Bank and Apollo, two significant shareholders in the Group,
     over 3,926,484 shares for an aggregate strike price of (pound)1. The
     options were exercisable within twelve months (or such shorter period
     ending on the date on which an exit, being either an initial public
     offering or completion of the disposal of all or substantially all of
     the Group's shares or assets, occurs) from the earlier of the date on
     which the board of Directors notifies the Deutsche Bank and Apollo
     affiliates in writing that an exit is imminent and the date of an
     announcement to the public of an intention to proceed with an initial
     public offering. UK GAAP is not prescriptive with respect to
     accounting for transactions by the principal shareholder which benefit
     the Group. Under US GAAP, AIN-APB25. No.1, " Stock Plans Established
     by a Principal Stockholder" provides guidance for accounting for
     compensatory and non-compensatory stock plans established by a
     principal stockholder and, by analogy, for other transactions entered
     into by a principal stockholder that may benefit the company. The
     option agreement specified that it was for the benefit of Maxon and
     for the benefit of and on behalf of the Group, and was made in
     consideration of Deutsche Bank and Apollo waiving certain rights
     contained in the shareholders' agreement. As such, the effects of the
     option would be recorded wholly within shareholders' funds.


                                      103
<PAGE>


     The compensation expense adjustment for 2001 of (pound)6.8 million is made
     up as follows:

     o    a UK/US GAAP difference relating to reward options of
          (pound)7.4million which is a reversal of the exceptional credit under
          UK GAAP relating to Reward options.

          UK GAAP reversal  (pound)8.7million
          US GAAP reversal  (pound)1.3million
                            -----------------
          US GAAP charge    (pound)7.4million

     The original UK GAAP charge in 2000 was the difference between the
     exercise price of the reward options at (pound)0.05 and the IPO price of
     (pound)2.60 multiplied by the number of Reward options issued (less lapsed
     Reward options). Under UK GAAP at December 31, 2000 this was taken as a
     one-off charge and amounted to (pound)9.2 million. Since the market price
     dropped to around (pound)0.52 at December 31, 2001 the majority of the
     accrual ((pound)8.7 million) had to be reversed. At December 31, 2000,
     under US GAAP the UK GAAP original debit was amortized over the vesting
     period, therefore a much smaller debit was taken under US GAAP in 2000,
     and therefore a lower US GAAP adjustment arises this year.

     o    a US GAAP charge of (pound)1.5 million also arises relating to the
          Premier options, the charge being the number of options multiplied by
          the difference between the usual exercise price of (pound)1.455 and
          (pound)2.60. This is amortised over the vesting period and is charged
          under US GAAP regardless of the movement in the market value. There
          is no charge taken under UK GAAP in relation to these Premier
          options.

     o    a US GAAP difference also arises in relation to National Insurance.
          Under UK GAAP a credit was taken of (pound)1.6 million as the
          majority of the accrual for National Insurance was released due to
          the movement in the market value. Under US GAAP there is no charge
          for National Insurance therefore the credit is reversed.

     o    a US GAAP credit of (pound)3.6 million was also taken in relation to
          Performance options. In December 31, 2000 a charge of (pound)3.6
          millon was taken to US GAAP profit to account for the difference
          between the exercise price and market value. Since the market value
          was lower than the exercise price on December 31, 2001 that charge
          has been reversed. There has never been a charge taken to UK GAAP
          profit for these options.

     o    The remaining (pound)100,000 US GAAP credit relates to Phantoms
          options. Certain of the options under the Reward, Premier and
          Performance plans are to be settled by cash based on the increase in
          value of our share price from grant until exercise. Any cash payments
          would be treated as compensatory and would qualify for variable plan
          accounting under AP 25. Under US GAAP these awards are 'marked to
          market' with the compensation expense recorded being the increase in
          the value of the underlying shares and amortized over the vesting
          period. Under UK GAAP the compensation expense is calculated in the
          same way, however there is no amortization over the vesting period.

     (c) Share purchase warrants
     Under UK GAAP, the recognition and measurement of share purchase warrants
     is not prescribed where the company is not a party to the warrant
     agreement. US GAAP is prescriptive and requires a portion of the proceeds
     from the issuance of debt with detachable warrants to be allocated to
     those warrants. The allocation between debt and warrants should be based
     upon the relative fair values of the two at time of issuance. If the
     contract does not give the issuing company the choice of cash settlement
     or settlement in shares, public companies should report the proceeds from
     the issuance of share purchase warrants as liabilities and subsequently
     measure the share purchase warrants at fair value with changes in fair
     value reported in earnings. The debt "discount" should be amortized using
     the effective interest method over the life of the debt.

     (d) Provision for onerous lease commitments

     Under UK GAAP, a company is required to provide for the onerous (i.e.
     loss-making) element of any present leasehold obligations. Regus reviewed
     its entire property portfolio and made appropriate provision for those
     leases which it felt were likely to result in net operating losses for the
     foreseeable future. US GAAP requires no such provision.

     (e) Franchise Revenue Recognition

     UK GAAP does not require the receipt of up front franchise fees to be
     recognized over the life of the franchise agreement but are recorded as
     the revenue is received in the franchisers accounts. Under US GAAP, up
     front payments from franchisees are required to be recognized over the
     length of the agreement.

     (f) Earnings per share (EPS)

     Under UK GAAP, primary EPS is based on the weighted average number of
     ordinary shares outstanding during the period. Primary EPS is the
     profit/(loss) in pence attributable to each equity share, based on the
     profit/ (loss) for the financial period attributable to ordinary
     shareholders divided by the weighted average number of ordinary shares in
     issue during the period. This method is used in computing basic EPS under
     US GAAP.

     Under FRS 14 (Earnings per share), diluted EPS must be disclosed. This is
     based on profit/(loss) for the financial period and computed using the
     weighted average number of shares in issue during the period and the
     dilutive effect of all share options and ordinary share equivalents. This
     method is similar to the treasury stock method used to compute diluted EPS
     for US GAAP purposes. Under UK GAAP, the weighted average number of
     ordinary shares in issue during the period should exclude the shares


                                      104
<PAGE>


     held by the Group's employee share ownership plans (ESOP) in respect of
     which dividends have been waived. Under US GAAP, such shares are regarded
     as treasury stock and are therefore not included. As of 31 December 2001,
     the ESOP had acquired 18,120,670 shares.

     As of 31 December 2001 and 31 December 2000, potentially dilutive options
     representing 28,054,777 and 24,621,498 shares, respectively, were excluded
     from the calculation of basic EPS, as they were deemed to be anti-dilutive.

     Classification differences between UK & US GAAP
     (g) Cash flows
     Under UK GAAP, the Group complies with FRS 1 (revised) (Cash Flow
     Statements), the objective and principles of which are similar to those
     set out in Statement of Financial Accounting Standards No. 95 (Statement
     of Cash Flows) (SFAS 95). The principal difference between the two
     standards is in respect of classification. Under FRS 1 (revised), the
     Group presents its cash flow for (a) continuing operating activities; (b)
     returns on investment and servicing of finance; (c) taxation; (d) capital
     expenditures and financial investment; (e) acquisitions and disposals; (f)
     dividends to ordinary shareholders; (g) management of liquid resources;
     and (h) financing activities. SFAS 95 requires only three categories of
     cash flow activity, those relating to (a) operating; (b) investing; and
     (c) financing activities.

     The cash flows within the UK headings of " Continuing operating
     activities", " Returns on investments and servicing of finance" and "
     Taxation" would all be included within the heading of " Net cash provided
     by operating activities" under SFAS 95. Likewise, the UK headings of "
     Capital expenditure and financial investment" and " Acquisitions and
     disposals" plus movements in restricted cash excluded from cash and cash
     equivalents as set out below corresponds with " Cash flows from investing
     activities" under SFAS 95, and " Management of liquid resources" and "
     Financing" under UK GAAP, subject to movements in restricted cash being
     classified within " Cashflows from investing activities" , correspond with
     " Cash flows from financing activities" under US GAAP. Other non cash
     movements comprise new finance leases and reclassifications between
     categories and the amounts of these adjustments are set out in note 20(d).

     In addition under FRS 1 (revised), cash represents cash at bank and in
     hand less bank overdrafts. Movements of liquid resources are included
     under a separate heading. Under US GAAP, cash and cash equivalents are not
     offset by bank overdrafts repayable within twenty four hours from the date
     of the advance. Such overdrafts are classified within financing activities
     under US GAAP. In addition, cash and cash equivalents would include cash
     and short-term investments with original maturities of three months or
     less. Under US GAAP cash and cash equivalents for cashflow purposes
     excludes restricted cash, primarily deposits held as security for lease
     guarantees, of (pound)40,945,000 and (pound)31,600,000 at 31 December 2000
     and 2001 respectively. Movements in restricted cash are classified within
     " Cashflows from investing activities".

     Set out below, for illustrative purposes, are summary consolidated
     statements of cash flows under US GAAP:

<TABLE>
                                                             12 months to       12 months to    12 months to
                                                              31 Dec 2001        31 Dec 2000     31 Dec 1999
                                                              (pound)'000        (pound)'000     (pound)'000

<S>                                                          <C>               <C>               <C>
     Net cash provided by operating activities                     38,024            108,672           6,661
     Net cash used in investing activities                       (104,605)          (109,336)        (90,809)
     Net cash provided by financing activities                     24,300             68,431         103,892
     Effect of exchange rate changes on cash                       (1,121)             1,482          (1,344)
                                                             ------------       ------------    ------------
     Net increase in cash and cash equivalents                    (43,402)            69,249          18,400
     Other non cash movement                                            -              9,497          (8,114)
                                                             ------------       ------------    ------------
                                                                  (43,402)            78,746          10,286
     Cash and cash equivalents at the beginning of year           128,877             50,131          39,845
                                                             ------------       ------------    ------------
     Cash and cash equivalents at the end of the year              85,475            128,877          50,131
                                                             ============       ============    ============
</TABLE>

     (h) Foreign Currency Translation
     Under UK GAAP the financial statements of the Group's foreign subsidiaries
     are measured using local currency (pounds sterling) as the functional
     currency. Assets and liabilities of these subsidiaries are translated at
     exchange rates as of the balance sheet date. Revenues and expenses are
     translated at average rates of exchange in effect during the year. Gains
     and losses arising on these translations are taken to reserves, net of
     exchange differences arising on related foreign currency borrowings.


                                      105
<PAGE>


     Under US GAAP, the financial statements of the Group's foreign
     subsidiaries are measured using local currency (pounds sterling) as the
     functional currency. Assets and liabilities of these subsidiaries are
     translated at exchange rates as of the balance sheet date. Revenues and
     expenses are translated at average rates of exchange in effect during the
     year. The resulting cumulative translation adjustments are recorded as a
     separate component of shareholders' funds/(deficit) as other comprehensive
     income. Foreign currency transaction gains and losses are included in
     consolidated net profit/(loss).

     Under UK GAAP the cumulative foreign exchange differences as at 31
     December, 2001, were (pound)3,000 (2000: (pound)(204,000)). Under US GAAP
     the cumulative foreign exchange adjustments are (pound)346,000 (December
     2000: (pound)129,000). The difference in foreign exchange differences
     between UK and US GAAP relates to exchange differences on deferred tax
     assets held under US GAAP.

     (i) Current assets & liabilities
     Current assets under UK GAAP include debtors which fall due after more
     than one year and restricted cash. Under US GAAP, such assets would be
     reclassified as non-current assets. Restricted cash of (pound)31,600,000
     (December 2000: (pound)40,945,000) would be reclassified under US GAAP from
     current assets to non-current assets.

     (j) Employee share trust arrangements
     An employee share trust has been established in accordance with certain
     employee share option schemes. Under UK GAAP, the Company's ordinary
     shares held by the employee share trust are included at either historical
     net book value or, in certain circumstances, at closing market value in
     fixed asset investments. As at 31 December 2001 the employee share trust
     held ordinary shares with a historical net book value of (pound)3,805,000.
     Under US GAAP, such shares are classified as treasury stock and presented
     at their historical cost as a deduction in shareholders' equity.

     (k) Extraordinary items
     Under UK GAAP, extraordinary items are those possessing a high degree of
     abnormality which arose from events or transactions that fall outside the
     ordinary activities of the business. Extraordinary items are included in
     the profit and loss account after " Profit on ordinary activities after
     tax". It is very rare under UK GAAP for a business to account for an item
     as extraordinary given the narrow definition.

     Under US GAAP, extraordinary items are considered both unusual in nature
     and infrequent in occurrence.

     (l) SFAS 130 (Reporting Comprehensive Income)

     Statement of Financial Accounting Standards No 130 (Reporting
     Comprehensive Income) (SFAS 130) requires that all items that are required
     to be recognized under accounting standards as components of comprehensive
     income should be reported in the financial statement that is displayed
     with the same prominence as other financial statements. It requires that
     an enterprise (i) classify items of other comprehensive income by their
     nature in a financial statement and (ii) display the accumulated balance
     of other comprehensive income separately from retained earnings and
     additional paid-in capital in the equity section of statement of financial
     position. Required disclosures have been made in the Group's financial
     statements in the statement of recognized gains and losses.

     (m) Effect of differences between UK & US GAAP

     The following is a summary of the material adjustments to net loss which
     would have been required if US GAAP had been applied instead of UK GAAP:

<TABLE>
                                                             12 months to       12 months to        12 months to
                                                              31 Dec 2001        31 Dec 2000         31 Dec 1999
                                                              (pound)'000        (pound)'000         (pound)'000

<S>                                                           <C>                 <C>                 <C>
    Net loss reported in accordance with UK GAAP (1)             (118,238)           (13,530)            (56,446)
    US GAAP adjustments:
    Franchise revenue                                                (682)                 -                   -
    Stock purchase warrants                                             -                  -              (1,500)
    Amortisation of debt discount                                       -                  -              (2,038)
    Compensation expense related to options granted by                  -             (6,836)            (11,840)
    shareholder
    Compensation expense related to other variable                 (6,809)             3,997                   -
    plan options
    Provision for onerous leases                                   27,446                  -                   -
    Deferred taxes                                                  5,438               (474)                644
    Write down of employee share trust shares                      41,395                  -                 611
                                                             -------------      ------------        ------------
    Net loss in conformity with US GAAP                           (51,450)           (16,843)            (70,569)
                                                             =============      ============        ============
</TABLE>


                                                       106
<PAGE>


<TABLE>
<S>                                                                     <C>                <C>             <C>
     Weighted average shares outstanding ('000)                         581,649            502,773         469,486
     Loss per ordinary share before extraordinary items                    (8.8)              (3.4)          (14.7)
     (p)
     Loss per ordinary share after extraordinary items                     (8.8)              (3.4)          (15.0)
     (p)

     (1) In the year ended 31 December, 1999 there was an extraordinary
     cost of (pound)1,775,000 relating to the early extinguishment of debt.

     The following is a summary of the material adjustments to
     shareholders' funds/ (deficit) which would have been required if US
     GAAP had been applied instead of UK GAAP:
<CAPTION>

                                                                    31 Dec 2001        31 Dec 2000     31 Dec 1999
                                                                    (pound)'000        (pound)'000     (pound)'000
<S>                                                                  <C>               <C>             <C>
     Shareholders' funds/(deficit) recorded in accordance with
     UK GAAP                                                             88,445            203,090         (23,731)
     US GAAP adjustments:
     Franchise revenue                                                     (682)                 -               -
     Stock purchase warrants and debt discount                                -                  -          (8,500)
     Compensation expense related to other variable plan options            595             10,778               -
     (1)
     Provision for onerous leases                                        27,446                  -               -
     Deferred taxes                                                       7,341              1,902           2,376
     Employee share trust (investment in own shares)                     (3,805)           (47,021)              -
                                                                    -----------        -----------     -----------
     Shareholders' funds/(deficit) recorded in accordance with
     US GAAP                                                            119,340            168,749         (29,855)
                                                                    ===========        ===========     ===========
</TABLE>

     (1) Shareholders' funds/(deficit) was not affected by the differences
     between UK GAAP and US GAAP on these options as the difference
     resulted in recording an increase to expense and a corresponding
     increase to contributed capital, except for awards granted to
     employees where the company will pay a cash bonus for the difference
     between the fair value and the base price of the awards.

29   Additional US GAAP disclosures

     (a) Income tax and deferred tax
     Loss before tax under UK GAAP between UK and overseas was as follows:

                                 12 months to      12 months to    12 months to
                                  31 Dec 2001       31 Dec 2000     31 Dec 1999
                                  (pound)'000       (pound)'000     (pound)'000

     UK                               (38,402)           21,994          (9,236)
     Overseas                         (71,679)          (25,851)        (45,703)
                                 ------------       -----------     -----------
                                     (110,081)           (3,857)        (54,939)
                                 ============       ===========     ==========


                                      107
<PAGE>


     The significant components of deferred income tax expense attributable
     to income from continuing operations for the years ended 31 December,
     2001, 2000 and 1999 as adjusted for US GAAP are as follows:
<TABLE>

                                              12 months to      12 months to   12 months to
                                               31 Dec 2001       31 Dec 2000    31 Dec 1999
                                              (pound) '000      (pound) '000   (pound) '000

<S>                                                <C>                 <C>          <C>
     Deferred tax (exclusive of the effects
     of other components  below)                   (5,376)             1,267         (1,357)
                                              ============      ============   ============
</TABLE>

     The tax effects of temporary differences that give rise to significant
     portions of the deferred tax assets and deferred tax liabilities at 31
     December, 2001 and 2000 adjusted for US GAAP are presented below:

                                               12 months to       12 months to
                                                31 Dec 2001        31 Dec 2000
                                                (pound)'000        (pound)'000
     Deferred tax assets:
     Net operating loss carry forwards               47,409             27,970
     Start up costs and reserves                     21,859              9,390
     Other                                           10,253              3,219
                                              -------------       ------------
     Total gross deferred tax assets                 79,521             40,579
     Less valuation allowance                       (68,216)           (33,976)
                                              -------------       ------------
     Net deferred tax assets after
     valuation allowance                             11,305              6,603
                                              -------------       ------------

     Deferred tax liabilities:
     Accelerated capital allowances                  (3,856)            (3,362)
     Other                                             (964)            (2,132)
                                              -------------       ------------
     Total gross deferred liabilities                (4,820)            (5,494)
                                              -------------       ------------
     Net deferred tax assets                          6,485              1,109
                                              =============       ============

     The valuation allowance for deferred tax assets as of 31 December 2001 and
     2000 was (pound)68,216,000 and (pound)33,976,000, respectively. The net
     change in the total valuation allowance for the years ended 31 December,
     2001 and 2000 was an increase of (pound)34,240,000 and (pound)11,492,000
     respectively. In assessing the realisability of deferred tax assets,
     management considers whether it is more likely than not that some portion
     or all of the deferred tax assets will not be realized. The ultimate
     realization of deferred tax assets is dependent on the generation of
     future taxable income during the periods in which those temporary
     differences become deductible. Management considers the scheduled reversal
     of deferred tax liabilities, projected future taxable income, and tax
     planning strategies in making this assessment. Management believes it is
     more likely than not that the Group will realize benefits of these
     deductible differences, net of existing valuation allowances at 31
     December 2001.

     (b) Share compensation
     Employee Share Option Scheme

     In October 1995, the Financial Accounting Standards Board issued
     Statement of Financial Accounting Standards No. 123 (Accounting for
     Stock-Based Compensation) (SFAS 123), which encouraged the use of a
     fair value based method of accounting for compensation expense
     associated with share options and similar plans. For US GAAP purposes,
     the Company has elected to continue to use the intrinsic value based
     method prescribed by Accounting Principles Board Opinion No. 25
     (Accounting for Stock Issued to Employees) (APB 25), as permitted by
     SFAS 123. SFAS 123 requires additional disclosures, including
     pro-forma calculations of net earnings and earnings per share as if
     the fair value method of accounting prescribed by SFAS 123 had been
     applied in 1999, 2000 and 2001.

     The Company issued share options to substantially all its employees
     during 1999. Further issues were made during 2000 and 2001. Employees
     received share options to acquire a fixed number of shares based on
     their salary level and position in the Company. All employees received
     options that are subject to a performance target (the performance
     options) and all employees received options designated as reward
     options. The exercise price for share options granted to employees is
     fixed at the date of the grant although the directors of the Company
     have the discretion to waive some or all of the exercise price of the
     reward options. The fair value of shares at the date of grant is equal
     to the exercise price.


                                      108
<PAGE>


     The options vested on the later of a flotation of the Company's shares or
     defined periods as follows: in the case of ordinary and performance
     options, vesting occurs in three equal installments on 1 January of each
     of 2003, 2004 and 2005. In the case of reward options, vesting occurs in
     two equal installments on 1 January in each of 2003 and 2004. In each
     case, the vesting period was extended by the directors as the market
     capitalization of the Company on flotation exceeded (pound)1 billion. The
     performance options require that the value of the Company's ordinary
     shares outperform the Financial Times Stock Exchange 250 Index by the
     following margins over the option period:

     30% for options exercisable in 2003 or before;
     40% for options exercisable in 2004; or
     50% for options exercisable in 2005 or after.

     If a target is not met, the performance options will only be exercisable
     if and when a subsequent target is met.

     Certain countries in which the Company operates do not provide for the
     issuance and exercise of share options. In these situations, the awards
     granted to the employees represent rights under which the Company will pay
     a cash bonus to the employee for the difference between the fair value of
     the Company's shares on the date of exercise and a base price for the
     award. The base price is an amount determined by the board of directors of
     the Company on the date of grant, which cannot be less than the fair value
     of the Company's shares at that date. As of 31 December, 2001 and 2000,
     these awards were not a material portion of the awards granted to date.

     If a participant's employment with the Group ends, his options or awards
     will normally lapse unless he leaves in specified circumstances such as
     injury, disability or redundancy. In such circumstances, his option or
     award may be exercised within 12 months of the later of the date on which
     his employment ends and the last vesting date for the option or award.

<TABLE>
                Options outstanding     31 Dec 1999   Granted   Forfeited  31 Dec 2000   Granted  Forfeited  Exercised  31 Dec 2001
<S>                                     <C>           <C>       <C>        <C>           <C>      <C>        <C>        <C>
          Number of options (000's)
     UK shares
            Exercise price(pound)0.335            -         -          -             -     3,430        (80)          -       3,350
            Exercise price(pound)0.475            -         -          -             -     1,051       (951)          -         100
            Exercise price(pound)0.050        3,897       150       (436)        3,611         -       (403)        (47)      3,161
            Exercise price(pound)1.455       17,075     2,851     (3,262)       16,664         -     (2,434)          -      14,230
            Exercise price(pound)2.275            -         -          -             -        85           -          -          85
            Exercise price(pound)2.560            -         -          -             -     2,294       (601)          -       1,693
            Exercise price(pound)2.600            -     4,075       (328)        3,747         -     (1,048)          -       2,699
     ADR shares
            Exercise price $2.300                 -         -          -             -       141         (5)          -         136
            Exercise price $3.290                 -         -          -             -       143        (50)          -          93
            Exercise price $16.200                -         -          -             -        84           -          -          84
            Exercise price $18.188                -         -          -             -       310        (76)          -         234
            Exercise price $25.000                -       120          -           120         -       (120)          -           0
     SAYE shares
            Exercise price(pound)2.42             -        59          -            59         -         (8)          -          51


                                      109
<PAGE>


            Exercise price(pound)2.64             -       734          -           734         -       (271)          -         463
            Exercise price(pound)15.98*           -        24          -            24         -         (6)          -          18
</TABLE>

     * over ADR shares

     Options have been issued at an exercise price ranging from (pound)0.05 to
     (pound)2.60. From the date of modification to the date the award is
     exercised, such awards shall be accounted for as variable. Compensation
     expense is recorded over the vesting period.

     The weighted average remaining contractual life amounts to 8.5 years (103
     months) (2000: 9.1 years (111 months). The Company granted 20,971,634
     options in December 1999, 2,790,203 options in January 2000, 100,000
     options in February 2000, 111,061 options in May 2000, 3,648,258 options
     in August 2000, 426,295 options in September 2000, 817,358 sharesave
     options in November 2000, 1,942,441 in March 2001, 436,264 in June 2001,
     1,051,250 in August 2001 and 3,430,000 in November 2001. In addition, the
     company issued 120,000 options over American Depositary Receipts in
     December 2000, 185,636 in March 2001, 208,388 in June 2001, 143,000 in
     August 2001 and 141,000 in November 2001.

     Share-based compensation represents the difference between the exercise
     price of share options granted in 1999, 2000 and 2001 and the fair market
     value of the underlying ordinary shares at each period end. The Company
     recorded a compensation expense under APB 25 for the years ended 31
     December 2001 of (pound)6,809,000 (December 2000: ((pound)3,997,000);
     December 1999: nil). The estimated fair value for purposes of APB 25 is
     based on a valuation of the Company at the time of the issuance of shares
     in October and November 1999.

     The Company did not issue stock options before 1999 therefore SFAS 123 has
     no effect on the Company's net loss for the year ended 31 December 1998.
     If compensation expense had been determined based upon the estimated grant
     date fair value in accordance with SFAS 123, the Company's net loss for
     the year ended 31 December, 1999, 2000 and 2001 would have been as
     follows:

<TABLE>
                                                     12 months to         12 months     12 months to
                                                      31 Dec 2001    to 31 Dec 2000      31 Dec 1999
                                                      (pound)'000       (pound)'000     (pound)'000
<S>                                                    <C>            <C>               <C>
     Net Loss:
     As reported                                          (51,450)          (16,843)        (70,569)
     Proforma                                             (47,318)          (19,282)        (70,672)

     Net loss per ordinary share                                p                 p               p
     As reported                                             (8.8)             (3.4)          (15.0)
     Proforma                                                (8.1)             (3.8)          (15.1)

     Fair values above were determined using
     the Black-Scholes option-pricing model.
     The key assumptions used in the Black-Scholes
     model were as follows:

     Dividend yield                                             0%                0%              0%
     Expected volatility                                       61%               33%              0%
     Risk free interest rate                                  5.2%              5.2%            5.6%
     Expected life                                      2-6 years         3-6 years         7 years
</TABLE>

     The weighted average fair value of stock options granted during 1999, 2000
     and 2001 is (pound)0.47, (pound)2.59 and (pound)0.45 respectively and is
     being amortized over the vesting periods ranging for up to five years from
     Ist January 2003 to Ist January 2008.

     SAYE scheme
     The group operates several sharesave plans in various countries which
     allow all employees to save a regular sum over 2 to 5 years after
     which the accumulated fund belonging to the employee can be used to
     purchase shares in Regus plc at a price from (pound)2.42 to
     (pound)2.64 depending upon local country legislation, a discount of
     15-20% at the date of the grant. Any options granted where the
     discount on the exercise price is greater than 15% are considered
     compensatory under US GAAP and any expense is recognized over the
     life of the savings contract.


                                      110
<PAGE>


     Executive Officer Share Option Agreements

     In November 1992 Maxon entered into option agreements with certain
     executive officers of the Company related to shares of the Company held by
     Maxon as part of the compensation for the services of these executive
     officers. These agreements covered 8% of the shares of the Company held by
     Maxon, with a stated exercise price of (pound)0.00375 per share, both as
     adjusted for subsequent share splits. Until 30 June, 2000, this exercise
     price was subject to adjustment based on a proportional share of any
     future capital contributions made by Maxon to the Company. There have been
     no such contributions since the date of these agreements. These options
     vest over periods from 31 December, 2002 to 31 December, 2003. On 30 June,
     2000 the agreement was amended to fix the exercise price at (pound)0.00375
     irrespective of any future capital contributions made by Maxon to the
     Company.

     In February 1999, Maxon entered into a supplemental agreement with one of
     the executive officers whereby Maxon paid the executive officer US$2
     million in exchange for the forfeiture of a portion of the shares covered
     under the option agreements leaving a total of approximately 23,140,000
     shares outstanding under the option agreements. The repurchase of the
     options resulted in no additional compensation expense, as the previously
     recorded compensation expense related to those options had already
     exceeded the consideration paid for the retirement of those options.








                                      112
<PAGE>


     As the exercise price was subject to adjustment, these option agreements
     required variable plan accounting under APB 25 up to 30 June, 2000.
     Accordingly, the Company has recorded a compensation gain/(expense) at
     each period end for the increase or decrease in the value of the
     underlying shares. From 1 July, 2000, as the exercise price is fixed,
     these option agreements will require fixed plan accounting and hence no
     further compensation gain or expense is expected. Therefore no
     compensation gain/(expense) was recorded in the year ended 31 December
     2001 (December 2000: ((pound)6,836,000); (December 1999:
     ((pound)11,840,000)) from the fluctuations in the fair value of the
     underlying securities.

     At 31 December 1999, there were no directly comparable quoted companies
     against which the Company's shares can be valued. Hence the fair value of
     the underlying shares have been calculated by reference to the
     subscription prices for shares issued by the Company to independent third
     parties on 3 August 1998 and October/November 1999. The subscription price
     for the shares issued at 3 August 1998 and October/November 1999 have been
     used to calculate the fair value of the options as at 31 December 1999.
     For the year ended 31 December 2000 and 2001, the value of the Company has
     been calculated by using the companies quoted price on the London Stock
     Exchange during 2000 and 2001.

     (c) Stock purchase warrants and options
     The Company entered into a medium term (pound)10 million secured loan
     facility with Union Bank of Switzerland (UBS) dated 12 November, 1997. The
     facility included a detachable stock warrant agreement of the same date
     among Maxon, Mark Dixon and UBS that grants options to UBS on a proportion
     of the shares of the Company held by Maxon. These options were exercisable
     upon the earliest of an initial public offering of ordinary shares of the
     Company's stock, a significant trade sale of the Company, or five years
     from the date of the warrant agreement. Under the original agreement the
     exercise price of the warrants was nominal and the number of shares
     granted via these warrants was contingent upon the timing and valuation of
     the Company, with a stated maximum value of (pound)8.5 million.

     On 3 August, 1998 Maxon and UBS entered into a deed of amendment to the
     UBS option agreement under which UBS agreed to waive its rights to receive
     shares of the Company at the time of an initial public offering in
     consideration for a payment by Maxon of (pound)8.5 million to be paid at
     the time of the initial public offering.

     Under UK GAAP this arrangement has no impact on the Company's financial
     statements as the Company is not a party to the warrant agreement.
     However, under US GAAP when the principal shareholder enters into
     transactions that directly relate to obligations of the Company these
     transactions should be accounted for as if the Company had entered into
     the transaction directly.

     At the date of the loan facility and warrant agreement, the fair value of
     the related warrants of (pound)2.6 million is reflected under US GAAP as a
     liability to the Company, due to UBS' ability to require the settlement of
     warrants in cash, and as a discount against proceeds. This discount has
     been amortized using the effective interest method over the life of the
     loan, with additional interest expense of (pound)527,000 in the year ended
     31 December, 1998. The loan facility was repaid in June 1999, with the
     unamortized portion of the discount charged to the profit and loss account
     at that time. The total additional interest expense in the year ended 31
     December, 1999 was (pound)2,038,000, which includes the amortization of
     (pound)263,000 and the write-off of the unamortized portion of the loan
     discount of (pound)1,775,000.

     The warrant liability was adjusted to the fair value at each balance sheet
     date. The Company has recorded expenses of (pound)1.5 million and
     (pound)nil for the years ended 31 December, 1999, and 2000 related to
     these increases in fair value. This results in a liability of (pound)8.5
     million at 31 December 1999. On the date of the IPO the warrant agreement
     between UBS and Maxon was settled, and the liability was reclassified as a
     contribution to share capital.

     (d) Convertible Bond Issue
     The Directors felt that the business would be additionally protected by
     the creation of a cash reserve and raised (pound)40m on 28 December 2001
     by way of a convertible bond issue.

     The option to convert the bond lies with Regus (unless the share price
     rises above 86.32 pence) and the Directors will closely monitor the
     trading performance and projected cashflows in order to be able to make an
     early decision to convert the bond if conditions require.

     (e) Segment information
     SFAS 131 (Disclosures about Segments of an Enterprise and related
     Information)

     Statement of Financial Accounting Standards No. 131
     (Disclosure about Segments of an Enterprise and Related Information) (SFAS
     131) requires that companies disclose segment data based on how management
     makes decisions about allocating resources to segments and measuring their
     performance. It also requires entity-wide disclosures about the products
     and services an entity provides, the material countries in which it holds
     assets and reports revenues and its major customers.


                                      113
<PAGE>


     Pursuant to the definitions contained in SFAS 131, the Company has eight
     geographical reportable segments for the purposes of managing the
     business: UK & Ireland, Benelux, Germany, Southern Europe, Northern
     Europe, North America, South and Central America and Rest of the World.
     Each segment has separate results that are reviewed by the Group's Chief
     operating decision maker. Each segment provides the same products and
     services. The accounting policies of the segments are the same as
     described in the summary of significant accounting policies. Other office
     costs comprise head office costs net of management charges to other
     operating segments. Other assets comprise assets managed at a corporate
     level and which are not attributed to individual segments.

     The Group's interest, tax expense and exceptional items are managed
     centrally at corporate level and are not attributed to individual
     segments.

<TABLE>
                                                     Turnover                            Gross profit (centre contribution)
                                12 months to     12 months to    12 months to  12 months to 31        12 months to   12 months to
                                 31 Dec 2001      31 Dec 2000     31 Dec 1999         Dec 2001         31 Dec 2000    31 Dec 1999
                                 (pound)'000     (pound) '000    (pound) '000      (pound)'000         (pound)'000    (pound)'000
<S>                              <C>              <C>             <C>               <C>                 <C>            <C>
     Geographical analysis
     United Kingdom & Ireland        215,188          188,862         102,856           56,916              59,619         20,169
     Benelux                          32,504           25,432          17,554            4,599               8,123          5,669
     Germany                          33,652           27,388          16,410           (3,520)              6,258          1,813
     Northern Europe                  24,754           23,847          15,279           (4,981)              1,345         (1,661)
     Southern Europe                  60,422           42,266          24,496           13,036              13,488          5,009
     North America                   106,579           79,230          11,268          (27,819)             12,407         (4,854)
     South & Central America          17,517           15,066           4,378            2,595               1,443         (1,158)
     Rest of world                    34,006           27,109           8,369             (935)             (2,390)        (7,873)
                                ------------     ------------    ------------   --------------        ------------    -----------
                                     524,622          429,200         200,610           39,891             100,293         17,114
                                ============     ============    ============   ==============        ============    ===========
     Total Group                     512,633          421,125         200,601
     Total joint ventures             11,989            8,075               9
                                ============     ============   ==============

                                         Operating profit/(loss)                                Net assets/(liabilities)
                                12 months to     12 months to    12 months to            As at             As at            As at
                                 31 Dec 2001      31 Dec 2000     31 Dec 1999      31 Dec 2001       31 Dec 2000      31 Dec 1999
                                 (pound)'000      (pound)'000     (pound)'000      (pound)'000       (pound)'000      (pound)'000
     Geographical analysis                           Restated        Restated                           Restated         Restated
     United Kingdom &                 32,416           33,720           4,696           46,932            20,852           (5,952)
     Ireland
     Benelux                           1,518            3,554           2,741            4,612             1,578             (858)
     Germany                          (6,273)             551          (2,224)         (13,248)           (7,331)          (7,548)
     Northern Europe                  (9,556)          (8,272)         (9,930)         (33,667)          (24,790)         (14,546)
     Southern Europe                   6,599            5,300          (1,332)           3,120            (1,079)          (4,121)
     North America                   (55,699)         (12,724)        (15,275)         (57,388)             3,351         (11,353)
     South & Central America          (2,590)          (3,538)         (4,589)          (7,722)           (5,275)          (3,836)
     Rest of world                    (1,221)         (11,789)        (15,778)         (29,596)          (29,474)         (17,791)
     Other office costs,             (74,720)          (3,896)         (6,466)         175,749           244,832           42,099
     (liabilities)/assets
                                ------------     ------------    ------------   --------------        ------------    -----------
                                    (109,527)           2,906         (48,157)          88,792           202,664          (23,906)
                                ============     ============    ============   ==============        ============    ===========
     Total Group                    (103,955)           3,933         (48,065)          87,698           198,524          (25,112)
     Total joint ventures             (5,572)          (1,027)            (92)           1,094             4,140            1,206
                                ============     ============    ============   ==============        ============    ===========

                                         Total Assets                                       Capital Expenditure
                                       As at            As at                12 months to 31     12 months to        12 months to
                                 31 Dec 2001      31 Dec 2000                       Dec 2001      31 Dec 2000         31 Dec 1999
                                 (pound)'000    (pound) '000'                    (pound)'000     (pound) '000        (pound) '000
     Geographical analysis
     United Kingdom & Ireland        154,403          151,534                         31,291           32,265              35,079
     Benelux                          31,954           24,764                          7,496            7,963               4,137
     Germany                          16,827           19,023                          4,496            3,062               3,967
     Northern Europe                  20,775           19,135                          6,199            1,686               6,091
     Southern Europe                  44,523           35,872                         13,447            5,992               4,038
     North America                   132,581          107,090                         49,429           41,122              20,752
     South & Central America          17,228           13,325                          5,616            3,374               4,214
     Rest of world                    36,776           41,783                          6,040            9,917              14,099
     Other office assets,
     expenditure                     238,332          224,200                          4,518            6,271                 876
     Less inter-company set off     (207,107)         (92,335)                             -                -                   -
                                ------------     ------------                ---------------     ------------        ------------
                                     486,292          544,391                        128,532          111,652              93,253
                                ============     ============                ===============     ============        ============

     Total group                     470,636          530,790
     Total joint ventures             15,656           13,601
                                ============     ============
</TABLE>


                                      114
<PAGE>


30   Principal group companies

                                                                            % of
                                                     Country of       equity and
     Name of group entity                            incorporation    votes held

     Regus Business Centre SA                         Argentina           100
     Regus Centres Pty Ltd                            Australia           100
     Regus Business Centre GmbH                       Austria             100
     Regus Business Centre SA                         Belgium             100
     Skyport Brussels NV                              Belgium             100
     Regus Belgium NV                                 Belgium             100
     Regus do Brasil Ltda                             Brazil              100
     Regus Business Centers Canada LP +++             Canada               60
     Regus Business Centre Ltd                        Canada              100
     Regus Business Centre Chile Ltda                 Chile               100
     Regus Business Service Co Ltd                    China                95
     Regus Business Services (Shanghai) Ltd           China               100
     Regus Colombia Ltda                              Colombia            100
     Regus Business Centre s.r.o                      Czech Republic      100
     Regus Copenhagen ApS                             Denmark             100
     Regus Business Centre (Egypt)                    Egypt               100
     Host Regus Ltd                                   England             100
     Park Business Centres Ltd +++                    England              50
     Regus Business Centres (Holdings) Ltd*           England             100
     Regus Business Centre Trading Ltd +              England             100
     Regus Business Centres (UK) Ltd                  England             100
     Regus City Ltd                                   England             100
     Regus Management Limited                         England             100
     Regus (UK) Limited                               England             100
     Regus Finland Oy                                 Finland             100
     Regus Paris SA                                   France              100
     Regus Roissy SA                                  France              100
     Regus Business Centre GmbH                       Germany             100
     Regus Hellas SA                                  Greece              100
     Regus Business Centre Ltd                        Hong Kong           100
     Regus Central Europe Trading and Servicing Ltd   Hungary             100
     Regus Kft                                        Hungary             100
     Europa Business Centre Ltd                       Ireland             100
     Regus Ireland Ltd                                Ireland             100
     Regus Finance                                    Ireland             100
     Regus Franchise International Limited            Ireland             100
     Regus Business Centres Ltd                       Israel              100
     Regus Business Centre Srl                        Italy               100
     Regus Business Centres Italia SpA +++            Italy                65
     Regus Japan KK                                   Japan               100
     Regus Korea Limited                              Korea               100
     SIA Regus Business Centre                        Latvia              100
     Regus Luxembourg SA                              Luxembourg          100
     Regus Centres Sdn Bhd                            Malaysia            100
     Regus Business Centre S.A. de C.V.               Mexico              100
     Regus Services S.A. de C.V.                      Mexico              100
     Regus Maroc SARL                                 Morocco             100
     Skyport Business Services BV                     Netherlands         100
     Satellite Business Centre Schiphol BV            Netherlands         100
     Skyport International BV                         Netherlands         100
     Regus Amsterdam BV                               Netherlands         100
     Regus Business Centre BV                         Netherlands         100
     Regus International Holdings BV ++               Netherlands          60
     Regus Business Centre Oslo AS                    Norway              100
     Regus Business Centre (Panama) S.A.              Panama              100
     Regus Business Centre (Peru) S.A.                Peru                100
     Regus Centres Inc                                Philippines         100
     Regus Business Centre SP zoo                     Poland              100
     Regus Business Centre Ltda                       Portugal            100


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     Regus Business Centre (Romania) S.R.L.           Romania             100
     LLC Regus Business Centre                        Russia              100
     Regus Centres Pte Ltd                            Singapore           100
     Regus Business Centre Bratislava s.r.o           Slovakia            100
     Regus Business Centre SA                         Spain               100
     Business Centre Gothenburg AB                    Sweden              100
     Business Centre Stockholm AB                     Sweden              100
     Regus Business Centre (S) S.A.                   Switzerland         100
     Regus Business Centre (Tanzania) Ltd             Tanzania            100
     Regus Centres (Thailand) Ltd                     Thailand            100
     Regus Tunisie SARL                               Tunisia             100
     Regus Is Merkezi Isletmeciligi Ltd Sirketi       Turkey              100
     Regus Business Centres (Ukraine)                 Ukraine             100
     Regus Duke-Weeks Business Centres LLC +++        USA                  50
     Stratis Business Centers Inc                     USA                 100
     Regus Business Centre Corp                       USA                 100
     Regus Crescent Business Centres LLC +++          USA                  50
     Regus Equity Business Centres LLC +++            USA                  50
     Regus Venezuela C.A.                             Venezuela           100
     Regus Centre (Vietnam) Ltd                       Vietnam             100

     Investments in Group undertakings are held at cost all of which are
     included within the consolidated results. Shares listed above are
     held directly by Regus plc. where indicated by an asterisk.


     Other than Regus Business Centre BV, Regus Business Centres
     (Holdings) Ltd and Regus Finance which are investment holding
     companies, and Regus Management Limited which is a management company
     employing head office staff, the principal activity of all other
     companies is the provision of fully serviced business centres.

     + Our Azerbaijan business operates as a branch of this company.

    ++ Our South African business operates as a branch of this company.

   +++ These are joint ventures.


ITEM 19.

                                 EXHIBIT INDEX

Exhibit Number       Description of Document
------------------------------------------------------------------

   1.*         Memorandum and Articles of Association of Regus plc.

   2.*         Service Agreement for Mark Dixon.

   3.*         The following exhibits were filed as part of the Registration
               Statement on Form F-1 (Registration No. 333-12504) and
               incorporate by reference herein.

   4.1         Form of specimen of certificate for share of Regus plc, nominal
               value 5p per share.

   4.2         Form of ADR (incorporated by reference in the Registration
               Statement on Form F-6 filed with the Securities and Exchange
               Commission on September 11, 2000).

   4.3         Form of Deposit Agreement between Regus plc and Morgan
               Guaranty Trust Company of New York, as depositary (incorporated
               by reference in the Registration Statement on Form F-6 filed
               with the Securities and Exchange Commission on September 11,
               2000).


                                      116
<PAGE>


   4.4         Form of Registration Rights Agreement among, Regus plc, AP
               Regus Investors LLC, AP Pelham Partners XI LLC, DB Capital
               Partners Europe LP and Serviced Office Investments Limited.

  10.1         Acquisition Subscription and Shareholders Agreements dated
               August 3, 1998 and as amended as of November 27, 1998, December
               21, 1998, September 17, 1999, October 28, 1999 and November 30,
               1999 between Maxon Investments BV, Serviced Office Investments
               Limited, BT Capital Partners Europe LP, AP Pelham Partners XI
               LLC, AP Regus Investors LLC, Regus Business Centres plc, Regus
               Business Centres BV and Apollo Real Estate Investment Fund III
               LP.

  10.2         Deed of Undertaking dated September 11, 2000 between Regus plc
               and Maxon Investments BV.

  10.3         Option Agreement dated November 12, 1997 as amended of
               August 3, 1998 and September 20, 2000 among Maxon Investments
               BV, Mark Dixon, Regus Business Centres BV, UBS and Regus
               Business Centres plc.

  10.4         Senior Secured Multicurrency Revolving Facilities Agreement
               dated June 24, 1999 and as amended on August 26, 1999, December
               23, 1999, March 3, 2000 and August 7, 2000 between Regus plc and
               its subsidiaries, Commerzbank, Deutsche Bank and Merrill Lynch
               International.

  10.5         Form of Loan  Agreement  between Regus (UK) Limited and Mourant
               & Co Trustees  Limited,  as trustee of the Regus Employee Trust.

  10.6         Form of Agreement for the Purchase of Shares in Regus plc
               between Maxon Investments BV and Mourant & Co Trustees Limited,
               as trustee of the Regus Employee Trust.

  10.7         Form of Agreement for the Purchase of Shares in Regus plc
               between Serviced Office Investments Limited and Mourant & Co
               Trustees Limited, as trustee of the Regus Employee Trust.

  10.8         Form of Agreement for the Purchase of Shares in Regus plc
               between DB Capital Partners Europe LP and Mourant & Co Trustees
               Limited, as trustee of the Regus Employee Trust.

  10.9         Form of Agreement for the Purchase of Shares in Regus
               between AP Regus Investors LLC and Mourant & Co Trustees
               Limited, as trustee of the Regus Employee Trust.

  10.10        Form of Agreement for the Purchase of Shares in Regus plc
               between AP Pelham Partners XI LLC and Mourant & Co Trustees
               Limited, as trustee of the Regus Employee Trust.

   4.          Form of 5% Convertible Debenture in the sum of (pound)10,000,000
               issued by Regus plc to HFTP Investment LLC (and to two other
               investors in separate deeds in a further aggregate sum of
               (pound)30,000,000).

   5.          Consent of KPMG Audit plc dated June 27, 2002.


* Previously filed.


                                      117
<PAGE>


                                   SIGNATURE

     Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant certifies that it meets all of the requirements for
filing on Form 20-F and has duly caused this annual report to be signed on its
behalf by the undersigned, thereunto duly authorized.


                                             By: /s/ Mark Dixon
                                                --------------------------------
                                                Name:  Mark Dixon
                                                Title: Chief Executive


Dated: June 28, 2002



                                      118
<PAGE>


                                 EXHIBIT INDEX

Exhibit Number    Description of Document
-------------------------------------------------------------------------------

   1.*            Memorandum and Articles of Association of Regus plc.

   2.*            Service Agreement for Mark Dixon.

   3.*            The following exhibits were filed as part of the Registration
                  Statement on Form F-1 (Registration No. 333-12504) and
                  incorporate by reference herein.

   4.1            Form of specimen of certificate for share of Regus plc,
                  nominal value 5p per share.

   4.2            Form of ADR (incorporated by reference in the Registration
                  Statement on Form F-6 filed with the Securities and
                  Exchange Commission on September 11, 2000).

   4.3            Form of Deposit Agreement between Regus plc and Morgan
                  Guaranty Trust Company of New York, as depositary
                  (incorporated by reference in the Registration Statement on
                  Form F-6 filed with the Securities and Exchange Commission on
                  September 11, 2000).

   4.4            Form of Registration Rights Agreement among, Regus plc, AP
                  Regus Investors LLC, AP Pelham Partners XI LLC, DB Capital
                  Partners Europe LP and Serviced Office Investments Limited.

  10.1            Acquisition Subscription and Shareholders Agreements dated
                  August 3, 1998 and as amended as of November 27, 1998,
                  December 21, 1998, September 17, 1999, October 28, 1999 and
                  November 30, 1999 between Maxon Investments BV, Serviced
                  Office Investments Limited, BT Capital Partners Europe LP, AP
                  Pelham Partners XI LLC, AP Regus Investors LLC, Regus
                  Business Centres plc, Regus Business Centres BV and Apollo
                  Real Estate Investment Fund III LP.

  10.2            Deed of Undertaking dated September 11, 2000 between Regus plc
                  and Maxon Investments BV.

  10.3            Option Agreement dated November 12, 1997 as amended of August
                  3, 1998 and September 20, 2000 among Maxon Investments BV,
                  Mark Dixon, Regus Business Centres BV, UBS and Regus Business
                  Centres plc.

  10.4            Senior Secured Multicurrency Revolving Facilities Agreement
                  dated June 24, 1999 and as amended on August 26, 1999,
                  December 23, 1999, March 3, 2000 and August 7, 2000 between
                  Regus plc and its subsidiaries, Commerzbank, Deutsche Bank
                  and Merrill Lynch International.

  10.5            Form of Loan Agreement between Regus (UK) Limited and Mourant
                  & Co Trustees Limited, as trustee of the Regus Employee
                  Trust.

  10.6           Form of Agreement for the Purchase of Shares in Regus plc
                  between Maxon Investments BV and Mourant & Co Trustees
                  Limited, as trustee of the Regus Employee Trust.

  10.7            Form of Agreement for the Purchase of Shares in Regus plc
                  between Serviced Office Investments Limited and Mourant & Co
                  Trustees Limited, as trustee of the Regus Employee Trust.

  10.8            Form of Agreement for the Purchase of Shares in Regus plc
                  between DB Capital Partners Europe LP and Mourant & Co
                  Trustees Limited, as trustee of the Regus Employee Trust.


                                      119
<PAGE>


  10.9            Form of Agreement for the Purchase of Shares in Regus between
                  AP Regus Investors LLC and Mourant & Co Trustees Limited, as
                  trustee of the Regus Employee Trust.

  10.10           Form of Agreement for the Purchase of Shares in Regus plc
                  between AP Pelham Partners XI LLC and Mourant & Co Trustees
                  Limited, as trustee of the Regus Employee Trust.

   4              Form of 5% Convertible Debenture in the sum of
                  (pound)10,000,000 issued by Regus plc to HFTP Investment LLC
                  (and to two other investors in separate deeds in a further
                  aggregate sum of (pound)30,000,000).

   5              Consent of KPMG Audit plc dated June 27, 2002.


* Previously filed.


                                      120
<PAGE>