As filed with the Securities and Exchange Commission on June 17, 2003

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 20-F

|o                                           | ANNUAL REPORT PURSUANT TO SECTION 12(  ) or (  ) OF THE SECURITIES EXCHANGE ACT OF 1934  
|------------------------------------------- | -----------------------------------------------------------------------------------------
|or                                         
|ý                                           | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(  ) OF THE SECURITIES EXCHANGE ACT OF 1934    
|For the fiscal year ended December 31, 2002
|or                                         
|o                                           | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(  ) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from [] to
[]

Commission
file number:

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SPIRENT PLC(Exact name of Registrant as specified in its charter)

England and Wales(Jurisdiction of incorporation or organization)

Spirent House
Crawley Business Quarter
Fleming Way, Crawley
West Sussex RH10 9QL
United Kingdom(Address of principal executive offices)

+44 (0)1293 767676(Registrant's telephone number, including area code)

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Securities registered or to be registered pursuant to Section 12(b) of the Act:

|Title of each class                         |  | Name of each exchange                           
|------------------------------------------- |  | ------------------------------------------------
|American Depositary Shares
Ordinary Shares* |  | New York Stock Exchange
New York Stock Exchange*

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

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

Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report: 942,760,977
Ordinary shares of 31/3p.

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 ý No o

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

Item 17 o Item 18 ý

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TABLE OF CONTENTS

|                                                     |                                                                             | Page
|---------------------------------------------------- | --------------------------------------------------------------------------- | ----
|ITEM 3. KEY INFORMATION                              |                                                                             | 4   
|                                                     | Selected Consolidated Financial Information of Spirent                      |     
|                                                     | Exchange Rate Information                                                   |     
|                                                     | Risk Factors                                                                |     
|ITEM 4. INFORMATION ON THE COMPANY                   |                                                                             | 18  
|                                                     | Overview of Our Business                                                    |     
|                                                     | Communications Group                                                        |     
|                                                     | Network Products Group                                                      |     
|                                                     | Systems Group                                                               |     
|                                                     | Organizational Structure                                                    |     
|                                                     | Properties and Facilities                                                   |     
|                                                     | Intellectual Property                                                       |     
|                                                     | Materials                                                                   |     
|                                                     | Regulatory and Other Government Requirements                                |     
|                                                     | Enforcement of Civil Liabilities                                            |     
|ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS |                                                                             | 36  
|                                                     | Overview                                                                    |     
|                                                     | Year Ended December 31, 2002 Compared with the Year Ended December 31, 2001 |     
|                                                     | Communications                                                              |     
|                                                     | Network Products                                                            |     
|                                                     | Systems                                                                     |     
|                                                     | Year Ended December 31, 2001 Compared with the Year Ended December 31, 2000 |     
|                                                     | Communications                                                              |     
|                                                     | Network Products                                                            |     
|                                                     | Systems                                                                     |     
|                                                     | Discontinued OperationSensing Solutions                                    |     
|                                                     | Liquidity and Capital Resources                                             |     
|                                                     | Contractual Obligations                                                     |     
|                                                     | Foreign Exchange                                                            |     
|                                                     | Research and Development                                                    |     
|                                                     | Factors That May Affect Future Results                                      |     
|                                                     | Inflation                                                                   |     
|                                                     | Differences Between UK GAAP and US GAAP                                     |     
|ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES   |                                                                             | 60  
|                                                     | Directors                                                                   |     
|                                                     | Senior Management                                                           |     
|                                                     | The Board of Directors and Committees of the Board                          |     
|                                                     | Compensation of Directors and Senior Management                             |     
|                                                     | Employees                                                                   |     
|                                                     | Shares Held by Directors and Senior Management                              |     
|                                                     | Share Schemes and Related Information                                       |     
|                                                     |                                                                             |     

2

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|ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS            |                                        | 71
|-------------------------------------------------------------------- | -------------------------------------- | --
|ITEM 8. FINANCIAL INFORMATION                                        |                                        | 73
|ITEM 9. THE OFFER AND LISTING                                        |                                        | 74
|ITEM 10. ADDITIONAL INFORMATION                                      |                                        | 76
|                                                                     | Memorandum and Articles of Association |   
|                                                                     | Material Contracts                     |   
|                                                                     | Exchange Controls                      |   
|                                                                     | Taxation                               |   
|                                                                     | Documents on Display                   |   
|ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS |                                        | 84
|ITEM 15. CONTROLS AND PROCEDURES                                     |                                        | 87
|ITEM 18. FINANCIAL STATEMENTS                                        |                                        | 88
|ITEM 19. EXHIBITS                                                    |                                        | 89

The
items omitted from the table of contents for Form 20-F are either not applicable to this annual report or we have nothing to disclose in respect of that item.

You
should rely only on the information contained in this annual report. We have not authorized anyone to provide you with information that is different. The information in this annual
report may only be accurate on the date of this annual report.

3

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ITEM 3.    KEY INFORMATION

Selected Consolidated Financial Information of Spirent

The selected consolidated profit and loss account data for each of the three years in the period ended December 31, 2002 and balance sheet data as of
December 31, 2002 and 2001 set forth below are derived from our audited consolidated financial statements, which are included elsewhere in this annual report. The profit and loss account data
for the years ended December 31, 1999 and 1998 and the balance sheet data as of December 31, 2000, 1999 and 1998 are derived from our audited consolidated financial statements. All of
these financial statements have been audited by Ernst & Young LLP, our independent auditors. The selected consolidated financial data set forth below should be read in conjunction with "Item 5.
Operating and Financial Review and Prospects," and our consolidated financial statements and notes thereto included elsewhere in this annual report.

We
prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United Kingdom, or UK GAAP, which differ in certain respects from
those generally accepted in the United States, or US GAAP. A description of the significant differences applicable to us and reconciliations of net income, shareholders' equity and cash flows are set
forth in Note 37 of Notes to the Financial Statements.

4

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Consolidated Profit and Loss Account Data

|                                   |                                                                     | Year ended December 31                 |         
|---------------------------------- | ------------------------------------------------------------------- | -------------------------------------- | --------
|
|
|Amounts in accordance with UK GAAP |                                                                     |                                        |         
|                                   | Turnover                                                            |                                        | 558.9   
|                                   |                                                                     |                                        |         
|                                   | Operating (loss)/profit                                             |                                        | (970.5  
|                                   |                                                                     |                                        |         
|                                   |                                                                     |                                        |         
|                                   | Other Information                                                   |                                        |         
|                                   | Exceptional items                                                   |                                        |         
|                                   |                                                                     | Goodwill impairment                    |         
|                                   |                                                                     | Other                                  |         
|                                   | Goodwill amortization                                               |                                        | 56.1    
|                                   | Operating profit before goodwill amortization and exceptional items |                                        | 50.5    
|                                   |                                                                     |                                        |         
|                                   | Income from interests in                                            |                                        |         
|                                   |                                                                     | Joint venture                          |         
|                                   |                                                                     | Associates                             |         
|                                   |                                                                     | Amortization of goodwill on associates |         
|                                   | (Loss)/profit on disposal and closure of operations                 |                                        | (48.4   
|                                   | Provision against investment in own shares                          |                                        | (30.1   
|                                   | Profit on disposal of tangible fixed assets                         |                                        |        
|                                   |                                                                     |                                        |         
|                                   | (Loss)/profit before interest                                       |                                        | (1,040.8
|                                   | Net interest payable                                                |                                        | (12.3   
|                                   |                                                                     |                                        |         
|                                   | (Loss)/profit before taxation                                       |                                        | (1,053.1
|                                   | Taxation                                                            |                                        | (26.9   
|                                   | Minority interestequity                                            |                                        | (0.4    
|                                   |                                                                     |                                        |         
|                                   | (Loss)/profit for the financial period                              |                                        | (1,080.4
|                                   |                                                                     |                                        |         
|                                   | Basic (loss)/earnings per share (pence)                             |                                        | (117.12 
|                                   |                                                                     |                                        |         
|                                   | Headline earnings per share (pence)(1)                              |                                        | 3.40    
|                                   |                                                                     |                                        |         
|                                   | Diluted (loss)/earnings per share (pence)                           |                                        | (117.12 
|                                   |                                                                     |                                        |         
|                                   | Dividend per share (pence)                                          |                                        | 1.35    
|                                   |                                                                     |                                        |         
|                                   | Dividend per share (US cents)                                       |                                        | 2.10    
|                                   |                                                                     |                                        |         
|                                   | Dividend per ADS (pence)                                            |                                        | 5.40    
|                                   |                                                                     |                                        |         
|                                   | Dividend per ADS (US cents)                                         |                                        | 8.40    
|                                   |                                                                     |                                        |         
|                                   | Turnover by segment                                                 |                                        |         
|                                   | Continuing operations                                               |                                        |         
|                                   |                                                                     | Performance Analysis                   |         
|                                   |                                                                     | Service Assurance                      |         
|                                   |                                                                     |                                        |         
|                                   |                                                                     | Communications                         |         
|                                   |                                                                     | Network Products                       |         
|                                   |                                                                     | Systems                                |         
|                                   |                                                                     |                                        |         
|                                   |                                                                     | 558.9                                  |         
|                                   | Discontinued operations                                             |                                        |        
|                                   |                                                                     |                                        |         
|                                   |                                                                     | 558.9                                  |         
|                                   |                                                                     |                                        |         
|                                   | Operating profit before goodwill amortization and exceptional items |                                        |         
|                                   | Continuing operations                                               |                                        |         
|                                   |                                                                     | Performance Analysis                   |         
|                                   |                                                                     | Service Assurance                      |         
|                                   |                                                                     |                                        |         
|                                   |                                                                     | Communications                         |         
|                                   |                                                                     | Network Products                       |         
|                                   |                                                                     | Systems                                |         
|                                   |                                                                     |                                        |         
|                                   |                                                                     | 50.5                                   |         
|                                   | Discontinued operations                                             |                                        |        
|                                   |                                                                     |                                        |         
|                                   |                                                                     | 50.5                                   |         
|                                   |                                                                     |                                        |         

5

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Amounts in accordance with US GAAP

|                  |                               | (£ millions, except per share and per ADS amounts)
|----------------- | ----------------------------- | --------------------------------------------------
|
|
|Net (loss)/income |                               | (774.3                                            
|                  |                               |                                                   
|                  | Net (loss)/income per share   |                                                   
|                  | Basic (pence):                |                                                   
|                  |                               | Continuing operations                             
|                  |                               | Discontinued operations                           
|                  |                               |                                                   
|                  | Net (loss)/income             |                                                   
|                  |                               |                                                   
|                  | Diluted (pence):              |                                                   
|                  |                               | Continuing operations                             
|                  |                               | Discontinued operations                           
|                  |                               |                                                   
|                  | Net (loss)/income             |                                                   
|                  |                               |                                                   
|                  | Dividend per share (pence)    |                                                   
|                  |                               |                                                   
|                  | Dividend per share (US cents) |                                                   
|                  |                               |                                                   
|                  | Net (loss)/income per ADS     |                                                   
|                  | Basic (pence):                |                                                   
|                  |                               | Continuing operations                             
|                  |                               | Discontinued operations                           
|                  |                               |                                                   
|                  | Net (loss)/income             |                                                   
|                  |                               |                                                   
|                  | Diluted (pence):              |                                                   
|                  |                               | Continuing operations                             
|                  |                               | Discontinued operations                           
|                  |                               |                                                   
|                  | Net (loss)/income             |                                                   
|                  |                               |                                                   
|                  | Dividend per ADS (pence)      |                                                   
|                  |                               |                                                   
|                  | Dividend per ADS (US cents)   |                                                   
|                  |                               |                                                   

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6

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Consolidated Cash Flow Data

|                                   |                                                 | Year ended December 31 |      
|---------------------------------- | ----------------------------------------------- | ---------------------- | -----
|
|
|Amount in accordance with UK GAAP  |                                                 |                        |      
|                                   | Net cash inflow from operating activities       |                        | 76.9 
|                                   | Acquisitions and disposals                      |                        | 6.4  
|                                   | Financing                                       |                        | 53.8 
|Amounts in accordance with US GAAP |                                                 |                        |      
|                                   | Cash inflow from operating activities           |                        | 60.7 
|                                   | Cash (outflow)/inflow on investing activities   |                        | (17.9
|                                   | Cash inflow/(outflow) from financing activities |                        | 13.8 

Consolidated Balance Sheet Data

|                                   |                                        | As at December 31
|---------------------------------- | -------------------------------------- | -----------------
|
|
|Amounts in accordance with UK GAAP |                                        |                  
|                                   | Intangible assets                      |                  
|                                   | Other investments                      |                  
|                                   | Current assets                         |                  
|                                   | Total assets                           |                  
|                                   | Total liabilities                      |                  
|                                   | Current liabilities                    |                  
|                                   | Creditors due after more than one year |                  
|                                   | Shareholders' funds                    |                  
|                                   | Share capital                          |                  
|Amounts in accordance with US GAAP |                                        |                  
|                                   | Intangible assets                      |                  
|                                   | Other investments                      |                  
|                                   | Current assets                         |                  
|                                   | Total assets                           |                  
|                                   | Total liabilities                      |                  
|                                   | Current liabilities                    |                  
|                                   | Creditors due after more than one year |                  
|                                   | Shareholders' funds                    |                  
|                                   | Share capital                          |                  

7

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Exchange Rate Information

We present our financial statements in UK pounds sterling. The financial statements of our WAGO joint venture are presented in euro; in 2000 these financial
statements were presented in German Marks. The information set forth below with respect to pounds sterling to US dollar exchange rates is based on the noon buying rate for pounds sterling in The City
of New York for cable transfers in pounds sterling as certified for customs purposes by the Federal Reserve Bank of New York. Also set forth below is exchange rate information pertaining to the euro
and the German Mark, in each case being the closing middle market price against pounds sterling. These rates are provided solely for the convenience of the reader and are not the exchange rates used
by us in the preparation of our consolidated financial statements included in this annual report.

US Dollar

The noon buying rate on June 2, 2003 was $1.64 = £1.00. The following table sets forth the high and low rate for each month of the
previous six months.

High

Low(US dollars per pound sterling)May 2003

1.65

1.59April 2003

1.60

1.55March 2003

1.61

1.56February 2003

1.65

1.57January 2003

1.65

1.60December 2002

1.61

1.56


The
following table sets forth information about the noon buying rate for the last five years. The average rates for each year are calculated by using the rate on the last business day
of each month during the relevant year.

|Year ended December 31 |  | High |  | Low  |  | Average |  | End of year
|---------------------- |  | ---- |  | ---- |  | ------- |  | -----------
|
|2002                   |  | 1.61 |  | 1.41 |  | 1.51    |  | 1.61       
|2001                   |  | 1.50 |  | 1.37 |  | 1.44    |  | 1.45       
|2000                   |  | 1.65 |  | 1.40 |  | 1.51    |  | 1.50       
|1999                   |  | 1.68 |  | 1.55 |  | 1.61    |  | 1.62       
|1998                   |  | 1.72 |  | 1.61 |  | 1.66    |  | 1.66       

Fluctuations
in the exchange rate between pounds sterling and US dollars affect the US dollar equivalent of the pound sterling denominated prices of our shares and, as a result, affect
the market price of our ADSs in the United States.

Euro

The euro rate on June 2, 2003 was €1.39 = £1.00. The following table sets forth the high and low rate for each month of
the previous six months.

High

Low(euro per pound sterling)May 2003

1.43

1.38April 2003

1.47

1.43March 2003

1.48

1.45February 2003

1.53

1.46January 2003

1.54

1.50December 2002

1.57

1.54


8

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The
following table sets forth information about the euro rate for the last four years. The average rates for each year are calculated by using the rate on the last business day of each
month during the relevant year.

|Year ended December 31 |  | High |  | Low  |  | Average |  | End of year
|---------------------- |  | ---- |  | ---- |  | ------- |  | -----------
|
|2002                   |  | 1.64 |  | 1.54 |  | 1.59    |  | 1.53       
|2001                   |  | 1.67 |  | 1.56 |  | 1.61    |  | 1.64       
|2000                   |  | 1.74 |  | 1.56 |  | 1.64    |  | 1.60       
|1999                   |  | 1.61 |  | 1.40 |  | 1.52    |  | 1.60       

The
euro rates were fixed permanently against euro-zone currencies, including the German Mark, on January 1, 1999. We present information about the German Mark for
1998 below. The average rate was calculated by using the rate on the last business day of each month during the relevant year.

|     |  | High |  | Low  |  | Average |  | End of year
|---- |  | ---- |  | ---- |  | ------- |  | -----------
|
|1998 |  | 3.10 |  | 2.73 |  | 2.93    |  | 2.78       

9

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Risk Factors

You should carefully consider the risks and uncertainties described below and the other information in this annual report, including the
discussions set forth in "Item 4. Information on the Company" and "Item 5. Operating and Financial Review and Prospects" as well as our consolidated financial statements and related notes
included elsewhere in this annual report.

Risks Related to Our Business

Our business, operating results and financial condition could continue to be harmed if the economy, and particularly the telecommunications industry
into which we sell our products, remains depressed.

The current economic downturn which has continued into 2003 has resulted in worldwide reduced purchasing and capital spending in many of the industries and
markets into which we sell our products, in particular the telecommunications industry. As a result we have experienced diminished product demand, excess manufacturing capacity and an erosion of
average selling prices. The decline in demand for our products and services has had and may continue to have an adverse effect on our results of operations and we are not able to predict when this
will cease. If the general economic conditions do not improve the markets for our products may decline further or fail to develop. Any further downturn in our customers' markets or in general economic
conditions would be likely to result in a further reduction in demand for our products and services and could further harm our business, operating results and financial condition.

Since
2001 the major customers in our Communications group, the network equipment manufacturers and network service providers, have continued to restructure their operations in response
to the significantly reduced overall market. This, coupled with certain regulatory issues for our customers in the United States, has resulted in reduced spending on our products and services. We
cannot be sure how long the current downturn will last, as market visibility remains low, and how long our business will continue to be affected.

Our cost reduction actions may not achieve their target cost savings and may also harm our business, operating results and financial condition.

In response to the fall in revenues in our Communications group and general economic conditions, we have taken cost reduction actions and continue to take such
measures to realign our cost base and resources. Our cost reduction actions are based on certain assumptions regarding the cost structure of our business, the nature and severity of the continuing
downturn in the telecommunications industry and economic climate generally and our expected revenues, that may not prove accurate. Our actions have involved the implementation of a number of
initiatives including the reduction of our operating costs, the exit from certain businesses, the re-organization of our operations, the reduction of our workforce and reductions in
discretionary spending. While we are making progress towards achieving our target cost savings, we can provide no assurance that we will not be required to refine, expand or extend our cost reduction
actions.

The
costs associated with implementing our cost reduction actions may exceed our realized savings and may also be higher than the amount that we have estimated. As a result, we may not
meet or achieve the benefits of our cost reduction goals and in addition may be unable to reduce our cost structures in response to further declines in business conditions. Current and additional cost
cutting initiatives may result in further cash and/or non-cash charges that could have an effect on our business, operating results and financial condition. In addition, reductions in our
assets, workforce and businesses may adversely affect our ability to enhance our existing products and services, keep pace with technological advances in our field and remain competitive. Workforce
reduction could lead to the loss of valuable staff and expertise and adversely affect general morale and the efficiency of our business. Therefore, our cost reduction initiatives may result in
significant disruption and harm to our business

10

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and
may reduce our ability to benefit from a potential future recovery in the telecommunications industry.

The risk of a breach of financial convenants remains.

While our recently renegotiated borrowing terms have provided us with more headroom under certain of our financial covenants (see "Liquidity and Capital
Resources" in Item 5 and "Material Contracts" in Item 10 below for a more detailed discussion of the renegotiated borrowing terms) we can provide you with no assurance that the covenants
will not be breached and that further renegotiation of our borrowing terms will not be needed to further increase our level of headroom.

The
renegotiated borrowing terms have increased our weighted average interest payments and placed new restrictions and tests on us, constraining our ability to make dividend payments,
incur further debt,
provide further security and make acquisitions and disposals. Such restrictions and tests will continue to apply until certain financial requirements are met (which in any event cannot occur prior to
June 30, 2004). We are unable to give guidance as to when we are likely to meet these financial requirements and can give no assurance that they will indeed be achieved.

Our pension fund deficit may become a further burden on our financial resources.

Given the decline in equity markets and reducing interest rates, which have both adversely affected funding levels, it is highly likely that a deficit in our
defined benefit scheme will arise at our next actuarial valuation, which commenced on April 1, 2003. Until the valuation has been performed it is not possible to indicate what the
deficit will be although, based on Financial Reporting Standard 17 ("FRS 17"), the funding position at December 31, 2002 was a deficit of £41.9 million
before taxation, representing a funding deficit of 32%. A pension deficit, should it arise, is likely to result in increased pension contributions which will result in an increased cash funding cost
to us which may have an adverse effect on our business. Our defined benefit pension scheme for UK employees was closed to new members on September 30, 2002 and has been replaced by a
defined contribution scheme.

We rely on a limited number of customers for a majority of our revenues in some of our businesses, and therefore any cancellation, reduction or delay in
orders could significantly harm our business, operating results and financial condition.

In some of our businesses we continue to rely on large orders from a limited number of customers, which makes our relationships with these customers critical to
the success of our business. We can provide you with no assurance that we will be able to retain this client base, that we will be able to increase our sales to our other existing customers or that we
will be able to attract additional customers. The loss of one or more of our largest customers, any reduction or delay in sales to these customers, or inability to successfully develop and maintain
relationships with existing and new customers could significantly harm our business, operating results and financial condition.

Our goodwill and other intangible assets may become further impaired.

If the demand for the products and services underlying our current goodwill decreases further as a result of the general economic downturn or other causes and, as
a result, the estimated future undiscounted net cash flows from the acquired businesses are insufficient to recover the carrying value of the assets over their estimated lives, we may record further
impairments of our goodwill and recognize asset impairment charges in the period in which that impairment is determined. Asset impairment charges of this nature could have an adverse effect on our
financial position, our ability to comply with certain covenants and reported results of operations.

We
perform reviews twice a year to determine if the carrying value of assets is impaired. The purpose of the review is to identify any facts or circumstances, either internal or
external, which

11

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indicate
that the carrying value of the assets cannot be recovered. Most recently we recorded a goodwill impairment charge of £923.3 million relating principally to our
Communications group. The remaining goodwill carrying value is £113.6 million. The impairment has resulted in a £575.9 million deficit in the distributable
reserves. At the appropriate time and with the consent of the English courts it may be possible to utilize the share premium account which at December 31, 2002 stood at
£696.1 million in order to off-set the deficit on distributable reserves. We can give no assurance that this consent would be forthcoming.

The loss of key managers and skilled employees may result in inefficiencies in managing and operating our business and our business will suffer if we
are not able to hire and retain appropriately qualified personnel.

For the fiscal year 2002, our average overall workforce was reduced from 7,812 to 5,179. This reduction has in part been due to the implementation of our cost
reduction actions in order to realign our cost base and resources. It has resulted in the loss of many highly skilled employees who often had many years of management and operational experience in our
business. The loss of such employees and the departure of further employees may impair our ability to run and expand our business effectively. The uncertainties associated with headcount reductions
may cause key employees to leave and otherwise increase employee and management turnover and, even if these employees stay, the headcount reductions may adversely affect general morale and the
efficiency of our business. This could result in significant disruption to our business.

Because of our significant international operations, we are exposed to a variety of risks, many of which are beyond our control, that could adversely
affect our business.

We operate in 31 countries throughout the world. Our international operations are subject to a variety of potential risks arising out of the global economy, the
political outlook, currency fluctuations, exchange control restrictions, investment in capital, the ability to enforce intellectual property rights, language and certain cultural differences in
countries where we have operations.

Events
such as the recent tensions in the Middle East, the continued threat of terrorism and the SARS virus outbreak in Asia may trigger unforeseen economic conditions and cause market
demand to fluctuate in an unpredictable manner which could adversely affect our business.

Fluctuations in exchange rates and heavy exposure to a weakening dollar could materially harm our operating results.

Since we conduct operations globally, a substantial portion of our assets, liabilities, revenues and expenses are denominated in various currencies, principally
the US dollar and pounds sterling. Because our financial statements are denominated in pounds sterling, fluctuations in exchange rates, especially if the US dollar continues to weaken against the
pound, could have a material impact on our reported results.

We
may at times engage in currency hedging transactions in an effort to cover any exposure to such fluctuations, and we may be required to convert currencies to meet our obligations.
Under such circumstances, hedging transactions could have an adverse effect on our financial condition.

Because our operating results have fluctuated in the past and are likely to fluctuate in the future, our Ordinary share and ADS prices are volatile and
may decline.

We have experienced and expect to continue experiencing, fluctuations in our operating results due to a number of factors beyond our control, including the
following:



12

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The
market price for our Ordinary shares and ADSs may decline significantly if our operating results deteriorate.

Acquisitions undertaken could be difficult to integrate, disrupt our business, dilute shareholder value and harm our operating results.

Acquisitions have historically been an important part of our business strategy and we continually evaluate strategic opportunities and may acquire businesses,
products or technologies in the future. Acquisitions are inherently risky and no assurance can be given that our previous or future acquisitions will be successful or will not adversely affect our
business, operating results or financial condition. Currently our renegotiated borrowing terms restrict our ability to make acquisitions.

Any
acquisition involves risks to our business, including:



We operate in rapidly changing industries and, if we do not keep up with these rapid changes, our turnover and operating results will suffer.

We sell our products and systems in several industries that are characterized by rapid technological changes, frequent product and service introductions and
evolving industry standards. We anticipate that our current products and services will become technologically obsolete over time and technological developments may eliminate whole markets or the need
for individual products. Entire product lines may be threatened by new technologies or market trends which reduce the value of these product lines. If we fail to keep up with changes in these
industries, our turnover and operating results will suffer.

We face aggressive competition and if we fail to compete effectively our turnover and operating results will suffer.

We face aggressive competition in all of our businesses. Our competitors are numerous including highly specialized firms as well as in-house
capability within customers, and new competitors may emerge. Some of our competitors have greater name recognition, larger customer bases, and greater financial, marketing, sales and other resources.
To stay competitive we will need to introduce successful new products and also may have to adjust prices of some of our products and manage financial returns

13

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effectively.
Our operating results will suffer and our business will be harmed if we do not compete effectively.

If we do not introduce successful new products, services and enhancements, our turnover and operating results will suffer.

The success of our new product and service offerings will depend on several factors, including our ability to:



Our
turnover and operating results will suffer if our new products and services are not successful.

Our research and development requires significant investment, which may not be recouped through increased turnover.

The development of new products generally requires a substantial investment before we can determine the commercial viability of these innovations. If we fail to
predict adequately our customers' needs and future activities, we may invest heavily in research and development of products and services that do not lead to significant turnover.

Third parties may claim we are infringing their intellectual property rights and as a result our business may be harmed.

Third parties may claim that we are infringing their intellectual property rights. While we do not believe that any of our products infringe the valid
intellectual property rights of third parties, we may be unaware of intellectual property rights of others that may cover some of our technology, products and services. We could suffer litigation or
licensing expenses, or could be prevented from selling certain products as a result of third-party infringement claims. The complexity of the technology involved and the uncertainty of intellectual
property litigation increase these risks. Claims of intellectual property infringement might also require us to enter into costly royalty or license agreements. However, we may not be able to obtain
royalty or license agreements on terms acceptable to us, or at all. We may also be subject to significant damages or injunctions against development and sale of certain of our products. We often rely
on obtaining licenses of intellectual property. We cannot assure you that these licenses will be available in the future on favorable terms or at all.

If third parties infringe our intellectual property rights, our business may be harmed.

Our success depends in part on our proprietary technology. If we fail to maintain or enforce our intellectual property rights, or if competitors design around our
technology or develop competing technologies, our competitive position could suffer, and our operating results may be harmed. We may not be able to detect infringement and our competitive position may
be harmed before we do so. Intellectual property rights may also be unavailable or limited in some foreign countries, which could make it easier for competitors to capture market share.

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If our products are defective, we may be held responsible for liabilities caused by malfunctions of equipment in which our products are used or have to
bear some of the cost of recalling this equipment, which would harm our turnover and our reputation.

Some of our products are incorporated as component parts by manufacturers into sophisticated equipment and machinery, are used in critical applications or are
stand-alone solutions. If our products are defective, we may be held responsible for the personal, property and financial damages that result and the costs associated with recalling the products
themselves and products in which our defective products were incorporated. Although we carry product liability insurance customary for companies of our size, such available insurance cover may not be
sufficient to cover a catastrophic loss or the costs of recall. In addition, our reputation with customers may be damaged as a result of any such event. Product liabilities or the costs of
implementing a recall could hurt our profitability, and the damage to our reputation if one or more of our products proves defective could cause us to lose customers.

Many of our businesses are dependent on third-party manufacturers. If we cannot obtain sufficient services or products from these manufacturers, we may
lose customers and turnover.

Several of our businesses contract out certain processes, such as raw material supply, component manufacture, sub-assembly and assembly, to third
party suppliers. If there were a failure of such a supplier because of, for example, insolvency or catastrophic loss, supply to our operations might be disrupted or even terminated. It might not be
possible to find an alternative supplier in an acceptable timeframe or to secure an alternative supply on the same economic terms as the original supply. If we cannot obtain sufficient quantities of
these products or services at an acceptable cost, we may not be able to meet customer demands in the desired timeframe at a commercially acceptable cost, which may result in the loss of customers and
a reduction in turnover and profits.

Some of our businesses are dependent on key component suppliers. If we cannot obtain sufficient components from these suppliers, we may lose customers
and turnover.

Several of our businesses, particularly in the Communications group, may be dependent on some components from suppliers who experience greater demand for their
products than they can meet. In some instances these suppliers have introduced quota systems to divide their available stock among potential customers. We may be affected because the quota allocated
to our business is too small or because suppliers change the way they apportion their available stock to our disadvantage. If we cannot obtain sufficient quantities of these products at an acceptable
cost, we may not be able to meet customer demands in the desired timeframe at a commercially acceptable cost, which may result in the loss of customers and a reduction in turnover and profits.

Prices for some of the commodity raw materials we use to manufacture our products fluctuate, and we may not be able to pass on increased costs of these
raw materials to our customers.

Prices fluctuate for some of the commodity raw materials our Network Products group uses to manufacture its products. If prices for commodities such as copper,
PVC and Nylon 66 increase significantly and we are not able to pass on the increased prices to our customers, our profitability will be reduced and our business may be adversely affected.

Some of our customers may not have sufficient resources to order or pay for products they have ordered as a result of the current economic climate.

Due to the economic downturn, many of our customers have failed to meet forecasts and are continuing to forecast that their revenues for the foreseeable future
will generally be lower than anticipated. Many of these customers are experiencing, or are likely to experience, serious cash flow problems, and they are finding it increasingly difficult to obtain
financing on attractive terms, if at all.

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As
a result, if some of these customers are not successful in generating sufficient revenues or securing alternate financing arrangements, they may not be able to pay, or may delay payment for, the
amounts that they owe us. Furthermore, they may not order as many products from us as originally forecasted or any products at all. The inability of our customers to pay us or to pay us in a timely
manner for our products may adversely affect our cash flow and the timing of our revenue recognition and harm our business, operating results and financial condition. The failure of our customers to
order products will also result in decreased revenues.

Remaining liabilities from discontinued businesses could adversely affect our results.

We have concluded a number of divestments of our non-core businesses. We may, however, have contingent liabilities arising out of those discontinued businesses
that could adversely affect the results of our operations.

Events described by our forward-looking statements may not occur.

This annual report includes forward-looking statements concerning our business, operations and financial performance and condition. We have based these
forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to risks,
uncertainties, and assumptions about us, including, among other things, those discussed above as well as under "Item 5. Operating and Financial Review and Prospects." You can identify these statements
by words such as "anticipate", "assume", "believe", "estimate", "expect", "intend", "may", "plan", "positioned", "should", "will", "would" and other similar expressions which are predictions of or
indicate future trends and future events. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this annual report might not occur. We undertake no obligation
to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Given these considerations, readers are cautioned not to place undue
reliance on such forward-looking statements.

Risks Relating to an Investment in our Ordinary Shares and ADSs

The price of our Ordinary shares and ADSs may be volatile and may decrease significantly below your purchase price.

The market price of our Ordinary shares is significantly affected by market forces. The market prices of securities of technology companies on the London Stock
Exchange, the New York Stock Exchange and other exchanges have fluctuated significantly in the last three years. The prices for securities of companies involved in Internet-related activities and
communications generally, including the Internet but also wireless and other technologies, have been particularly volatile. A significant portion of our activities is based on communications and thus
the market price of our Ordinary shares and ADSs is likely to remain highly volatile. In addition to general factors, the following specific factors may have a significant effect on the market price
of our Ordinary shares and ADSs:



As
a result, you may only be able to resell our Ordinary shares or ADSs at a price significantly below your purchase price. See "Item 9. The Offer and Listing" for historical pricing
data on our shares.

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Fluctuations in the exchange rate between the pound sterling and the US dollar may affect the price at which our ADSs trade on US securities markets.

For any particular price in pounds sterling at which our shares are trading on the London Stock Exchange, fluctuations in the exchange rate between the pound
sterling and the US dollar may affect the price in US dollars at which our ADSs trade on the New York Stock Exchange. For example, a fall in the value of the pound sterling against the US dollar is
likely to reduce the price of our ADSs in the US market.

The availability of sufficient purchasers and sellers for our shares, whether in the form of Ordinary shares or ADSs, cannot be guaranteed and therefore
you may not be able to purchase or sell our shares or ADSs at any particular time.

The volume of our stock traded on the London Stock Exchange can vary from day to day and is affected by events and circumstances out of our control, such as the
announcement of movements in interest rates. This also applies to the ADSs traded on the New York Stock Exchange. You may not be able to purchase or sell our Ordinary shares or ADSs at any particular
time because of the lack of sufficient purchasers or sellers for our Ordinary shares or ADSs.

Your ability to bring an action and enforce judgments against us may be limited under English law.

We are a public limited company incorporated under the laws of England and Wales. The rights of holders of Ordinary 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 actions on the company's behalf. Under English law generally, only we can bring a claim 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 relying upon, US securities laws. See "Item 4.
Information on the CompanyEnforcement of Civil Liabilities".

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ITEM 4.    INFORMATION ON THE COMPANY

Overview of Our Business

Spirent plc ("the Company") is the parent company of a group of international network technology companies providing
state-of-the-art systems and solutions for a broad range of customers worldwide. In the mid 1990s Spirent embraced a strategy focusing on high-growth,
high-margin, high-technology businesses and identified the communications test industry as a prime sector of interest. Since then we have focused our activities through
strategic acquisitions and divestments, as well as organic growth. Our operations are now organized into three operating groups: Communications, Network Products and Systems.

In
the year ended December 31, 2002, we had total turnover of £558.9 million and operating profit before goodwill amortization and exceptional items of
£50.5 million. Our Communications group remains our largest business, representing 59% (2001 66%) of ongoing turnover and 63% (2001 84%) of ongoing operating profit before goodwill
amortization and exceptional items in the year ended December 31, 2002.

During
the year ended December 31, 2002, our segment of the telecommunications industry was adversely affected by a further drop in spending by our major customers, the network
equipment manufacturers and network service providers. This, together with the general slowdown in the world economy, the continuing uncertainties created by the 2001 terrorist attacks in the United
States and the tensions in the Middle East resulted in a significant decline in the market environment. In response to the declining market conditions we realigned our cost base during 2002. This
involved an 11% reduction in workforce, the reorganization of our operations and reductions in discretionary spending within the Communications group. As part of our ongoing control of costs we
implemented further cost reductions in the Communications group in May 2003 and also exited from our under-performing very high-speed optical testing activities.

We
are committed to remaining at the forefront of technological developments and continued to invest in new product development, spending £77.7 million in 2002.

During
2002 we continued our strategy of focusing our activities by completing the divestments of our aerospace component businesses, Switching Systems International Inc and Monitor Labs
Incorporated, from within our Systems group. In April 2003 we completed the divestment of our 51% interests in WAGO, our interconnection joint venture, to our joint venture partners.

During
2002 we added to the scope of our Communications group through the acquisition of a remote special services test product line and a Wideband Code Division Multiple Access (WCDMA)
base station emulator product line, which have been integrated into our Service Assurance and Performance Analysis divisions, respectively. In August 2002 the remaining 85% of Caw
Networks, Inc. ("Caw") not already owned by the Communications group was acquired and has been integrated into the broadband activities of our Performance Analysis division.

The
main activities of our operating groups are:





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Our
turnover for ongoing businesses by market in 2002 comprised: North America 57% (2001 63%), Europe 27% (2001 24%), and Asia Pacific, Rest of Americas and Africa 16% (2001 13%).
A breakdown of turnover by market and by source is given below.

Turnover by Market

|                         |                                        | Year ended December 31
|------------------------ | -------------------------------------- | ----------------------
|
|
|Continuing operations:   |                                        |                       
|                         | Europe(1)                              |                       
|                         | North America(2)                       |                       
|                         | Asia Pacific, Rest of Americas, Africa |                       
|                         |                                        |                       
|                         |                                        | 533.9                 
|                         |                                        |                       
|                         | Divested operations                    |                       
|                         | Europe(1)                              |                       
|                         | North America(2)                       |                       
|                         | Asia Pacific, Rest of Americas, Africa |                       
|                         |                                        |                       
|                         |                                        | 25.0                  
|                         |                                        |                       
|Discontinued operations: |                                        |                       
|                         | Europe(1)                              |                       
|                         | North America(2)                       |                       
|                         | Asia Pacific, Rest of Americas, Africa |                       
|                         |                                        |                       
|                         |                                        |                      
|                         |                                        |                       
|                         |                                        | 558.9                 
|                         |                                        |                       

---

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Turnover by Source

|                         |                                        | Year ended December 31
|------------------------ | -------------------------------------- | ----------------------
|
|
|Continuing operations:   |                                        |                       
|                         | Europe(1)                              |                       
|                         | North America(2)                       |                       
|                         | Asia Pacific, Rest of Americas, Africa |                       
|                         |                                        |                       
|                         |                                        | 533.9                 
|                         |                                        |                       
|                         | Divested operations                    |                       
|                         | Europe(1)                              |                       
|                         | North America(2)                       |                       
|                         |                                        |                       
|                         |                                        | 25.0                  
|                         |                                        |                       
|Discontinued operations: |                                        |                       
|                         | Europe(1)                              |                       
|                         | North America(2)                       |                       
|                         | Asia Pacific, Rest of Americas, Africa |                       
|                         |                                        |                       
|                         |                                        |                      
|                         |                                        |                       
|                         |                                        | 558.9                 
|                         |                                        |                       

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In
2002 our share of turnover and operating profit from WAGO, our interconnection joint venture, was £75.6 million and £7.4 million, respectively.
After the completion of the divestment of our 51% interests in WAGO in April 2003 the income derived from our attributable share of WAGO will no longer be included in our consolidated financial
statements.



Our overall strategy is to provide state-of-the-art systems and solutions for a broad range of customers worldwide. We aim to
deliver this strategy by focusing on five key elements:



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The first of our companies was established in 1936. The Company was incorporated on July 16, 1949 as Bowthorpe Holdings Limited. In 1955 Bowthorpe Holdings
Limited was listed on the London Stock Exchange. The Company re-registered on July 15, 1981 as Bowthorpe Holdings PLC and was re-named Spirent plc in May 2000.
Our address is Spirent House, Crawley Business Quarter, Fleming Way, Crawley, West Sussex RH10 9QL, United Kingdom, and our telephone number is +44 (0) 1293 767676. The website address is www.spirent.com. Information contained on the website and subsidiaries' websites is not intended to be, and should not be regarded as being, part of
this annual report.

The
Communications group has grown through a combination of acquisition and organic development since 1995. Our Network Products group and the remaining power controls and aerospace
businesses within our Systems group have been part of the overall Group for some time.

Communications Group

Our Communications group develops, markets and sells specialized communications testing, monitoring and management systems for customers worldwide. We serve
several categories of customer including network equipment manufacturers, independent product evaluation specialists, network operators, network service providers, large enterprises and government
departments. Our products help customers analyze the performance of new communications equipment and services in order to assist their development and evaluation processes and to monitor performance
in order to enhance the reliability of these products and services once they are introduced into communications networks.

We
focus on staying at the forefront of communications industry innovation and have technical expertise in a broad range of sophisticated communications technologies and network designs.
We believe we have expert knowledge of the individual items of equipment making up a network, giving us particular strength in understanding the way connected pieces of network equipment work
together, which is a key concern for our customers.

Our
Communications group consists of two divisions: Performance Analysis and Service Assurance.

Our
Performance Analysis division provides instruments and systems that measure and analyze the performance of network and terminal equipment, particularly the devices that route voice
and data messages to their destination. Our products are mainly used in the research and development laboratories of network equipment manufacturers but are also used by independent evaluation bodies,
network operators, network service providers, large enterprises and government departments to assess the capabilities of such equipment. We have expertise in many of the technologies being used by our
customers to create new generations of network equipment that are better able to handle high-speed data communications, in addition to traditional voice calls. In addition, we provide
products and systems that automate the testing of mobile phone handsets and wireless network equipment. We make instruments that assist in the design and development of equipment that determines a
geographical position from signals received from orbiting satellites, as used in commercial and military applications. We also provide portable instruments that assist engineers to install and
maintain communications network lines linking homes and offices to a core network. With the acquisition and integration of Caw into the Performance Analysis division in 2002 we now provide equipment
that can simulate Internet traffic to stress test websites and web infrastructure devices such as firewalls.

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Our Service Assurance division provides systems that enable network service providers to monitor and assure the performance quality of their network services. This helps them to ensure
that network services are operating smoothly, to locate quickly any equipment faults and to correct them as rapidly as possible. Our systems combine software applications, hardware probes that gather
data from the physical network, and technical support services.

The
technology and expertise of the Performance Analysis and Service Assurance divisions are highly complementary. The Performance Analysis division's presence in the development
laboratories of network equipment manufacturers gives the Service Assurance division early knowledge of which technologies are likely to be adopted for future use in networks. The Service Assurance
division has knowledge of large-scale operational issues which can be fed back into the design and testing of successive generations of network equipment and services. This helps us anticipate market
requirements and provide customers with innovative products. We believe the diversification of our business into two divisions serving distinct market segments gives us a unique competitive advantage
by positioning us at the forefront of new technology development and extending the potential return on our research and development investment through the entire life cycle of network technology
deployment.

In
September 2002 we acquired a third generation (3G) wireless base station emulator product line and certain intellectual property rights from UbiNetics for
£6.1 million in cash. This has brought us expertise in WCDMA, the 3G wireless technology being adopted in countries in Europe and Asia.

In
August 2002 the remaining 85% of Caw not already owned by Spirent was acquired for an initial consideration including expenses of £26.7 million in cash. We acquired
our initial 16% interest in Caw in October 2001 for consideration of £6.4 million including expenses, which gave us the ability to offer application layer testing of websites and
firewalls. Caw was reported as an associated company until the acquisition in August 2002 of the majority holding. Caw has now been integrated into the Performance Analysis division.

In
July 2002 we acquired a remote special services test product line from Anritsu Company US for a cash consideration of £16.4 million. The product line has
been integrated into the Service Assurance division and brings us a large installed base and ongoing business at BellSouth Corporation and Korea Telecom.

An
important part of our strategy is to increase our international presence and during 2002 we opened sales and support services offices for the Performance Analysis division in Beijing,
Shanghai and
Guangzhou to better serve customers in the important Asian region. Our efforts in Asia were also reinforced by the opening in Beijing in early 2003 of a Service Assurance sales and support services
office for the Asian region and the formation of Spirent DM, a partnership with two local companies, to facilitate the development of service assurance products for the Chinese market.

The
strategic objective of our Communications group continues to be to establish a leadership position as a provider of innovative performance analysis and service assurance solutions to
enable customers to develop, deploy and assure next-generation network equipment and services worldwide more economically and efficiently.



The market for our Communications group's performance analysis products comprises three major worldwide customer groups:



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Our
communications test products are targeted at the research and development facilities of equipment manufacturers where they are used to develop and test new network equipment products
and technologies. Our products are also used by network service providers and major enterprise end-users, such as large financial institutions, and government departments to evaluate
networking equipment, compare products from multiple vendors effectively, ensure performance meets the levels claimed and assess interoperability with existing network elements.

The
worldwide market for service assurance systems includes both network management software and test equipment hardware. Service assurance typically includes network testing, fault
isolation, alarm surveillance, and monitoring the quality and level of service provided. Spirent is one of the world's largest providers of service assurance systems and has a leading position in DSL
and private line service assurance in the North American market.



Products from our Communications group's Performance Analysis division can simulate entire communications networks, generating simulated voice and/or data traffic
and analyzing network performance under normal and faulty conditions. They are used in applications including product development, design verification, quality assurance, production testing and
network installation and maintenance. This enables customers to test and analyze their equipment or service under various operating conditions, to help ensure their functionality, quality and
reliability.

Our
Performance Analysis division is focused on key next-generation technologies and markets such as Gigabit and 10-Gigabit Ethernet in the access and metro
networks, voice over Internet Protocol (VoIP), Internet Protocol version 6 (IPv6), Internet infrastructure and security testing, storage area networks, position location testing and 3G wireless. Our
investments in these areas resulted in numerous new products and enhancements to existing product lines being launched during 2002 including the first end-to-end performance
analysis and radio frequency channel emulation system for the wireless Local Area Network (LAN) market, a fully automated system for testing WCDMA mobile handsets, a system for the analysis of
Internet infrastructures simultaneously from the physical layer to the application layer, and a test system for storage area networks. Spirent is especially active in the 10-Gigabit
Ethernet and IPv6 segments which respectively aim to ease bottlenecks in broadband metro and access networks and provide higher levels of security and broader address space for the next phase of the
Internet.

During
2002 we strengthened our position in wireless testing particularly for next-generation wireless technologies including CDMA-2000 and WCDMA. We successfully
introduced new systems that provide automated conformance, network emulation and position location testing for CDMA-2000 mobile handsets. We also expanded our 3G wireless portfolio through
the acquisition of a WCDMA base station emulator product line during the year which has brought us important capabilities in WCDMA technology.

We
further addressed the testing and performance analysis needs of users and providers of Internet and security applications in 2002 with the Avalanche and
Reflector products acquired through Caw. With these systems customers are able to generate large amounts of Internet traffic in the laboratory to stress test network equipment and actual
website or security applications to ensure their robustness.

Our
Service Assurance division provides network monitoring, operations support systems (OSS), remote test probes, consulting and technical services for some of the world's largest
providers of communications services including private line, DSL, wireless, optical and managed IP services. Our systems assist service providers in cutting their operational costs by automating their
network monitoring and service assurance processes and are therefore important to our customers in the current difficult market conditions.

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During
2002 we continued to provide service assurance systems to the US incumbent local exchange carriers, particularly for private line and DSL services. The year saw the initial
large-scale deployment of the CenterOp platforms, Sentry and Perform, for fault and performance management. In the wireless space our service assurance systems provide
centralized remote test and performance monitoring for the core, or land side, of mobile networks. An important driver for the acceptance of our systems is their ability to measure the performance of,
or interoperate with, a wide range of network elements and other OSS. In 2002 we advanced our certification program and now have interoperability with network elements and OSS from a broad range of
leading suppliers worldwide.



The markets for performance analysis and service assurance systems are highly fragmented and competitive. Among the more significant competitors of our
Performance Analysis division are Acterna Corporation, Agilent Technologies, Inc., Ixia and Network Associates, Inc., as well as the internal development of communications test equipment
by network equipment manufacturers. Competitors in our service assurance sector include Acterna Corporation, Agilent Technologies, Inc., Micromuse Inc., Telcordia
Technologies Inc., and Tollgrade Communications, Inc.

We
believe we compete effectively in these markets and that our key competitive advantages are our close relationships with customers, our breadth of industry-leading products, our focus
on being first-to-market, our recruitment and retention of top engineering talent, and our technological expertise in high-speed digital, wireline and wireless
technologies.



Our Performance Analysis division's customer base includes leading network equipment manufacturers, communications and network service providers and enterprise
end-users worldwide. Orders typically have a short lead time.

Equipment
and chipset manufacturer customers include Alcatel, Cisco Systems, Inc., Foundry Networks, Inc., Motorola, Inc., Nortel Networks Corporation, NTT Group,
QUALCOMM Incorporated and 3Com Corporation. We also sell to both the evaluation laboratories and the operations departments of service provider customers including AT&T Corp., BT Group plc, and
Cable & Wireless plc. End-user customers are typically large network users and web application providers with their own product evaluation labs. This category includes civilian
organizations and defense agencies, including Accenture Ltd, Aetna Inc., Bank of America Corporation, The Boeing Company, eBay Inc., IBM, Microsoft Corporation and the US Army.

Our
Service Assurance division's traditional customer focus has been on North American service providers. We have significant service assurance installations in nearly every
top-tier service provider in North America, including BellSouth Corporation, Qwest Communications International Inc., SBC Communications Inc., Sprint FON Group and Verizon Communications
Inc. Each of these accounts represents a long-term multi-level customer relationship, with lengthy selling cycles and long-term commitments by both parties. Wireless service
providers also present important market opportunities and customers include AT&T Wireless Services, Inc., Nextel Communications, Inc., Sprint PCS Group, T-Mobile USA and Verizon
Wireless. Spirent systems are now used by seven of the top ten mobile service providers in the United States.

The
Communications group has made progress in international markets over the recent years particularly with its Performance Analysis systems. Our Service Assurance sales are largely all
within North America, but we continue to pursue opportunities in Europe and Asia.

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Our Performance Analysis division has a worldwide sales force operating from offices throughout North America, Europe and Asia. In 2002 we established direct
sales and support offices in multiple locations in China. Where appropriate, we sell our products directly to customers, particularly in North America and some European and Asian countries. We also,
however, have a strong network of international distributors and manufacturer's representatives.

Our
Service Assurance division maintains a direct sales force operating from offices throughout North America and Europe. In early 2003 we established a sales and support services office
in Beijing to serve the important Asian region.



Our Performance Analysis division's manufacturing operation consists primarily of materials planning and procurement, warehousing, logistics, quality control,
assembly, systems integration and test. We outsource the majority of our circuit board assembly to third-party contract manufacturers. We then assemble and configure our products to customer orders at
our facilities after which the completed system is functionally tested to ensure durability and reliability before shipment to the customer. This approach to our manufacturing process lets us retain
maximum flexibility and responsiveness to customer demands with minimum human and capital resources.

In
2002 we consolidated the manufacturing activities of several of our Performance Analysis business units into one centralized facility located in California. Additional facilities
remain in New Jersey, Canada and the United Kingdom. These facilities currently comprise approximately 37,000 square feet.

Our
Service Assurance division manufactures the majority of its products in a state-of-the-art 64,000 square foot facility in Gaithersburg, Maryland.
We outsource the manufacture of certain high volume products to other suppliers.

Network Products Group

Our Network Products group provides innovative solutions for fastening, identifying, insulating, organizing, routing and connectivity that add value to electrical
and communication networks in a wide range of applications marketed under the HellermannTyton name worldwide. Our main activity is the design and manufacture of a broad range of high-grade
nylon ties, clips, channels and fixings for fastening cables and wires in electrical, communications, automotive, industrial equipment, aerospace and construction applications. We also produce
products with value-added identification and security features such as standard cable markers, application tailored labels, printed customized markers and tags, tamper-evident fixings, security seals
and printed ties for clinical waste. Our heatshrink insulation, convoluted tubing and cable covering products provide insulation and physical protection for wires and cables. We are a market leader in
systems for the automated application of cable fixings and identification printing and application systems. We also produce a range of products used in the installation of local area and wide area
communication networks such as raceways, ducting, racks, patch panels and modular jacks. Our 'Network Sciences' structured cabling system includes GigaBand Category 6 and MegaBand
Category 5e systems with performance which far exceeds the required standards.

While
global vehicle production was broadly flat in 2002 the trend towards increasing electronic/electrical systems content and lighter vehicles requiring increased use of plastics has
provided underlying market growth. As a result we have been able to increase our penetration with vehicle manufacturers, their first tier suppliers and major vehicle cable harness manufacturers
worldwide. Our sales in the US heavy vehicles market recovered in 2002 after a significant market downturn in 2001.

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Due
to our product quality and innovation we have 'preferred supplier' status with several important automotive manufacturers and tier one suppliers worldwide.

The
market for our broadband products (used in wide area networks to route and organize fiber optic cables in large telephone exchanges and outside plant) and structured cabling products
(used in local area networks to provide network connectivity) remained very weak in both the United States and the United Kingdom throughout 2002 due to the depressed conditions in the telecoms market
and reductions in enterprise IT spending.

Despite
a generally weak global economy in 2002 we increased our penetration with distributors, wholesalers and catalogue houses that sell a broad range of our products worldwide. The
major contract we signed with the UK's Royal Mail during the year to provide ties for mail sacks has commenced well with 60% of all orders now being placed using an XML e-procurement
system.

The
mission of the Network Products group is to provide innovative solutions with customer satisfaction as our first priority. We aspire, through global leadership and quality products
that add value to electrical and communication networks, to be the customers' partner of choice. We aim to achieve world class operational excellence for the benefit of our customers, our employees
and the interaction of our business with the environment.

Markets

Our Network Products group serves customers in a broad spectrum of industries throughout the world. We serve five principal markets: automotive; data and voice
networks; commercial and public sector construction; electrical and electronic goods; and mass transit, aerospace and defense.

Products



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Competition

The market addressed by our Network Products group is highly competitive. We believe we compete effectively on the basis of product quality and performance
against specification, breadth and availability of product range, pricing, global customer service and support (with global support being particularly important in the automotive industry), product
innovation, and certification, accreditation and standards compliance.

Our
principal competitors in our served markets are:



Customers

The Network Products group has a global base of several thousand customers, with many customers present in multiple geographic markets. Customers are principally
equipment and automotive manufacturers, subsystem suppliers, and systems/component suppliers, installers, wholesalers, expeditors and specialist and catalogue distributors.

No
single customer accounts for a significant portion of the Network Products group's turnover. Repeat business, however, is important to the group and established relationships play an
important role in many of the served markets.

Sales, Marketing and Support

Sales are either made directly to end users or through third parties such as wholesalers, expeditors or distributors. We focus marketing and sales efforts on the
end-user application independent of where the eventual customer may source the products. Our sales channels depend on the nature of the products and the requirements of the customer as
well as the established practices and infrastructure in the different regional markets in which the business operates.

Manufacturing

Our Network Products group has major manufacturing sites in the United States, United Kingdom and Germany and a significant presence in Japan through a joint
venture operating under the HellermannTyton brand. In addition, the group has strategic manufacturing sites in a further six countries around the globe. During 2002 we successfully completed the move
into our new production and distribution facility in Jundaí, Brazil without any interruption to customer service. We also

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increased
the range of products being manufactured at the Wuxi, China facility after increasing the production space last year. The sites together have approximately a million square feet of
manufacturing and distribution space. Labor-intensive products are manufactured in lower-cost locations where practical. Nearly all of our sites are certified to appropriate global
automotive industry quality standards. Our Network Products group derives about 25% of its turnover from products which are manufactured by third parties.

Systems Group

Our Systems group now comprises two businesses which develop, manufacture and sell integrated systems for the power controls market and the aerospace market. Our
systems typically combine hardware, software and high levels of customer service and support. In April 2002 we sold our aerospace component businesses for a net consideration of
£37.6 million which comprised a number of subsidiaries in the United Kingdom and the United States which manufactured a range of aerospace hardware products including cockpit voice
recorders, flight data retrieval systems and in-flight fire detection systems. The divestments of Switching Systems International Inc, a power management business, and Monitor Labs Incorporated, an
environmental monitoring business, from our Systems group were also completed during 2002 for a net cash consideration of £18.0 million.



Our power controls business develops and manufactures electronic control systems for specialist electrically powered vehicles in the healthcare sector, such as
powered wheelchairs and mobility scooters, and the small industrial vehicles sector, such as floor cleaning vehicles and access platforms. All of these systems enable the user to control the power,
speed and other functions of these electrically powered vehicles.

Our
strategy for the power controls business is to continue to develop strong positions as a focused supplier of systems that add significant value to the performance of our customers'
products. In particular, we have built our market leadership position in our key healthcare mobility market largely as a result of our innovative design approach. We have now begun to exploit our
technology in other related markets, particularly specialty electrically powered industrial vehicles.



Our power controls activities serve two principal customer groups. These are manufacturers of healthcare mobility equipment and equipment manufacturers making
specialist battery powered electric vehicles.



Our innovative designs for power control devices for wheelchairs and mobility scooters offer exceptional ease-of-use, cost-effectiveness and features,
making them adaptable to a wide variety of manufacturers' requirements. During 2002 we launched the VSI power control system for wheelchairs and a competitively priced mobility scooter controller, the
S-Drive. We are now expanding our product range into specialist controllers for industrial applications and have had initial success in penetrating this market with the multi-functional
TRIOTM product.

We
believe that ongoing research and development focused on developing new products and enhancing existing products, involving both software and hardware, is critical to the success of
our business. Our research and development activities in this business are primarily directed towards extending product capabilities and improving the performance and
ease-of-use of our products.

29

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The market for power control products is highly competitive and we believe we compete effectively on the basis of important factors such as strong customer
relationships, the ability to respond to customer requirements with appropriate design and application engineering capabilities, short time to market, product quality and reliability, pricing, and an
understanding of the standards and legislative environment of served industries, particularly with respect to medical products.

In
the healthcare vehicle markets we consider our main competitors to be Dynamic Controls Limited and Curtis Instruments, Inc. We are establishing ourselves in the industrial
market, where there is competition from Curtis Instruments, Inc., Tech/Ops Sevcon, Inc. and ZAPI group S.p.a.

We
also face potential competition from our customers who may choose to manufacture their own supplies and from equipment manufacturers who may choose to compete in the market.



We have a broad customer base comprised mainly of healthcare equipment manufacturers worldwide. Major customers include Pride Mobility Products Corp. and Sunrise
Medical Inc. For industrial equipment, major customers include JLG Industries, Inc.



Our products are sold through a direct sales force. At December 31, 2002, we had sales support personnel based in the United States, the United Kingdom and
the Far East and we continue to have personnel in all of these locations.



Our devices are designed and manufactured in the United Kingdom.



Our aerospace business supports aircraft operators, both military and civil, with a range of information management products, combining both hardware and
software, to enable the operators to improve their efficiency while improving flight safety. Software products such as GRAF, Vision, GOLD and AuRA help to
improve the safety and efficiency of aircraft maintenance, repair and overhaul by providing timely and effective management information from the large volumes of data which are generated, monitored
and recorded during the routine operation and servicing of aircraft. Our ReVision software is targeted at improving the efficiency of pilot training.

Our
aerospace hardware products are used to acquire and process data and to display or transmit information onboard the aircraft. Products such as our airborne file servers, electronic
flight bags, pilot access terminals and maintenance access terminals provide platforms for our flight operations and airborne maintenance software applications. We also supply a range of instruments
displays for use on the flight deck and display systems for use by passengers.

Our
strategic objective is to be a leader in integrated information management products for the aerospace industry.



The market for our aerospace products comprises three major customer groups: commercial airlines; military aircraft operators (airforce, army and navy); and
airframe manufacturers of rotary and fixed wing aircraft.

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Many
of our products are upgrade items for in-service aircraft and as such civil airlines or military aircraft operators are typically our primary customers. Airframe
manufacturers, as well as being customers for our electronics products, form a significant part of our maintenance software customer base. Aerospace equipment manufacturers, such as engine or
avionics suppliers, frequently have considerable repair and overhaul operations and thus form part of our maintenance software customer base.



Our aerospace business has developed a range of integrated solutions that allow airlines and airforces to improve their safety, operational efficiencies, customer
service and mission effectiveness. Our aerospace activities primarily focus on three areas: electronics; applications software; and integrated solutions.





The markets for our aerospace products are highly competitive. We believe we compete effectively, particularly through our understanding of the key issues facing
aviation customers, our breadth of product offering, and our competence and reputation in the aerospace industry.

Although
we believe we have no direct competitors competing across our full range of capabilities, we face competition from several sources. Our hardware electronics activities face
competition from established avionics companies, including Honeywell International Inc., Rockwell Collins, Inc., Smiths Group plc, Teledyne Technologies Incorporated and Universal
Avionics Systems Corporation. Our MRO software activities face competition from:



Our
aviation information software solutions face competition from organizations such as The Boeing Company, Airbus S.A.S. and Aircraft Management Technologies Limited.

31

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Leading commercial aircraft operators, national defense organizations and manufacturers of aircraft and aircraft systems use our aerospace products. Our customers
include The Boeing Company, FedEx Corporation, the Ministry of Defense, Northwest Airlines Corporation, Lockheed Martin Corporation, Qantas Airways Limited, Singapore Airlines Limited, Continental
Airlines, Inc., Southwest Airlines Co., JetBlue Airways Corporation, the US Airforce and the US Navy.



Our aerospace products are sold either through a direct sales force or through distributors, depending on the geographic region and the preferences of the markets
being served. At December 31, 2002, we had sales support personnel based in the United States, the United Kingdom and Singapore and we continue to have personnel in all of these locations. The
sales process for one of our larger aerospace systems typically takes six to twelve months from the start of discussions with a prospective customer to the placing of a contract.



Our aerospace activities have facilities in San Diego, Wichita and Minneapolis in the United States, in Ottawa, Canada and in West Drayton and Yeovil in the
United Kingdom. We use these facilities both for software development and manufacturing, although we contract out to third parties some of our manufacturing for hardware.

The
products we sell to the aerospace industry must meet standards and certifications requirements set by regulatory agencies such as the US Federal Aviation Authority, the UK Civil
Aviation Authority and the European Joint Aviation Authority, as well as those prescribed by aerospace manufacturers. We are constantly monitoring these standards to ensure our continued compliance.

32

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Organizational Structure

Spirent plc is the ultimate parent company of our Group. We conduct our operations through various subsidiaries and trading divisions. Although this is our legal
structure, this does not necessarily coincide with our organizational or management structure. The following is a list of our significant subsidiaries, trading divisions, joint ventures and associates
as at December 31, 2002. We have not listed below other subsidiaries that are less significant.

|                                                                                                                               |                            | Country of
Incorporation |  | Percentage held at
December 31, 2002
|------------------------------------------------------------------------------------------------------------------------------ | -------------------------- | ------------------------ |  | ------------------------------------
|Communications                                                                                                                 |                            |                          |  |                                     
|Performance Analysis division                                                                                                  |                            |                          |  |                                     
|Caw Networks, Inc                                                                                                              |                            | Delaware, USA            |  | 100                                 
|Spirent Communications (Scotland) Ltd*                                                                                         |                            | England                  |  | 100                                 
|Spirent Communications Inc:                                                                                                    |                            | Delaware, USA            |  | 100                                 
|                                                                                                                               | Calabasas, California, USA |                          |  |                                     
|                                                                                                                               | Honolulu, Hawaii, USA      |                          |  |                                     
|                                                                                                                               | Sunnyvale, California, USA |                          |  |                                     
|                                                                                                                               | Eatontown, New Jersey, USA |                          |  |                                     
|Spirent Communications of Ottawa Ltd                                                                                           |                            | Canada                   |  | 100                                 
|Spirent Communications (SW) Ltd*                                                                                               |                            | England                  |  | 100                                 
|Service Assurance division                                                                                                     |                            |                          |  |                                     
|Spirent Communications of Rockville, Inc.                                                                                      |                            | Delaware, USA            |  | 100                                 
|Spirent Communications Ltd*                                                                                                    |                            | England                  |  | 100                                 
|Network Products                                                                                                               |                            |                          |  |                                     
|Trading divisions of Spirent plc:
HellermannTyton:
Aldridge, West Midlands, UK
Plymouth, Devon, UK
Wythenshawe, Manchester, UK |                            |                          |  |                                     
|HellermannTyton (Pty) Ltd                                                                                                      |                            | South Africa             |  | 90                                  
|HellermannTyton S.A.                                                                                                           |                            | France                   |  | 100                                 
|HellermannTyton AB                                                                                                             |                            | Sweden                   |  | 100                                 
|HellermannTyton GmbH                                                                                                           |                            | Austria                  |  | 100                                 
|HellermannTyton GmbH                                                                                                           |                            | Germany                  |  | 100                                 
|HellermannTyton Ltda                                                                                                           |                            | Brazil                   |  | 100                                 
|HellermannTyton Pte Ltd                                                                                                        |                            | Singapore                |  | 75                                  
|HellermannTyton Data Ltd* [nc_cad,217]                                                                                         |                            | England                  |  | 90                                  
|HellermannTyton Corporation                                                                                                    |                            | Delaware, USA            |  | 97                                  
|Tyton Company of Japan Ltd* (Associate)                                                                                        |                            | Japan                    |  | 49                                  
|Systems                                                                                                                        |                            |                          |  |                                     
|PG Drives Technology Ltd                                                                                                       |                            | England                  |  | 100                                 
|PG Drives Technology Inc                                                                                                       |                            | Delaware, USA            |  | 100                                 
|Spirent Systems San Diego Inc                                                                                                  |                            | Delaware, USA            |  | 100                                 
|Spirent Systems Wichita Inc                                                                                                    |                            | Delaware, USA            |  | 100                                 
|WPDS Software Ltd*                                                                                                             |                            | England                  |  | 100                                 
|The Flight Data Company Ltd                                                                                                    |                            | England                  |  | 100                                 
|Spirent Systems (Ottawa) Ltd                                                                                                   |                            | Canada                   |  | 100                                 
|                                                                                                                               |                            |                          |  |                                     

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|Financial                                 |  |                 |  |    
|----------------------------------------- |  | --------------- |  | ---
|Spirent BV                                |  | The Netherlands |  | 100
|Spirent GmbH                              |  | Germany         |  | 100
|Spirent Holdings Corporation              |  | Delaware, USA   |  | 100
|Interconnection Joint Venture[nc_cad,217] |  |                 |  |    
|WAGO Contact SA                           |  | Switzerland     |  | 51 
|WAGO Kontakttechnik GmbH                  |  | Germany         |  | 51 

The
above companies operate and are incorporated in the countries listed. All shareholdings in the companies are held indirectly by Spirent plc, except where indicated by an asterisk (*)
where the shareholding is held directly by Spirent plc. The percentage held reflects the proportion of shares controlled and not the beneficial interest.

[nc_cad,217]
Our holding in HellermannTyton Data Ltd increased from 90% to 100% in April 2003. We completed the disposal of our interests in the WAGO joint
venture in April 2003.

Properties and Facilities

The following facilities, all of which are leased, are individually material to the business of our group as a whole:



Intellectual Property

We believe that our patents and applications have value. However, in general no single patent is in itself material to our business as a whole, although the
patent portfolios of our Communications and Network Products groups are somewhat important to the businesses of those groups. If we fail to maintain or enforce our intellectual property rights, or if
competitors design around our technology or develop competing technologies, our competitive position could suffer.

Materials

Because of the diversity of our group, we purchase raw materials and components from a wide range of suppliers. We are not dependent on any single supplier.
Prices fluctuate for certain raw commodities used by our Network Products group, particularly Nylon 66, PVC and copper. Although we believe that our relationships with our suppliers for these
commodity materials are relatively secure, the prices we have to pay for these raw materials may increase. In addition, certain suppliers of electronic components used by several of our businesses use
a quota system to allocate sales of their products when demand exceeds supply. When quotas are in effect, we may not be able to purchase at an acceptable cost as many components as we require to
manufacture our products.

Regulatory and Other Government Requirements

No regulatory or other government requirements exist that are material to us or our business as a whole. However, regulations relating to the aerospace and
aviation industries are important to our aerospace business. The regulatory environment in which our aerospace business operates is discussed further in "Item 4. Information on the Company."

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Enforcement of Civil Liabilities

We are a public limited company incorporated under the laws of England and Wales. Our registered office is Spirent House, Crawley Business Quarter, Fleming Way,
Crawley, West Sussex RH10 9QL, United Kingdom. The majority of our directors and executive officers are residents of countries other than the United States. All or a substantial portion of
their assets and our assets are located outside the United States. As a result, it may not be possible for you:



Under
English law, our directors and officers have fiduciary duties to our company, including, generally, duties to act in the best interests of the company and to exercise appropriate
skill and care. English law, however, limits the circumstances under which shareholders of English companies may bring actions on the company's behalf for breach of these duties more significantly
than does, generally, state law in the United States.

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ITEM 5.    OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The following discussion and analysis relates to our financial condition as of December 31, 2002 and the results of operations for the years ended
December 31, 2002, 2001 and 2000. This discussion should be read in conjunction with our Selected Consolidated Financial Information and our Audited Consolidated Financial Statements included
elsewhere in this annual report. You should also read the description of our business included in "Item 4. Information on the Company."

The
following discussion and analysis by segment is based on the Consolidated Financial Statements of Spirent plc and its subsidiaries, together with its share of profits of its joint
venture and associates, which we refer to as the Group. These Consolidated Financial Statements are prepared in accordance with UK GAAP. A summary of the main differences between UK GAAP and US GAAP
as they relate to us is set out in Note 37 of Notes to the Financial Statements.

We
evaluate performance for each reportable segment based on turnover and operating profit for ongoing operations before goodwill amortization and exceptional items.

Overview

We are an international network technology company providing state-of-the-art systems and solutions for a broad range of customers worldwide. Our Communications
group is a worldwide provider of integrated performance and service assurance systems for next-generation network technologies. Spirent's solutions enable our customers to develop and
deploy network equipment and services by emulating real-world conditions and assuring end-to-end performance of large-scale networks. Our Network Products group
provides innovative solutions for fastening, identifying, insulating, organizing, routing and connectivity that add value to electrical and communication networks in a wide range of applications. Our
Systems group offers integrated product solutions for the power controls and aerospace markets.

Turnover
of £558.9 million and operating profit before goodwill amortization and exceptional items of £50.5 million were 30% and 55% below our
results for 2001, respectively, but all our groups generated operating profit and cash in 2002. A drop in the capital
expenditure by US network service providers during the third quarter of 2002 reduced the performance of our Communications group. This fall in revenues led us to realign our cost base, involving an
11% reduction in workforce, reorganization of our operations and reductions in discretionary spending.

Following
the deterioration in trading, goodwill impairment has been charged at the year-end. The total charge reported is £923.3 million and is
principally in relation to our Communications group.

Operating
cash flow of £76.9 million was 46% down on the previous year of £141.2 million.

On
March 12, 2003 we announced the divestment of our interests in WAGO to our joint venture partners for net cash proceeds of £59.5 million. The divestment was
approved by shareholders on March 31, 2003 and completed on April 4, 2003.

To
provide the Group with an increase in the level of headroom available in relation to certain of the financial covenants related to our senior unsecured loan notes and our syndicated
bank facility, amendments to the terms of the loan notes and the syndicated bank facility were agreed. These amendments were conditional on the completion of the divestment of WAGO and use of the net
proceeds to partially pre-pay the loan notes together with an associated contractual make-whole amount.

These
revised terms took effect on completion of the divestment of WAGO on April 4, 2003, at which time £47.0 million of the loan notes were repaid together
with an associated contractual make-whole amount of £12.5 million. (See "Liquidity and Capital Resources" in Item 5 below and "Material Contracts" in Item 10 below for a more
detailed discussion of the revised terms.)

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Acquisitions and Disposals

Acquisitions

Acquisitions and disposals are discussed in "Item 4. Information on the Company" and in Notes 34 and 35 of Notes to the Financial Statements.

There
were three acquisitions in the year ended December 31, 2002 for a total cash cost of £49.2 million.

In
July 2002 we invested £16.4 million in the acquisition of certain assets of the remote special services test product line of Anritsu Company US.

In
August 2002 we acquired the remaining, then, 85% not already owned by the Group, of Caw for an initial consideration including expenses of £26.7 million in
cash and the roll-over of outstanding options and shares under the previous Caw employee stock plan. Contingent consideration of up to $60 million in value, expected to be satisfied by way of
shares, is payable dependent on certain performance criteria being achieved by Caw for the year ended December 31, 2003.

In
September 2002 we acquired a product line and certain intellectual property rights from UbiNetics for a cash consideration of £6.1 million including
expenses.

Disposals

In April 2002 we sold our aerospace component businesses from within our Systems group to Curtiss-Wright Corporation for a cash consideration of
$60 million (£37.6 million including expenses). During 2002 two other smaller businesses were sold from within the Systems group for a combined total consideration of
£18.0 million.

Recent developments

On March 12, 2003 we announced the divestment of our interests in WAGO to our joint venture partners. The divestment was completed on April 4, 2003
with net proceeds received of £59.5 million. The net proceeds from the divestment have been used to pre-pay
$73.8 million (£47.0 million) of the loan notes and pay an associated contractual make-whole amount of £12.5 million.

To
provide the Group with an increase in the level of headroom available in relation to certain of the financial covenants, amendments to the terms of the loan notes and syndicated bank
facility have been agreed. These amendments include restrictions on dividend payments and restrictions on acquisitions and disposals. These amendments are discussed in more detail in "Liquidity and
Capital Resources" in Item 5 below and in "Material Contracts" in Item 10 below.

Following
the application of the net proceeds from the divestment of WAGO, $144.2 million of loan notes will remain outstanding with unchanged maturities, $6.4 million
matures in 2006 and $137.8 million in 2009. The applicable interest rate will be increased to a weighted average of 9.45%, which will decrease if certain financial requirements are satisfied. (See
"Liquidity and Capital Resources" in Item 5 below for a more detailed discussion of the new financial requirements).

At
the Annual General Meeting of shareholders held on May 20, 2003, we stated that "Spirent's trading performance in the first quarter of 2003 has been in line with expectations
against a background of continuing tough conditions in the telecoms sector, with all our operating groups profitable and cash generative.

"As
part of our ongoing control of costs we have implemented further cost reductions in the Communications group which are expected to deliver annualized savings of
£5.0 million at an exceptional cost of £1.0 million in cash. In addition we have exited from our under-performing optical

37

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test
activities at an exceptional cost of £3.0 million, of which £2.4 million is in cash. Optical test sales were £0.7 million in the year to
December 31, 2002.

"Net
debt at the end of April 2003 reduced to £103.0 million, compared with £161.8 million at December 31, 2002, following completion
of the divestment of our interests in WAGO, our interconnection joint venture.

"Difficult
trading conditions continue to be experienced by our Communications group with many of our key customers maintaining a short-term outlook in respect of the timing of capital
spending and we expect this to continue throughout 2003. We believe that the longer term outlook for our products and services remains positive with future opportunities being created by the
continuing strong underlying growth in data traffic and the development of next-generation networks worldwide."

Results of Operations

Reported turnover was £558.9 million and operating profit before goodwill amortization and exceptional items was
£50.5 million. Turnover from ongoing businesses was £533.9 million and operating profit was £49.2 million, down 18% and 50%, respectively,
compared with 2001 due to the reduced performance of our Communications group. Levels of activity in the Communications group in the first half of 2002 were in line with those seen in the second half
of 2001. During the third quarter of 2002, however, we saw a marked reduction in activity, particularly in the Service Assurance division, following the announcements by many of our major customers
that they were further cutting their capital expenditure budgets.

The
fall in revenues in our Communications group led us to realign our cost base in the fourth quarter of 2002. This involved an 11% reduction in workforce, reorganization of our
operations and reductions in discretionary spending within the Communications group.

The
effects of currency translation were to reduce reported turnover by £18.4 million and reported operating profit by £1.6 million compared to
2001.

As
a result of the drop in turnover in our Communications group and with the cost saving actions only becoming effective in the fourth quarter, return on sales for the Group declined to
9.0% 5.1 percentage points below 2001. The Network Products group, however, maintained a return of 9.1% and returns in the Systems group improved over 2001 benefiting from the restructuring in
the aerospace business and growth in power controls.

In
2002 North America accounted for 66% of turnover by source from ongoing businesses (2001 73%) at £350.2 million compared with £472.0 million in
2001. Europe accounted for 28% of turnover by source for ongoing businesses (2001 23%).

By
market, turnover was reduced in absolute terms in Europe and North America but there was marginal growth in Asia where turnover increased from 13% to 16% of the total.

Turnover
and operating profit within our Communications group was much reduced from 2001 at £315.4 million (2001 £430.6 million) and
£30.8 million (2001 £83.4 million), respectively. The Communications group comprised 59% (2001 66%) of Group turnover from ongoing businesses.

Turnover
for the Performance Analysis division was £187.1 million (2001 £245.5 million) and operating profit £9.4 million (2001
£38.7 million). For the Service Assurance division turnover was £128.3 million (2001 £185.1 million) and operating profit
£21.4 million (2001 £44.7 million).

The
Performance Analysis division achieved a stable order intake rate of approximately £50 million per quarter in the first half of 2002 but this dropped to
£42 million in the third quarter. Order intake recovered in the fourth quarter to £50 million. The Service Assurance division's order book closed the year at
£37 million compared with £31 million at the end of the third quarter and £73 million at the

38

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end
of 2001, reflecting customers' changing order patterns and reduction in capital expenditure over the year.

Our
Network Products and Systems groups delivered more stable performances in the year. These businesses supply a broad range of industries and therefore have provided some protection
from the volatile conditions in the telecoms market. The Network Products group contributed turnover of £164.7 million (2001 £170.4 million), being 31% (2001 26%)
of the Group's turnover from ongoing businesses, and the Systems group contributed £53.8 million (£48.6 million), being 10% (2001 7%).

Reported
loss before taxation for the Group was £1,053.1 million (2001 loss £730.7 million) after charging exceptional items of
£1,043.4 million (2001 £745.0 million) giving a basic loss per share of 117.12 pence (2001 loss 83.43 pence). Headline earnings per share were 3.40 pence (2001
7.76 pence).

Operating
exceptional charges were £964.9 million and include a goodwill impairment charge of £923.3 million. Following the deterioration in
trading, goodwill impairment has been charged at the year end. The total charge of £923.3 million is principally in relation to our Communications group. In line with best practice
this charge includes £87.0 million in respect of goodwill previously charged to reserves. The remaining goodwill carrying value is £113.6 million and it is
expected that the goodwill amortization charge will be approximately £10.0 million in 2003.

Other
operating exceptional items charged as a result of the cost saving actions taken in 2002 include restructuring costs of £8.6 million in respect of redundancy
payments and other costs incurred in the restructuring of the business, provisions of £20.2 million in relation to our continuing obligations under vacated leases,
£4.4 million for stocks in excess of twelve
months' usage and £3.6 million in relation to the write-down of the value of certain tangible fixed assets. Acquisition retention bonuses of £4.8 million have
also been charged as an exceptional item in 2002.

Non-operating
exceptional charges were £78.5 million and comprise a net loss of £48.4 million reported on the divestments from within
the Systems group and a charge of £30.1 million to write down the investment in own shares held in the Employee Share Ownership Trust to market value at December 31, 2002.

Operating
cash generation for 2002 was £76.9 million compared with £141.2 million in 2001. Despite the lower levels of trading we were able to
generate £36.4 million of free cash flow, defined as cash flow before acquisitions and disposals, equity dividends and financing, compared with £40.4 million in
2001. This was achieved after investing £77.7 million (2001 £95.9 million) in product development representing 14% of turnover up from 12% in 2001. Free cash flow
was down by only £4.0 million despite a fall of £64.3 million in cash flow from operating activities. Net borrowings were reduced to
£161.8 million (2001 £179.1 million) at December 31, 2002.

We
announced on March 12, 2003 the divestment of our interests in WAGO to our joint venture partners for net cash proceeds of £59.5 million. This divestment was
subject to shareholder approval, which was obtained at the Extraordinary General Meeting held on March 31, 2003. WAGO was not considered to be a core business of the Group and did not
materially contribute to the Group's cash flow. The divestment was completed on April 4, 2003 and the proceeds were used to reduce debt.

At
December 31, 2002 we continued to be in compliance with our borrowing covenants but in order to increase the level of headroom available under certain of our financial
covenants we renegotiated our borrowing terms. These revised terms became effective on completion of the divestment of WAGO on April 4, 2003 (see "Liquidity and Capital Resources" in
Item 5 below and "Material Contracts" in Item 10 below for a more detailed discussion of the revised terms).

39

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Our revenues, which we refer to as turnover, are derived from:



Turnover
is generally recognized upon shipment of the product unless there are significant post-delivery obligations or collection is not considered probable at the time of
sale. When significant post-delivery obligations exist, turnover is deferred until such obligations are fulfilled. Turnover from service obligations is deferred and generally recognized
ratably over the period of the obligation.

During
the year ended December 31, 2002 turnover by source for ongoing businesses in Europe was 28% (2001 23%), of which the United Kingdom comprised 12% (2001 10%), and in North
America 66% (2001 73%). This reflects the reduction in turnover in North America following the deterioration seen in our Communications group which is predominantly North American based. The
proportion of turnover generated in North America is expected to remain at these levels in the near term.

No
single customer accounted for more than 10% of total turnover in any of the three years in the period ended December 31, 2002.



Cost of sales is comprised of direct costs associated with product sales including product development and all attributable overheads. Of our three operating
groups, our Communications group has typically experienced the lowest cost of sales as a percentage of turnover and has consequently earned the highest margins.



Operating expenses consist of selling and distribution expenses, administration expenses and other operating income. Selling and distribution expenses consist
primarily of salaries and related costs for sales and marketing personnel and promotional expenditures. Administration expenses include goodwill amortization and impairment expense. For both
categories of expenses excluding goodwill amortization and exceptional items, the principal variable is headcount.



This represents our share of operating profit from our WAGO joint venture which was sold in April 2003.



Interest receivable and similar income is comprised of interest from cash and cash equivalents.



Interest payable primarily comprises interest on loans and bank overdrafts, as well as finance charges on finance leases. Finance charges associated with debt
issuances are charged to the profit and loss account over the life of the instrument and included in interest expense.

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Critical Accounting Policies

The fundamental objective of financial reporting is to provide useful information that allows a reader to comprehend the business activities of Spirent. To aid in
that understanding, management has identified Spirent's 'critical accounting policies'. These policies are considered "critical" because they have the potential to have a material impact on Spirent's
financial statements, and because they require judgments and estimation due to the uncertainty involved in measuring, at a specific point in time, events which are continuous in nature.



Goodwill arising on the acquisition of subsidiaries and representing the excess of cost over the fair value of the attributable assets and liabilities acquired,
is capitalized as an intangible asset and amortized over its estimated useful economic life up to a maximum of 20 years. Goodwill is reviewed for impairment at the end of the first full
financial year following acquisition and in other periods if events or changes in circumstances indicate the carrying value may not be recoverable. US GAAP requires that goodwill is reviewed at least
annually for impairment.

The
deterioration in trading in the second half of 2002 in the telecommunications market together with the significant fall in the Spirent share price have necessitated a further review
of our businesses for impairment. This review has resulted in impairment losses of £923.3 million being recognized during 2002. A similar impairment loss of
£724.6 million was recognized in 2001. These losses are the aggregate from the impairment reviews of each individual income generating unit and are determined in accordance with
Financial Reporting Standard 11 ("FRS 11") "Impairment of Fixed Assets and Goodwill". The impairment loss restates the asset to value in use using estimated
cash flows which include assumptions on future growth rates, margins, product development spend and other expenditure in these businesses. The resulting cash flows have been discounted at
pre-tax discount rates of between 15 and 20%, which are considered appropriate to those businesses based on their perceived risk compared to Spirent's weighted average cost of capital.

In
addition, independent valuations were obtained for the purpose of impairment reviews in accordance with US GAAP to determine the fair value of the businesses and any necessary
impairment charges. These valuations were based on management's estimates of the future cash flows of the businesses and have been considered in determining the fair values of the businesses.

The
impairment reviews for UK and US GAAP have been performed using a number of assumptions which management considers most appropriate given the current market conditions. These
assumptions underpin the cash flows upon which the calculations are performed. The discount rate applied has been chosen based on the perceived risk within each business. Given the significance of the
impairments identified, varying any of these assumptions could have materially changed the impairment charge reported.

In
implementing our amortization policy various judgments and assumptions have been made in relation to the estimated useful economic lives of the goodwill concerned and its
recoverability. Using a different useful economic life could materially affect the amortization charge under UK GAAP.



Spirent makes provisions against inventories in excess of 12 months' usage and for doubtful debts. Spirent's policy is to reserve against both excess and
obsolete inventories. Inventory is assessed and reserved if in excess of 12 months' usage. Obsolete inventories are identified on an itemized basis. Debtors are reserved based on exposures on
specific customer accounts and reserved as soon as that exposure is identified by management through the process of regular reviews. Use of a different policy in respect of inventory and debtors could
result in materially different provisions being made.

41

---

Provisions
of £4.4 million related to excess inventories in our Communications group have been classified as operating exceptional costs given their size and nature.



Revenue from product sales of hardware and software is recognized at time of delivery and acceptance. Terms of acceptance are dependent upon the specific
contractual arrangement agreed with the customer. Where the sale is to a new customer and installation is to be performed, revenue recognition is deferred until acceptance has occurred. Revenue
recognition is also deferred until acceptance where a new product is supplied to an existing customer.

Revenue
from multiple element contracts is allocated based on prices charged for each individual element when sold separately. Revenue from services is recognized ratably over the period
of performance.

The
Group does not enter into a significant number of long-term sales contracts. Revenue and estimated profits on long-term contracts are recognized under the
percentage-of-completion method of accounting. When estimates of total contract revenues and costs indicate a loss, a provision for the entire amount of the contract loss is
recognized in the period in which the loss becomes evident.

The
Group does not enter into bill and hold transactions and revenue is only recognized when collectibility is probable.



The Group applies the principles of Statement of Standard Accounting Practice ("SSAP") 24 for determining pension charges. Spirent operates one major defined
benefit pension plan, which is in the United Kingdom. This standard requires that actuarial surpluses and deficits are spread over the average expected remaining service of plan members, being
13 years. The surplus or deficit on the one major defined benefit plan identified, is based on the last actuarial triennial valuation, which, for Spirent, was April 1, 2000, at which
time a surplus was identified.

The
next actuarial valuation commenced in April 2003 and it is likely that these surpluses will have been eroded due to declining share values and reducing interest rates, which
have both adversely affected funding levels. The actuarial valuation being used as a reference point for the SSAP 24 based pension charge is not current and therefore the pension charge under an
updated valuation is likely to be materially different.

In
November 2000, the Accounting Standards Board ("ASB") published FRS 17 "Retirement Benefits". Under FRS 17, plan assets and liabilities are determined by, respectively,
market-related values at the date of the financial statements and by discounting plan obligations using a market derived discount factor. Under FRS 17 actuarial gains and losses are recognized in full
in the balance sheet with movements recognized in the statement of total recognized gains and losses. The standard is required to be fully implemented in the 2005 financial year with disclosures of
the impact required from 2001. Based on FRS 17 the funding position of the plan identified at December 31, 2002 was a deficit of £41.9 million before taxation, representing a
funding deficit of 32%. The Group, as permitted by FRS 17, has chosen to defer full implementation of this standard for the time being.

Deferred taxation

The reduction in activity levels and the resulting deterioration in operating profits has necessitated a reassessment of the carrying value of
£19.0 million of deferred tax assets. These assets had previously been recognized on the acquisition of businesses, on prior years' exceptional items, and on timing differences.
Although we expect the assets to be recovered in full over time there is currently insufficient evidence to support the continued recognition of the deferred tax assets under FRS 19.

The
deferred tax write-off has been predicated on the current forecasts and estimates prepared by management. A change to these forecasts and estimates, given the significance of the
charge, could have materially changed the deferred tax write-off and related deferred tax assets.

42

---



Year Ended December 31, 2002 Compared with the Year Ended December 31, 2001

The previous year's presentation of segmental information has been restated to comply with current year presentation, due to the disposal of certain businesses
within the Systems group. Organic change is not presented as acquisitions and disposals during the period under review as it did not have a material impact on the results of operations or the
financial position.

|                                                                    |                      | Year ended
December 31
|------------------------------------------------------------------- | -------------------- | ----------------------
|
|
|Turnover                                                            |                      |                       
|Continuing operations                                               |                      |                       
|                                                                    | Performance Analysis |                       
|                                                                    | Service Assurance    |                       
|                                                                    |                      |                       
|                                                                    | Communications       |                       
|                                                                    | Network Products     |                       
|                                                                    | Systems              |                       
|                                                                    |                      |                       
|                                                                    | Ongoing businesses   |                       
|                                                                    | Divested operations  |                       
|                                                                    | Systems              |                       
|Discontinued operations                                             |                      |                       
|                                                                    | Sensing Solutions    |                       
|                                                                    |                      |                       
|                                                                    |                      | 558.9                 
|                                                                    |                      |                       
|Operating Profit before Goodwill Amortization and Exceptional Items |                      |                       
|Continuing operations                                               |                      |                       
|                                                                    | Performance Analysis |                       
|                                                                    | Service Assurance    |                       
|                                                                    |                      |                       
|                                                                    | Communications       |                       
|                                                                    | Network Products     |                       
|                                                                    | Systems              |                       
|                                                                    |                      |                       
|                                                                    | Ongoing businesses   |                       
|                                                                    | Divested operations  |                       
|                                                                    | Systems              |                       
|Discontinued operations                                             |                      |                       
|                                                                    | Sensing Solutions    |                       
|                                                                    |                      |                       
|                                                                    |                      | 50.5                  
|                                                                    |                      |                       



Comparisons by segment are given below for ongoing businesses. Operating profit and return on sales are stated before goodwill amortization and exceptional items.

43

---



|                                                                       |                      | Year ended December 31 |       |  |      
|---------------------------------------------------------------------- | -------------------- | ---------------------- | ----- |  | -----
|
|
|Turnover                                                               |                      |                        |       |  |      
|                                                                       | Performance Analysis |                        | 187.1 |  | 245.5
|                                                                       | Service Assurance    |                        | 128.3 |  | 185.1
|                                                                       |                      |                        |       |  |      
|                                                                       | Communications group |                        | 315.4 |  | 430.6
|                                                                       |                      |                        |       |  |      
|Operating profit before goodwill amortization and exceptional items    |                      |                        |       |  |      
|                                                                       | Performance Analysis |                        | 9.4   |  | 38.7 
|                                                                       | Service Assurance    |                        | 21.4  |  | 44.7 
|                                                                       |                      |                        |       |  |      
|                                                                       | Communications group |                        | 30.8  |  | 83.4 
|                                                                       |                      |                        |       |  |      
|Return on sales before goodwill amortization and exceptional items (%) |                      |                        |       |  |      
|                                                                       | Performance Analysis |                        | 5.0   |  | 15.8 
|                                                                       | Service Assurance    |                        | 16.7  |  | 24.1 
|                                                                       | Communications group |                        | 9.8   |  | 19.4 

Throughout
2002 our major customers, the network equipment manufacturers (NEMs) and network service providers (NSPs), continued to restructure their operations in response to the
significantly reduced overall market. This coupled with certain regulatory issues for our customers in the United States resulted in a reduction in spending on our products, particularly in the third
quarter. By taking immediate cost-saving actions in October 2002 we were able to return to profitability in our Communications group in the fourth quarter after delivering a small
loss in the third quarter.

The
Communication group's turnover was £315.4 million for the year ended December 31, 2002, compared to £430.6 million for the year ended
December 31, 2001, a decrease of 27%. Operating profit was £30.8 million for the year ended December 31, 2002, compared to £83.4 million for the
year ended December 31, 2001, a decrease of 63%.

Return
on sales, before goodwill amortization and exceptional items, decreased to 9.8% for the year ended December 31, 2002, compared to 19.4% for the year ended
December 31, 2001. Return on sales was reduced in both divisions and the most significant reduction was seen in the Performance Analysis division where return on sales dropped to 5.0% compared
with 15.8% in 2001. The Service Assurance division's return on sales reduced to 16.7% compared with 24.1% in 2001.

During
the year we maintained investment in the development of our products to ensure we continue to meet our customers needs to be both cost-efficient and cutting-edge.
Product
development expenditure of £66.2 million (2001 £73.0 million) represented 21% of the Communications group turnover and was invested in key areas such as Gigabit
and 10-Gigabit Ethernet in the access and metro networks, VoIP, IPv6, Internet infrastructure and security testing, storage area networks and 3G wireless technologies. This investment
resulted in numerous new products and enhancements to existing product lines being launched during the year including the first end-to-end performance analysis and radio
frequency channel emulation system for the wireless LAN market, a fully automated system for testing WCDMA mobile handsets, a system for the analysis of Internet infrastructures simultaneously from
the physical layer to the applications layer, and a test system for storage area networks.

In
the Performance Analysis division turnover fell in 2002 to £187.1 million from £245.5 million due to decreased spending by our major customers in
the United States and Europe. The return on sales declined to 5.0% due to a combination of the drop in trading levels and the timing of the associated cost reductions in this business. Despite the
overall reduction there were areas of growth, in

44

---

particular
our wireless test products, which increased strongly with turnover up 57% and our position location test products, which performed well.

In
the Service Assurance division turnover fell in the third quarter as our major customers, the incumbent local exchange carriers in the United States reduced investment in their
networks in response to financial constraints and regulatory pressures. As a result of lower volume, return on sales was affected falling to 16.7% from 24.1% in 2001. Return on sales was also affected
by the product mix which included a higher hardware content (lower margin) in the second half of the year as compared with the first half which had a higher software element (higher margin).
Additionally, sales of monitoring systems for leased line broadband services having a lower margin, represented a higher proportion of turnover in 2002 compared with 2001, which had a predominance of
DSL business.

An
important opportunity for growth in the Service Assurance division is the expansion of the customer base internationally. Although the sales cycle for the Service Assurance division's
large ticket systems is long, we are encouraged by the progress we have made in pursuing opportunities outside the United States. We have begun formatting our products to enable local language support
and were pleased to secure our first order in Japan.



|                                                                       |  | Year ended December 31 |  |       | 
|---------------------------------------------------------------------- |  | ---------------------- |  | ----- | 
|
|
|Turnover                                                               |  | 164.7                  |  | 170.4 | 
|Operating profit before goodwill amortization and exceptional items    |  | 15.0                   |  | 15.3  | 
|Return on sales before goodwill amortization and exceptional items (%) |  | 9.1                    |  | 9.0   | 

Turnover
in our Network Products group was down marginally by 3% and operating profit before goodwill amortization and exceptional items was down 2% on the prior year. In the United
States, improved sales to the heavy vehicles market and growth of our recently introduced LAN 'Network Sciences' product line were off-set by reduced sales to the telecoms service
providers. Our European sales showed a small increase overall and in Japan sales were broadly flat. In South America the recession led by the severe economic collapse in Argentina negatively affected
the group. The restructuring actions taken in 2001 to consolidate and extend customer-facing activities and reduce administrative and back office activities became fully effective in the first half of
2002 and return on sales improved to 9.1% compared to 7.3% in the second half of 2001.

Sales
to the automotive sector contributed 30% to turnover in 2002 compared with 27% in 2001. While global vehicle production was broadly flat in 2002 the trend towards increasing
electronic/electrical systems content and lighter vehicles requiring increased use of plastics has provided underlying market growth. As a result we have been able to increase our penetration with
vehicle manufacturers, their first tier suppliers and major vehicle harness manufacturers worldwide. Our sales in the US heavy vehicles market recovered showing 23% growth after the significant market
downturn in 2001.

The
market for our broadband products and structured cabling products remained very weak in the United States and the United Kingdom throughout the year due to depressed conditions in
the telecoms market and reductions in enterprise IT spending. We have developed and extended our LAN products for the European market which we expect will benefit sales in 2003.

45

---



|                                                                       |  | Year ended December 31 |  |     
|---------------------------------------------------------------------- |  | ---------------------- |  | ----
|
|
|Turnover                                                               |  | 53.8                   |  | 48.6
|Operating profit before goodwill amortization and exceptional items    |  | 3.4                    |  | 0.5 
|Return on sales before goodwill amortization and exceptional items (%) |  | 6.3                    |  | 1.0 

Figures
in the above table relate to ongoing businesses only.

On
an ongoing business basis the Systems group saw an increase in revenues from £48.6 million to £53.8 million and in operating profit from
£0.5 million to £3.4 million. Return on sales improved to 6.3%. These improvements have been achieved through increased customer penetration, product launches
(including the new airborne file server) and the successful entrance into new markets. The impact of cost reductions taken in the first half of 2002 in the aerospace business coupled with increased
sales resulted in improved trading in the Systems group in the second half of 2002.

The
power controls business saw good growth in turnover over 2001 mainly due to increased penetration of the mobility vehicles market. Sales to the industrial market, a new market for
the business, also contributed to the improvement.



During 2002 Spirent sold three businesses all from within the Systems group. In April, May and September, we completed the divestment of our aerospace component
businesses, Switching Systems International and Monitor Labs Incorporated, respectively. Combined revenues from these businesses were £25.0 million in 2002 with operating profit of
£1.3 million.



Cost of sales was £340.8 million for the year ended December 31, 2002 compared with £490.7 million for the year ended
December 31, 2001, a reduction of 31% as a result of reduced activity. Cost of sales as a percentage of turnover was unchanged at 61%. Cost of sales includes an exceptional charge of
£4.4 million in respect of inventories in excess of 12 months' usage (2001 £14.2 million) which was caused by the deterioration in the technology industry.

Product
development expenditure was £77.7 million compared with £95.9 million for the year ended December 31, 2001, a decrease of 19%.
Product development expenditure represented 14% of turnover, as compared with 12% in 2001. Of the total product development expenditure £66.2 million was incurred by the
Communications group (2001 £73.0 million).



Total operating expenses were £1,188.6 million for the year ended December 31, 2002 compared with £1,044.3 million
for the year ended December 31, 2001, impacted by goodwill amortization and exceptional items as discussed below.

Selling
and distribution expenses were £124.6 million for the year ended December 31, 2002, compared with £156.0 million for the year ended
December 31, 2001, a decrease of 20%. As a percentage of turnover selling and distributions costs were 22% compared to 19% in 2001. The absolute decrease was due to cost reductions taken in
late 2001 and in 2002 and to the effect of the divestments.

46

---

Administration
expenses were £1,064.6 million for the year ended December 31, 2002, compared with £889.5 million for the year ended
December 31, 2001. Included within administration expenses are £923.3 million of goodwill impairment (2001 £724.6 million),
£37.2 million of exceptional costs (2001 £20.7 million) and £56.1 million of goodwill amortization (2001 £86.6 million).
Excluding exceptional items and goodwill amortization, administration costs are £48.0 million and represented 9% of turnover in 2002 compared with £57.6 million,
7% in 2001. The reduction in costs in absolute terms can be attributed to the cost reductions taken as well as the effect of divestments. The reduction in the goodwill amortization charge to
£56.1 million compared with £86.6 million in 2001 is due to the goodwill impairment charge taken in 2001.

Other
operating income, consisting of non-trading income net of any specific expenses relating to that income, amounted to £0.6 million for the year ended
December 31, 2002 compared with £1.2 million for the year ended December 31, 2001.

Exceptional
items of £37.2 million other than goodwill impairment and included in administrative expenses are as follows:

Restructuring
costs of £8.6 million have been charged in respect of redundancy payments and other costs incurred in the restructuring of the business. Tangible fixed
assets have been written down by £3.6 million relating to the down-sizing in our Communications group.

After
the reduction in workforce in the fourth quarter we relocated certain employees to make more efficient use of our facilities and this has resulted in certain leased properties
being vacated. Provisions of £20.2 million have been recognized in the period in relation to our continuing obligations under these leases.

Acquisition
retention bonuses arising from acquisitions made in 2000 of £4.8 million were charged in 2002.

The
cash cost of these operating exceptional items was £7.7 million in 2002 (2001 £11.9 million).



In 2002 our share of turnover from the WAGO joint venture decreased by 3% to £75.6 million (2001 £78.3 million) and our
share of operating profit decreased by 23% to £7.4 million (2001 £9.6 million). The decline was due to the continuing depressed conditions WAGO experienced in
most of its geographic markets during the year. Our share of interest payable and of taxation from WAGO were £0.7 million and £2.7 million, respectively, giving a
profit after taxation of £4.0 million.

We
announced on March 12, 2003 the divestment of our interests in WAGO to our joint venture partners. The transaction completed on April 4, 2003.



Income from interests in associates, consisting of Tyton Company of Japan, 3M/ECC in the Netherlands, and Caw in the United States, amounted to
£1.0 million for the year ended December 31, 2002 compared with £1.3 million in the year ended December 31, 2001. The majority holding of Caw was
acquired by Spirent in August 2002, from which date Caw was fully consolidated.



We continued to divest our non-core businesses and realized £37.6 million in net proceeds from the sale of our aerospace component
businesses from within our Systems group to Curtiss-Wright Corporation in April 2002. Other divestments, also within our Systems group realized a further £18.0 million.

47

---

A
net loss of £48.4 million is reported on divestments after charging £70.8 million representing goodwill written off against reserves in previous
years and now reinstated in accordance with FRS 10.



The investment in own shares held in the Employee Share Ownership Trust has been written down, given the marked reduction in Spirent's share price, to market
value at December 31, 2002 of 16.75 pence per share resulting in a charge of £30.1 million. These shares had been purchased in previous years to hedge obligations under
various option schemes and the long-term share purchase plan and were being carried at an average price of £2.56.



Net interest payable was reduced from £22.8 million in 2001 to £12.3 million in 2002, as we have benefited from the
reduction of interest rates, primarily on the US dollar borrowings. Benefit has also been obtained from the reduction in borrowings following receipt of the proceeds from the sale of Sensing Solutions
in November 2001.



The tax charge amounted to £26.9 million in the year ended December 31, 2002 compared with £32.6 million in the year
ended December 31, 2001. The charge for 2002 includes an exceptional tax charge of £18.5 million arising principally through the re-evaluation of the recovery of
deferred tax assets under FRS 19. The effective tax rates after adjusting for goodwill amortization, exceptional items, the loss on disposal of operations, the provision against investment in own
shares and the exceptional tax charge were 18.1% and 29.4% respectively, in the years ended December 31, 2002 and 2001. The effective tax rate is lower than the expected rate of 29% due to a
credit relating to prior years of £6.2 million. At current levels of profitability it is expected that the tax rate will revert to a level of 31% going forward.

48

---



Year Ended December 31, 2001 Compared with the Year Ended December 31, 2000

The previous years presentation of segmental information has been restated to reflect divestments in 2002.

|                                                                    |                     | Year ended December 31 |      
|------------------------------------------------------------------- | ------------------- | ---------------------- | -----
|
|
|Turnover                                                            |                     |                        |      
|Continuing Operations                                               |                     |                        |      
|                                                                    | Communications:     |                        |      
|                                                                    |                     | Performance Analysis   |      
|                                                                    |                     | Service Assurance      |      
|                                                                    |                     |                        |      
|                                                                    |                     | 430.6                  |      
|                                                                    | Network Products    |                        | 170.4
|                                                                    | Systems             |                        | 48.6 
|                                                                    |                     |                        |      
|                                                                    | Ongoing businesses  |                        | 649.6
|                                                                    | Divested operations |                        | 75.4 
|Discontinued operations                                             |                     | 76.8                   |      
|                                                                    |                     |                        |      
|                                                                    |                     | 801.8                  |      
|                                                                    |                     |                        |      
|Operating Profit before Goodwill Amortization and Exceptional Items |                     |                        |      
|Continuing Operations                                               |                     |                        |      
|                                                                    | Communications:     |                        |      
|                                                                    |                     | Performance Analysis   |      
|                                                                    |                     | Service Assurance      |      
|                                                                    |                     |                        |      
|                                                                    |                     | 83.4                   |      
|                                                                    | Network Products    |                        | 15.3 
|                                                                    | Systems             |                        | 0.5  
|                                                                    |                     |                        |      
|                                                                    | Ongoing businesses  |                        | 99.2 
|                                                                    | Divested operations |                        | 5.6  
|Discontinued operations                                             |                     | 8.1                    |      
|                                                                    |                     |                        |      
|                                                                    |                     | 112.9                  |      
|                                                                    |                     |                        |      



Comparisons by segment are given below for ongoing businesses and operating profit and return on sales are stated before goodwill amortization and exceptional
items. Organic change is the change at constant currencies excluding acquisitions and disposals and has been disclosed due to the effect of the significant acquisitions made within our Communications
group in 2000.



|                                                                       |  | Year ended December 31 |  |       |  |     |  
|---------------------------------------------------------------------- |  | ---------------------- |  | ----- |  | --- | -
|
|
|
|Turnover                                                               |  | 430.6                  |  | 289.2 |  | 49  |  
|Operating profit before goodwill amortization and exceptional items    |  | 83.4                   |  | 98.6  |  | (15 | )
|Return on sales before goodwill amortization and exceptional items (%) |  | 19.4                   |  | 34.1  |  |     |  

49

---

The
financial year ended December 31, 2001 saw significant growth and progress by our Communications group through the acquisition at the end of 2000 of Hekimian. In 2001, we
derived 84% of our ongoing operating profit from our Communications group, compared with 82% in 2000.

The
Communication group's turnover was £430.6 million for the year ended December 31, 2001, compared with £289.2 million for the year ended
December 31, 2000, an increase of 49%. Organically, this represented a decline of 4%.

Operating
profit was £83.4 million for the year ended December 31, 2001, compared with £98.6 million for the year ended December 31,
2000, an decrease of 15%. Organically, this represented a decline of 40%.

Return
on sales, before goodwill amortization and exceptional items, decreased to 19.4% for the year ended December 31, 2001, compared with 34.1% for the year ended
December 31, 2000. The majority of this reduction can be attributed to the Performance Analysis division where the return was reduced to 15.8% compared to 34.2% for 2000. The Service Assurance
division's return on sales was maintained at 24.1% compared with 24.0% in 2000.

Part
of the reduction in return on sales can be attributed to the significant increase in product development spend which more than doubled to £73.0 million compared
with £34.7 million in 2000, equivalent to 17% and 12% of sales, respectively, which led to a number of successful new product launches.



|                                                                       |  | Year ended December 31 |  |       |  |     |  
|---------------------------------------------------------------------- |  | ---------------------- |  | ----- |  | --- | -
|
|
|
|Turnover                                                               |  | 245.5                  |  | 283.7 |  | (13 | )
|Operating profit before goodwill amortization and exceptional items    |  | 38.7                   |  | 97.1  |  | (60 | )
|Return on sales before goodwill amortization and exceptional items (%) |  | 15.8                   |  | 34.2  |  |     |  

Turnover
of our Performance Analysis division was impacted significantly by decreased demand by the major network equipment manufacturers in North America and Europe. Sales to customers
in Asia grew strongly. Manufacturing margins were maintained, but reduced volumes combined with increased product development spend resulted in a fall in the operating margin achieved. Turnover
declined from £283.7 million for 2000 to £245.5 million, this represented an organic decline of 23%. Operating profit at £38.7 million compared
with £97.1 million for 2000 declined organically by 65%.

The
Performance Analysis division was directly affected by the downturn in the overall communications industry. This division's top customers were among those hardest hit by the telecoms
downturn. Cost-cutting measures were taken and the division focused on leading-edge product development in 2001.

50

---



|                                                                       |  | Year ended December 31 |  |       |  |   
|---------------------------------------------------------------------- |  | ---------------------- |  | ----- |  | --
|
|
|
|
|Turnover                                                               |  | 185.1                  |  | 121.3 |  | 53
|Operating profit before goodwill amortization and exceptional items    |  | 44.7                   |  | 29.1  |  | 54
|Return on sales before goodwill amortization and exceptional items (%) |  | 24.1                   |  | 24.0  |  |   

Amounts
for December 31, 2000 are pro forma and include a full year's result for Hekimian.

Turnover
grew strongly, increasing organically by 46% over 2000, as the incumbent local exchange carriers in the United States increased demand for our test probes and software systems
for service assurance applications. New customers added in the year further increased sales. Manufacturing margins and operating expenses were maintained in proportion to sales. Operating profit of
£44.7 million compared with a pro forma for 2000 of £29.1 million grew organically by 49%.

The
Service Assurance division won significant contracts from Verizon Communications Inc., SBC Communications Inc., Qwest Communications International Inc. and other major service
providers. Contracts during 2001 for DSL and private line service assurance systems included the first large-scale
deployments of CenterOp Sentry, Perform, Flow and Gateway.

A
major strategic initiative of the Service Assurance division was to expand globally from its largely North American customer base. The division established a European sales and support
infrastructure in 2001 and embarked upon the long-term selling cycle required to sell large-scale operations support systems into Europe.



|                                                                       |  | Year ended December 31 |  |       |  |     |  
|---------------------------------------------------------------------- |  | ---------------------- |  | ----- |  | --- | -
|
|
|
|Turnover                                                               |  | 170.4                  |  | 181.4 |  | (6  | )
|Operating profit before goodwill amortization and exceptional items    |  | 15.3                   |  | 25.3  |  | (40 | )
|Return on sales before goodwill amortization and exceptional items (%) |  | 9.0                    |  | 13.9  |  |     |  

In
the face of the general slowdown in North America and Europe, and a second half downturn in South America, the Network Products group experienced a decline in both sales and margins.
Key customer sectors, including both telecoms and truck building, were particularly affected by difficult market conditions.

Turnover
at £170.4 million compared with £181.4 million in 2000, declined organically by 6% with a reduction in operating profit from
£25.3 million to £15.3 million, an organic decline of 40%. Return on sales reduced by 4.9 percentage points to 9.0%.

During
2001 we completed a major restructuring of the global business, consolidating and extending customer-facing activities whilst reducing administrative and production resources to
bring costs in line with changes in demand. The results of this restructuring became fully effective in the first half of 2002.

51

---

Despite
the difficult market environment, the Network Products group continued to invest in its telecoms-related business to support future growth. The second half year also saw our
small office/home office solutions translated into further contracts with a major UK telecom provider to create fully networked homes and offices. We continued to work towards expanding this concept
into the United States and Europe.

In
2001 we saw record annual sales of Autotools, which are automatic tools for the application of our fixing products.



|                                                                          |  | Year ended December 31 |  |      |   |     
|------------------------------------------------------------------------- |  | ---------------------- |  | ---- | - | ----
|
|
|
|Turnover                                                                  |  | 48.6                   |  | 45.0 |   | 8   
|Operating profit(loss) before goodwill amortization and exceptional items |  | 0.5                    |  | (4.2 | ) | >100
|Return on sales before goodwill amortization and exceptional items (%)    |  | 1.0                    |  | (9.3 | ) |     

The
Systems group turnover was £48.6 million for the year ended December 31, 2001 compared with £45.0 million for the previous year for
ongoing businesses. This represents an organic increase of 5%. Operating profit grew to £0.5 million, with return on sales at 1.0%. The Systems group was able to report an operating
profit, generated in part through the completion of the initial development of AuRA and the consolidation program within the aerospace information and software systems businesses.

Our
AIS business made good headway, the expansion of our existing relationship with FedEx Corporation was expanded to supply 90 of their Airbus fleet with airborne file servers and
software applications at an order value of some $10 million.

Our
power controls business continued to deliver strong profitability in its existing wheelchair control business, with substantial improvement in efficiency and inroads into the access
platform market.

As
previously discussed, we disposed of our aerospace component businesses in April 2002.

Discontinued operations

In November 2001, we completed the sale of the equity and assets of our Sensing Solutions group to the General Electric Company for a cash consideration of
$220 million (approximately £152 million).

The
net proceeds of the sale were used to reduce net debt. The sale represented a further step in Spirent's increasing focus on communications related activities. Under the terms of the
transaction, all of the approximately 2,000 employees in the Sensing Solutions group transferred with the business.

Combined
Sensing Solutions revenues for the period up to divestment were £76.8 million with an operating profit for the combined Sensing Solutions group of
£8.1 million.



Cost of sales was £490.7 million for the year ended December 31, 2001 compared with £378.1 million for the year ended
December 31, 2000, an increase of 30%. Cost of sales as a percentage of turnover was 61% in 2001 compared with 54% in 2000 due to the increasing investment

52

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in
product development and reduced sales volumes. Cost of sales includes an exceptional charge of £14.2 million in respect of inventories in excess of 12 months' usage.

Product
development expenditure was £95.9 million compared with £60.3 million for the year ended December 31, 2000, an increase of 59%.
Product development expenditure represented 12% of turnover, as compared with 9% in 2000 due to increased investment in our Communications group.



Total operating expenses were £1,044.3 million for the year ended December 31, 2001 compared with £208.6 million for
the year ended December 31, 2000, impacted by goodwill amortization and exceptional items as discussed below.

Selling
and distribution expenses were £156.0 million for the year ended December 31, 2001, compared with £126.3 million for the year ended
December 31, 2000, an increase of 24%. As a percentage of turnover selling and distributions costs were 19% compared to 18% in 2000. The absolute increase is partly attributable to a full
year's charge in respect of our 2000 acquisitions, but also to the emphasis being placed on global expansion within our Communications group particularly into Europe and Asia.

Administration
expenses were £889.5 million for the year ended December 31, 2001, compared with £83.1 million for the year ended
December 31, 2000, an increase of £806.4 million. Of this increase goodwill amortization accounted for £60.9 million due to the full-year
impact of the acquisitions made in 2000, especially Hekimian. Exceptional items of £745.3 million were charged in administration expenses in 2001, being
£724.6 million of goodwill impairment, £11.3 million of reorganization costs, £5.2 million of debtor provisions and
£4.2 million of acquisition retention bonuses. Excluding amortization expense and exceptional items, administration expenses increased in line with the growth of the business,
representing 7% of turnover in 2001 and 8% in 2000.

Other
operating income, consisting of non-trading income net of any specific expenses relating to that income, amounted to £1.2 million for the year ended
December 31, 2001 compared with £0.8 million for the year ended December 31, 2000, an increase of £0.4 million.



Our share of turnover increased by 3% to £78.3 million (2000 £76.0 million) and our share of the operating profit decreased
by 28% to £9.6 million (2000 £13.3 million).

The
business experienced a marked deterioration in market conditions during the second half of the year as a result of the downturn experienced in its market. Local management took
actions to reduce costs. Against this background, the business continued to expand its market through delivery of a high level of product innovation.



Income from interests in associates, consisting of Tyton Company of Japan, 3M/ECC in the Netherlands, and Caw in the United States, acquired in
October 2001, amounted to £1.3 million for the year ended December 31, 2001 compared with £2.7 million in the year ended December 31, 2000.
The reduction was primarily due to a downturn experienced in Japan.



During the year ended December 31, 2000, a profit of £3.2 million was made on the sale of two properties. There were no similar
disposals in 2001.

53

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We continued to dispose of our non-core activities. In November 2001, the Sensing Solutions group was sold to the General Electric Company for
total consideration of $220 million (approximately £152 million). The net cash proceeds after expenses generated from the sale of £147.1 million were used
to reduce net borrowings, the tax liability associated with this transaction, estimated at £13.2 million, was paid in 2002.

Other
minor divestments and closures took place during the year, which did not materially affect our results.

The
net profit on divestment was £14.5 million after charging £65.1 million of goodwill previously written off to reserves.



Net interest payable reduced from £29.3 million in 2000 to £22.8 million, as we benefited from the reduction in interest
rates, primarily on the US dollar. Benefit was also obtained from the reduction in borrowings following receipt of the proceeds from the sale of Sensing Solutions in November 2001.



Taxation amounted to £32.6 million in the year ended December 31, 2001 compared with £30.6 million in the year ended
December 31, 2000. The effective tax rates after adjusting for goodwill amortization, exceptional items and the loss on disposal of operations were 29.4% and 30.3% in the years ended
December 31, 2001 and 2000, respectively.

We
implemented the requirements of FRS 19 "Deferred Tax", which required substantially full provision to be made in respect of deferred taxation. There is no prior year adjustment as the
prior year impact is not significant.

The
reported charge of £32.6 million (2000 £30.6 million) included a tax charge of £13.2 million in respect of the profit on
divestments.

Liquidity and Capital Resources

Our policy is to finance operations through a combination of internal cash generation and external financing. The parent company raises the majority of the
funding for the Group. Debt is principally sourced from the syndicated bank market and the US private placement market. WAGO, which was a joint venture, arranged its own financing.

We
meet our medium-term borrowing requirements primarily through the use of a syndicated credit facility and our long-term requirements through the use of senior unsecured
loan notes.

At
December 31, 2002, the amount of loan notes outstanding was $218 million, equivalent to £135.4 million at December 31, 2002 exchange rates.
These loan notes have various maturity dates in 2006 and 2009.

Amounts
available under the committed banking facilities were £194.4 million at December 31, 2002 of which £96.2 million was drawn. These
facilities mature in July 2004.

At
December 31, 2002, gross borrowings amounted to £245.4 million, comprising £150.1 million of US dollar borrowings,
£84.5 million of sterling borrowings and £10.4 million of euro borrowings with the balance in a variety of other currencies.

At
December 31, 2002, we held £83.5 million of cash and £0.1 million of current asset investments.

54

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Cash
is held in the United Kingdom or in the United States. There are no material amounts subject to restriction on repatriation to the parent company. Dividends are remitted through to
the parent company as appropriate having considered the working capital needs of the individual subsidiaries.

In
2002 Spirent continued to generate cash in all its operating groups. Operating cash flow was £76.9 million, 46% down on the previous year of
£141.2 million.

At
December 31, 2002 Spirent was in compliance with the existing borrowing covenants. The ratio of consolidated net interest to earnings before interest, taxation, amortization
and exceptional items (EBITA) was 4.4 to 1.0 (2001 5.1 to 1.0) and the ratio of consolidated net debt to earnings before interest, taxation, depreciation, amortization and exceptional items (EBITDA)
was 1.9 to 1.0 (2001 1.2 to 1.0).

To
provide the Group with an increase in the level of headroom available in relation to certain of the financial covenants, amendments to the terms of the loan notes and syndicated bank
facility have been agreed. These amendments were conditional on the completion of the divestment of WAGO and the
use of the net proceeds to pre-pay £47.0 million of the loan notes and pay an associated contractual make-whole amount of £12.5 million.
This amount and any professional fees in relation to the renegotiation of the borrowing terms will be charged as exceptional costs in 2003. The divestment was completed on April 4, 2003, and
from this date the revised borrowing terms have taken effect.

Under
the revised terms relating to the syndicated bank facility Spirent has a committed line of £75 million available, which reduces to £60 million
by December 31, 2003. The bank facility remains repayable in July 2004. The interest rate will be increased to an initial margin over LIBOR of 1.75%, which may decrease in certain
circumstances.

Following
the application of the net proceeds from the divestment of WAGO $144.2 million of loan notes (equivalent to £89.6 million at December 31, 2002
exchange rates) will remain outstanding with unchanged maturities principally in 2009. The applicable interest rate will be increased to a weighted average of 9.45% which will decrease if certain
financial requirements are satisfied.

Certain
of the financial covenants attaching to both the syndicated bank facility and the loan notes, which will be tested on a quarterly basis, have been amended (see also "Material
Contracts" in Item 10). The new borrowing terms also contain a covenant that consolidated net worth, calculated as shareholders' funds translated at December 31, 2002 exchange rates,
must not be less than £100 million at any time. Other significant terms include restrictions on dividend payments and restrictions on acquisitions and disposals. Some of these
restrictions fall away on certain financial requirements being satisfied, which in any event cannot occur before June 30, 2004. The financial requirements to be satisfied are, among others:



On
satisfaction of these financial requirements, the quarterly covenant tests will be replaced by semi-annual covenant tests requiring Spirent to have (i) a ratio of
consolidated net debt to consolidated EBITDA of no more than 3.0 to 1.0 and (ii) a ratio of consolidated EBITA to consolidated net interest expense of at least 3.0 to 1.0.

55

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In
our opinion our working capital is sufficient for our present requirements. We believe that the present requirements of our existing businesses and future investment can be met
through funds generated internally, divestment of businesses and external financing we expect to be available to us.

Interest
rate exposures are managed through an optimum mix of fixed and floating rate debt and the use of interest rate swaps.

At
December 31, 2002 the Group's borrowings were composed of 20% of fixed rate debt. This excludes $163.4 million of private placement notes which have been swapped into
floating rates through the use of a seven-year swap, callable at the counterparties' option at six-monthly intervals commencing in May 2003.

Net
interest payable was £12.3 million (2001 £22.8 million). A one percentage point movement in short-term dollar interest rates based on the year
end position would impact profit before tax by approximately £1 million.

Net
capital expenditure of £25.8 million was substantially lower than in the previous year (2001 £57.7 million) and was below the 2002 depreciation
charge of £33.6 million. It is anticipated that capital expenditure for 2003 will remain at around the same level as 2002.

An
interim dividend of 1.35 pence per share was paid to shareholders in November 2002. A final dividend was not paid in respect of the year ending December 31, 2002 nor
will a dividend be paid in respect of the year ending December 31, 2003. The Board intends to keep future dividend policy under review but any future dividend payments will be dependent on
trading outlook and the availability of cash and distributable reserves, and subject to our borrowing terms.

Contractual Obligations

The following table summarizes the Group's contractual cash obligations and commitments at December 31, 2002, and the effect such obligations are expected
to have on liquidity and cash flows in future periods.

|                            |  | Payments due by period
|--------------------------- |  | ----------------------
|
|Private placement notes     |  | 210.1                 
|Bank and other loans        |  | 108.4                 
|Finance lease obligations   |  | 13.0                  
|Operating lease obligations |  | 75.7                  
|Capital commitments         |  | 1.4                   
|                            |  |                       
|Total                       |  | 408.6                 
|                            |  |                       

The
above table does not take account of the amendments to the borrowing terms described in "Liquidity and Capital Resources" above.

Foreign Exchange

Currency exposures arise from trading transactions undertaken by subsidiaries in foreign currencies and on the translation of the operating results and net assets
of our overseas subsidiaries.

Subsidiaries
are required to hedge material transactional exposures against their local currency, using forward contracts. The Group Treasury, by means of forward foreign exchange
contracts, carries out the majority of this hedging activity.

We
do not hedge translation exposures on translation of the operating results or net assets of our overseas subsidiaries since these are accounting, not cash exposures. Where possible we
aim to match

56

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the
currency of our borrowings with the currency profile of profits and net assets. This provides a partial hedge against these translation exposures.

Details
of the currencies of borrowings are set out in Item 5 "Liquidity and Capital Resources" above.

At
the year end the balance sheet translation exposure was 70% hedged (2001 69%).

During
the year the pound sterling strengthened against the US dollar, the main currency to which we are exposed. A movement in the US dollar against the pound sterling by 1% if
maintained over the
whole year based on 2002 results, would affect reported profit before tax by approximately £0.2 million.

Research and Development

With our continued commitment to innovation, investment in product development spend for 2002 was £77.7 million (2001
£95.9 million; 2000 £60.3 million) and represents 14% of turnover (2001 12%; 2000 9%).

In
2002, our Communications group devoted 21% of its turnover to product development, which amounted to £66.2 million (2001 £73.0 million: 2000
£34.7 million). A further £5.6 million (2001 £6.9 million: 2000 £7.2 million) was invested by our Systems group and
£3.6 million (2001 £3.6 million; 2000 £3.3 million) was spent by the Network Products group. Divested and discontinued operations account for
the remaining £2.3 million of product development (2001 £12.4 million; 2000 £15.1 million).

Factors That May Affect Future Results

We operate globally in a dynamic and rapidly changing environment that involves numerous trends, risks and uncertainties. The risks and uncertainties facing our
business are discussed more fully in the section entitled 'Item 3. Key InformationRisk Factors'. The following section lists some of those trends that have occurred and that we expect to
have an effect on our business, financial condition or results of operations.



Inflation

Inflation has not had a significant impact on our results of operations during any of the periods reported.

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Differences Between UK GAAP and US GAAP

The accounting policies under which the consolidated financial statements of our group are prepared conform with accounting principles generally accepted in the
United Kingdom, or UK GAAP. Such principles differ from those generally accepted in the United States, or US GAAP. The principal differences applicable to us relate to the accounting treatment of
goodwill, share-based compensation, investment in own shares and goodwill on businesses sold. The differences are described in more detail in Note 37 of Notes to the Financial Statements
included elsewhere in this annual report. The effect of these differences on profit attributable to shareholders is summarized below:

|                                                                      |                                            | Year ended December 31 |      
|--------------------------------------------------------------------- | ------------------------------------------ | ---------------------- | -----
|
|
|(Loss)/profit attributable to shareholders in accordance with UK GAAP |                                            | (1,080.4               | )    
|                                                                      |                                            |                        |      
|Adjustments:                                                          |                                            |                        |      
|                                                                      | Amortization of intangible assets          |                        | 39.3 
|                                                                      | Write off of IPR&D on acquisition          |                        |     
|                                                                      | Goodwill impairment                        |                        | 158.5
|                                                                      | Contingent consideration                   |                        | (0.2 
|                                                                      | Stock compensation                         |                        | 0.2  
|                                                                      | Profit on disposal of operations           |                        | 49.4 
|                                                                      | Provision against investment in own shares |                        | 30.1 
|                                                                      | Deferred taxation                          |                        | 28.6 
|                                                                      | Other                                      |                        | 0.2  
|                                                                      |                                            |                        |      
|Total adjustments                                                     |                                            | 306.1                  |      
|                                                                      |                                            |                        |      
|Net loss in accordance with US GAAP                                   |                                            | (774.3                 | )    
|                                                                      |                                            |                        |      

Newly Adopted Accounting Standards

There are no new UK accounting standards implemented by Spirent in 2002.

For
purposes of the US GAAP reconciliations presented in Note 37 of Notes to the Financial Statements and above, the following new US accounting standards have been implemented:

In
June 2001, the U.S. Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") 141, "Business Combinations" and
SFAS 142. SFAS 141 requires that all business combinations initiated after June 30, 2001 be accounted for using the purchase method of accounting and also requires identified
intangible assets acquired in a business combination to be recognized apart from goodwill if they meet certain criteria.

SFAS 142
applies to all goodwill and identified intangible assets acquired in a business combination. Under the new standard, all goodwill and indefinite-lived intangible assets,
including those acquired before initial application of the standard, will not be amortized but will be tested for impairment at least annually. The provisions of SFAS 142 are effective for
fiscal years beginning after December 15, 2001.

Goodwill
and any intangible asset determined to have an indefinite useful life acquired in a purchase business combination completed after June 30, 2001 is not amortized but will
be tested for impairment at least annually. On adoption of SFAS 142 for the financial year ended December 31, 2002, goodwill and intangible assets acquired in a purchase business
combination completed prior to July 1, 2001 are also not amortized.

With
the adoption of SFAS 142 effective January 1, 2002, goodwill is no longer amortized but is subject to periodic review for impairment. Upon adoption of FAS 142, the
Group was required to

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perform
a transitional goodwill impairment test based on the carrying amount of goodwill at January 1, 2002. At that date, the fair values of the Group's reporting units equaled or exceeded
their carrying values and therefore the transitional goodwill impairment test did not result in any impairment being recorded. The Group obtained independent valuations as at November 30, 2002.
These valuations resulted in impairment of goodwill in our Performance Analysis division, in addition to the impairment in the Service Assurance division.

Other
intangible assets continue to be amortized over their individually determined estimated useful economic lives subject to the provisions of SFAS 141, which clarifies the
criteria to recognize these intangible assets separately from goodwill. SFAS 144 requires review for impairment if events or changes in circumstances indicate the carrying value may not be
recoverable. The Group considered that an event had been triggered in 2002 and obtained independent valuations as at November 30, 2002 for SFAS 144 purposes, which ultimately resulted in
impairment of other intangible assets and goodwill within the Service Assurance division.

US Standards Not Yet Adopted

Asset Retirement Obligations

In June 2001, the FASB issued SFAS 143 "Accounting for Asset Retirement Obligations" which is effective for financial years beginning after June 15,
2002. The Statement requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of the fair value can be
made. The associated asset retirement costs are capitalized as part of the carrying value of the relevant long-lived asset. The impact of adopting the standard cannot be reasonably estimated at this
time.

Costs Associated with Exit or Disposal Activities

In July 2002, the FASB issued SFAS 146 "Accounting for Costs Associated with Exit or Disposal Activities". This standard will require us to recognize
certain costs associated with disposal activities when they are incurred, rather than at the date of a commitment to a disposal plan. SFAS 146 is effective for disposal activities initiated
after December 31, 2002. Given the nature of disposal plans, it
is not possible to determine in advance the impact it might have on our financial position at a particular date or our results of operations for a particular period in the future.

Stock-Based Compensation

In December 2002, the FASB issued SFAS 148 "Accounting for Stock-Based CompensationTransition and Disclosurean Amendment of
SFAS 123". This standard provides two additional transition methods for companies electing to adopt the fair value accounting provisions of SFAS 123 "Accounting for Stock-Based
Compensation", but does not change the fair value measurement principles of SFAS 123. As permitted by SFAS 123, Spirent has continued to apply the methodologies set out in Accounting
Principles Board Opinion 25, "Accounting for Stock Issued to Employees" and other US GAAP literature in calculating its US GAAP adjustments for share option plans and awards of
share rights. If the compensation cost for the company's share incentive plan had been determined based on the fair value at the grant date for awards in 2002, 2001 and 2000 consistent with the
provisions of SFAS 123, the group's net income and earnings per share would have been reduced to the pro forma amounts indicated on page F-105.

Derivatives Instruments and Hedging Activities

In May 2003, the FASB issued SFAS 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities". SFAS 149 amends and
clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under SFAS 133. SFAS 149 clarifies under
what circumstances a contract with an initial net investment meets the characteristic of a derivative as discussed in SFAS 133. In addition, it clarifies when a derivative contains a financing
component that warrants special reporting in the statement of cash flows. SFAS 149 amends certain other existing pronouncements. With certain exceptions, SFAS 149 is effective for
contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003.

59

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ITEM 6.    DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

Directors

|Name                        |  | Date of birth |  | Position                                           
|--------------------------- |  | ------------- |  | ---------------------------------------------------
|John P. Weston(1)(2)(3)     |  | 8.16.51       |  | Chairman of the Board; Non-Executive               
|Nicholas K. Brookes(3)      |  | 5.19.47       |  | Chief Executive                                    
|My E. Chung                 |  | 8.4.52        |  | Executive Director; Group President, Communications
|Eric G. Hutchinson          |  | 5.31.55       |  | Finance Director                                   
|Marcus Beresford(1)(2)(3)   |  | 5/15/42       |  | Non-Executive                                      
|Paul M. F. Cheng(2)(3)      |  | 10.19.36      |  | Non-Executive                                      
|Göran Ennerfelt(1)(3)       |  | 3.6.40        |  | Non-Executive                                      
|Richard M. Moley(2)(3)      |  | 3.10.39       |  | Non-Executive                                      
|James A. D. Wyness(1)(2)(3) |  | 8.27.37       |  | Non-Executive                                      

---

Non-Executive
Directors are appointed for an initial fixed three-year term of office upon expiry of which the Board will consider renewal of appointment. In
addition, directors are subject to retire by rotation at least every three years, in accordance with Spirent's Articles of Association. Executive Directors and members of senior management do not have
fixed terms of office. Details of Executive Directors' service contracts including termination benefits (if any) are set out at Note 10 of Notes to the Financial Statements.

John P. Weston CBEwas appointed Non-executive Chairman of Spirent in November 2002. Mr. Weston was Chief
Executive of BAE SYSTEMS from May 1998 to March 2002. During his tenure the business grew from an organisation located mainly in the UK to an international group with multi-billion pound
sales. He joined British Aircraft Corporation, later British Aerospace, in 1970 and by 1992 had been appointed Group Managing Director of British Aerospace Defence Businesses. Mr. Weston was
awarded the CBE in 1993, is a member of the President's Committee of the CBI, Chairman of the European Group of the CBI, a member of the Prime Minister's Committee for Science and Technology, a
lifetime Vice President of the Royal United Services Institute, a Fellow of the Royal Academy of Engineering, a Fellow of the Royal Aeronautical Society, a Fellow of the Royal Society for Science,
Arts and Commerce, a Companion of the Institute of Management and a Freeman of the City of London. He was educated at Kings School, Worcester and has an engineering degree from Trinity Hall,
Cambridge.

Nicholas K. Brookesjoined Spirent as Deputy Chief Executive in July 1995 and was appointed Chief Executive in January 1996.
Previously, Mr. Brookes was a Vice President of Texas Instruments Inc. and President of the Materials & Controls Group, based in the United States. He joined Texas Instruments in
Spain in 1975 and in 1977 transferred to the United States and held several assignments within manufacturing, marketing and personnel. In 1980 he became Managing Director of Texas Instruments Canada
and in 1986 was appointed Group Vice President responsible for Texas Instruments' operations in Europe. He was appointed a non-executive director of De La Rue plc in June 1997 and
of Corporacion Financiera Alba S.A. in May 1999. Mr. Brookes is a Fellow of the Institute of Chartered Accountants in England and Wales.

My E. Chungjoined the Board in May 2001. He joined Spirent in July 1998 as Group President, Communications, a position he
still holds. Previously, he was Division President of Telecommunications Techniques Corporation, or TTC. Having joined TTC in 1987 as National Sales Manager, Mr. Chung

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later
became Director of Sales and Vice President of US Sales. In 1992, he became Division President with responsibility for the Network Services Division focusing on products used in the installation
and maintenance of networks at customer premises. His responsibilities included product development, marketing, manufacturing and accounting. He was involved in setting TTC's strategic direction
through a number of strategic partnerships and acquisitions. Mr. Chung's earlier career was spent at Hewlett Packard, where he spent 11 years in sales and sales management.
Mr. Chung was awarded a BSEE from the New Jersey Institute of Technology in 1974.

Eric G. Hutchinsonwas appointed Finance Director on January 1, 2000. He joined Spirent in 1983 and was appointed Chief Accountant
in 1987. In 1997, Mr. Hutchinson was appointed Head of Corporate Accounting with responsibility for all financial reporting and control within Spirent. Mr. Hutchinson gained a BA with
honors from Leicester University and undertook post-graduate research in Contemporary History at Trinity College, Oxford. He is a Fellow of the Chartered Association of Certified
Accountants.

Marcus Beresfordwas appointed to the Board in 1999. He was the Chief Executive of GKN plc from August 2001 to December 2002
and has over 30 years' managerial experience in the automotive and electronic industries. He graduated with an M.A. Mech. Sc. from St Johns College, Cambridge and is a Fellow of the Institute
of Electrical Engineers and a Companion of the Institute of Management.

Paul M. F. Chengwas appointed to the Board in 1996. He is a founding partner of China Key Consultants Limited. He was formerly Chairman
of Inchcape Pacific Limited and NM Rothschild & Sons (Hong Kong) Limited as well as a member of Hong Kong's Legislative Council. He currently serves as an independent non-executive
director of several listed companies on the Hong Kong Stock Exchange and is an adjunct professor at the business school of the Hong Kong University of Science and Technology. He holds an MBA from the
Wharton Business School and currently serves as a member of the school's Asian Advisory Board.

Göran Ennerfeltwas appointed to the Board in December 2000 following completion of the acquisition of Hekimian
Laboratories Inc. Mr. Ennerfelt became President and Chief Executive Officer of Axel Johnson AB, a member of the Axel Johnson Group (as was Hekimian Laboratories Inc. before its
acquisition) in 1979 having joined the company in 1966. He is Chairman of the Swedish Federation of Trade, the Board of Trustees of SNS (Center for Business and Policy Studies), the General Export
Association of Sweden and the Stockholm Institute of Transition Economics at the Stockholm School of Economics. He also holds Board memberships of Svenska Handelsbanken, the Confederation of Swedish
Enterprise and the Swedish National Committee of the International Chamber of Commerce.

Richard M. Moleywas appointed to the Board in April 2000. He was previously a main board director and Senior Vice President of
Cisco Systems, from where he retired in 1997. He currently serves as a non-executive director (formerly Chairman) of Netro Corporation and a number of other US high technology companies
including Linear Technologies Corporation, Echelon Corporation, Calient Systems Inc. and Polaris Networks, Inc. Mr. Moley was a non-executive director of Netcom
Systems, Inc. until we acquired Netcom in 1999. Mr. Moley holds a BSc in Electrical Engineering from Manchester University, an MSEE from Stanford University and an MBA from Santa Clara
University.

James A. D. Wynesswas appointed to the Board in 1979 and was appointed as the senior independent non-executive director in
1999. He was previously Managing Partner and then Senior Partner of Linklaters, our UK legal advisers, from which he retired in 1997. He is a non-executive director of Saracens Limited.
Mr. Wyness graduated M.A. LL.B. in law from Cambridge University.

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Senior Management

We consider our senior management to be those persons who are members of our Operations Management Team. The names of these persons, their dates of birth and
their positions with us, are listed in the following table:

|Name                   |  | Date of birth |  | Position                                                         
|---------------------- |  | ------------- |  | -----------------------------------------------------------------
|Nicholas K. Brookes    |  | 5.19.47       |  | Chief Executive                                                  
|My E. Chung            |  | 8.4.52        |  | Executive Director; Group President, Spirent Communications      
|Paul R. Eardley        |  | 9.13.60       |  | Company Secretary and General Counsel                            
|Eric G. Hutchinson     |  | 5.31.55       |  | Finance Director                                                 
|W. Barry Phelps        |  | 3.7.47        |  | President, Performance AnalysisBroadband, Spirent Communications
|Stephen J. Salmon      |  | 8.16.49       |  | Group President, Network Products                                
|James H. Schleckser    |  | 9.16.62       |  | President, Service AssuranceBroadband, Spirent Communications   
|Geoffrey P. L. Zeidler |  | 12.23.62      |  | President, Europe and Wireless, Spirent Communications           

Biographical
information for Mr. Brookes, Mr. Chung and Mr. Hutchinson has been provided above, as they are also members of our Board. None of these individuals have
fixed terms of office.

Paul R. Eardley,was appointed Company Secretary on December 31, 2001. He joined Spirent as Company lawyer in 1998. He was
appointed General Counsel in July 2001. Prior to joining Spirent Mr. Eardley spent five years as a partner in the UK law firm DLA and before that six years with the law firm Linklaters.
Mr. Eardley graduated from the University of Manchester and is a solicitor.

W. Barry Phelpsjoined Spirent in June 1999, following its acquisition of Netcom Systems Inc. He was promoted to President,
Telecom Test Division (now known as Performance AnalysisBroadband) in December 2000, he became Executive Vice President in April 2002 and then President, Performance
AnalysisBroadband, Spirent Communications in April 2003. Mr. Phelps is also actively involved in corporate initiatives that enhance the development and implementation of the
overall vision and strategy for Spirent Communications. Mr. Phelps has over 30 years of experience in financial and business management for high technology companies. Prior to his
position as Division President, Mr. Phelps was President and Chief Executive Officer of Netcom Systems, and Chairman and Chief Executive Officer of MICOM Communications, a division of Nortel.
Mr. Phelps holds a BSc in Mathematics from St. Lawrence University and an MBA from the University of Rochester, N.Y.

Stephen J. Salmonjoined us in October 1973 as Special Projects Accountant. In 1985 he was promoted to Group Financial Controller
and became a Group General Manager in 1995. In January 1997 he became Group President, Cable Management (now Network Products), holding responsibility for our Network Products businesses
worldwide. Having qualified as a chartered accountant at 21, Mr. Salmon joined Courtaulds in 1970, where he worked until he joined us.

62

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James H. Schleckserjoined the Group in 1998, when the company he was running was acquired by Spirent. He is currently responsible for the
globalization, growth and strategic direction of the Service Assurance division of Spirent Communications. Since joining he has served as a Group Vice President of Sensing Solutions and subsequently
as Vice President of Business Development for Spirent Communications. He has nearly 20 years' experience in multiple industries with Rogers Corporation, The J.M. Ney Company and High Voltage
Engineering and now Spirent. In those companies he held roles in engineering, sales, marketing and general management. Mr. Schleckser holds a bachelors degree in chemical engineering from the
University of Delaware and an MBA from the University of Connecticut.

Geoffrey P. L. Zeidlerwas appointed President, Europe and Wireless for Spirent Communications in December 2000. He has operational
responsibility for our existing wireless operations in New Jersey, Texas and the United Kingdom, and strategic responsibility for developing both the Performance Analysis and Service Assurance
divisions businesses in Europe. Mr. Zeidler joined us in October 1997 in the newly created position of Director of Business Development. His primary responsibilities were to lead and
drive forward our acquisition program and to develop further our corporate and group business strategy. Previously Mr. Zeidler was a Director of Corporate Finance at Robert Fleming & Co.
leading the technology and industry specialist team. Mr. Zeidler has both an MA and an MSc in Manufacturing from Cambridge University.

The
following persons retired or resigned from the Operations Management Team during the year ended December 31, 2002:

Olivier
Huon
Robert Potter

The Board of Directors and Committees of the Board

The Board comprises a non-executive Chairman, five further non-executive directors and three executive directors. The roles of Chairman
and Chief Executive are held separately with a clear division of responsibility between them. The Board considers that all non-executive directors are independent with the exception of
Göran Ennerfelt by virtue of his notifiable interests referred to below (see "Shares Held by Directors and Senior Management"). James Wyness is the senior independent
non-executive director. The non-executive directors below (each appointed for an initial three year term) have a wide range of skills and experience which helps to ensure that
independent judgment is exercised on issues such as strategy and performance and also that a proper balance of power is maintained for full and effective control.

The
role of the Board is to determine the long term direction and strategy of the Group, monitor the achievement of business objectives, ensure that good corporate governance is
practiced and ensure that the Group meets its responsibilities to its shareholders, customers and other stakeholders.

The
Board meets at least six times a year and a separate meeting is held annually to review and approve long term strategy. Full attendance of the Board is expected at Board meetings and
in 2002 attendance was in excess of 90%. A schedule of matters specifically reserved for the Board's decision has been adopted while certain other responsibilities have been delegated to four standing
committees with clearly defined terms of reference which, together with the composition of each Committee, are reviewed annually. To ensure good communication between the Board and each of the
Committees, the Company Secretary is the appointed Secretary to all standing Board Committees.

All
directors receive appropriate training and briefing upon appointment and subsequently as necessary. Non-executives have the opportunity to enhance their understanding of
the Group through regular business sector presentations, the receipt of monthly reports from the Chief Executive and site visits.

63

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The
directors have access to the advice and services of the Company Secretary (and, if necessary, access to further independent advice, at the Company's expense), who advises the Board
in respect of its procedures, directors' duties and responsibilities, corporate governance and all compliance matters. The appointment and removal of the Company Secretary is a matter reserved to the
Board.

The Acquisitions and Divestments Committeeis comprised of Mr. Brookes (Chairman), Mr. Hutchinson, Mr. Chung and any
two non-executive directors. The Committee is primarily concerned with concluding acquisitions and divestments where authority has been specifically delegated to it by the Board.

TheAudit Committeeis comprised of Mr. Wyness (Chairman), Mr. Beresford, Mr. Ennerfelt and Mr. Weston. The
Committee meets no less than four times a year with the external auditors, the Chief Executive, the Finance Director, the Head of Financial Control and the Head of Financial Reporting in attendance.
It also meets with the external auditors in private for part of each meeting. The Committee reviews all published accounts and post audit findings before their presentation to the Board, focusing in
particular on accounting policies, compliance, management judgment and estimates. It also monitors the Group's internal control regime and financial reporting. Any significant findings or identified
weaknesses are closely examined so that appropriate action can be taken, monitored and reported to the Board.

The
Audit Committee advises the Board on the appointment of external auditors and on the scope, results and cost effectiveness of both audit and non-audit work. The Committee
has adopted a policy which restricts certain types of non-audit work that may be performed by the Company's auditors. The Audit Committee also assesses the objectivity of the auditors'
services so that an independent professional relationship is maintained. Details of the auditors' remuneration for 2002 appear in Note 5 of Notes to the Financial Statements.

TheNomination Committeeis comprised of Mr. Weston (Chairman), all the other non-executive directors and
Mr. Brookes and meets at least once a year. It is responsible for reviewing the composition and structure of the Board and for identifying and recommending candidates for executive and
non-executive appointments. Executive search consultants are used by the Committee to assist this process as appropriate.

TheRemuneration Committeeis comprised of the independent non-executive directors, that is Mr. Beresford (Chairman),
Mr. Cheng, Mr. Moley, Mr. Weston and Mr. Wyness and meets at least three times a year. The Committee is principally concerned with making recommendations to our Board on
the framework of executive directors' remuneration and its cost and also with determining the specific remuneration package of each executive director and members of senior management, including
incentive arrangements, pension rights and compensation payments.

In
addition to the standing committees described above, the Chief Executive chairs theOperations Management Team. This is a monthly
meeting of the senior management and, following each meeting, the Chief Executive issues a summary report to the Board. The Operations Management Team develops and oversees corporate strategy and
reviews annual business plans, budgets and operational and financial performance. It agrees and monitors policies and other matters not reserved to the Board.

Compensation of Directors and Senior Management

Our administrative, supervisory and management personnel consists of the same group of people we refer to as our senior management.

The
aggregate compensation paid, including benefits in kind, by us and our subsidiaries to all 16 persons who were members of our Board and senior management during the year ended
December 31,

64

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2002,
as a group (including the three individuals who ceased being members during the year), for services in all capacities for that year, totaled £2.5 million.

The
total amounts set aside or accrued by us or our subsidiaries to provide pension, retirement or similar benefits to the members of our board and senior management were
£0.6 million.

The
following table sets forth the total compensation for 2002 of each of our directors holding office during the year.

|                        |  | Remuneration and fees |  | Benefits |  | Total
|----------------------- |  | --------------------- |  | -------- |  | -----
|
|Executive Directors     |  |                       |  |          |  |      
|N Brookes               |  | 500.5                 |  | 44.8     |  | 545.3
|M Chung(1)              |  | 232.3                 |  | 18.9     |  | 251.2
|E Hutchinson            |  | 250.5                 |  | 22.4     |  | 272.9
|Non-Executive Directors |  |                       |  |          |  |      
|M Beresford             |  | 37.0                  |  |         |  | 37.0 
|P Cheng                 |  | 35.0                  |  |         |  | 35.0 
|G Ennerfelt             |  | 30.0                  |  |         |  | 30.0 
|R Moley                 |  | 35.0                  |  |         |  | 35.0 
|G Sarney(2)             |  | 66.7                  |  | 1.4      |  | 68.1 
|J Weston(2)             |  | 22.5                  |  |         |  |      
|J Wyness                |  | 89.3                  |  |         |  | 89.3 

---

Details
of bonus and pension arrangements for our Executive Directors are set out in Note 10 of Notes to the Financial Statements.

Employees

As of December 31, 2002, we employed approximately 4,500 employees, including approximately 2,764 employees in manufacturing and product development,
approximately 1,290 selling and distribution employees and approximately 446 administrative employees. As of the same date, approximately 1,137 of our employees were located in the United Kingdom and
approximately 2,117 were located in North America. The remainder were based in other locations in continental Europe, South America, Asia, Africa and Australasia. We are predominantly
non-unionized with good labor relations and have no history of significant disputes.

65

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Shares Held by Directors and Senior Management

The following table sets forth, as of June 2, 2003, the beneficial and non-beneficial interests held in respect of the number of our shares by
persons who were members of our Board of Directors. Other than Mr. Ennerfelt (see below), no director or other member of our senior management beneficially owns more than 1% of our shares.

|                                                  |  | Beneficial
interests |  | Non-beneficial
interests(1) |  | Options and
rights to
acquire
Ordinary shares |  | Performance
units granted
under the Long
Term Share
Purchase Plan(2) |  | Rights
under the
Stock
Appreciation
Rights Plan
|------------------------------------------------- |  | -------------------- |  | --------------------------- |  | --------------------------------------------- |  | -------------------------------------------------------------------- |  | -----------------------------------------------
|
|N Brookes                                         |  | 2,947,083            |  | 26,315                      |  | 3,602,135                                     |  | 123,000                                                              |  |                                               
|M Chung(3)                                        |  | 31,377               |  | 39,620                      |  | 3,131,609                                     |  | 50,000                                                               |  | 42,740                                         
|E Hutchinson                                      |  | 726,210              |  | 12,171                      |  | 2,129,726                                     |  | 62,000                                                               |  |                                               
|
|M Beresford                                       |  | 65,225               |  |                            |  |                                              |  |                                                                     |  |                                               
|P Cheng                                           |  | 7,250                |  |                            |  |                                              |  |                                                                     |  |                                               
|G Ennerfelt(4)                                    |  | 131,000,000          |  |                            |  |                                              |  |                                                                     |  |                                               
|R Moley                                           |  | 1,010,000            |  |                            |  |                                              |  |                                                                     |  |                                               
|J Weston                                          |  | 1,600,000            |  |                            |  |                                              |  |                                                                     |  |                                               
|J Wyness                                          |  | 346,037              |  |                            |  |                                              |  |                                                                     |  |                                               
|Senior management as a group(3)                   |  | 4,751,314            |  | 78,886                      |  | 15,178,091                                    |  | 235,000                                                              |  | 42,740                                         
|All directors and senior management as a group(3) |  | 138,779,826          |  | 78,886                      |  | 15,178,091                                    |  | 235,000                                                              |  | 42,740                                         

---

66

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Share Schemes and Related Information

We have five different share incentive plans under which employees currently may be granted share options, purchase rights or stock appreciation rights. There are
also seven additional share plans with options, performance units or rights which remain outstanding but are now closed to new grants to employees, including three plans that were assumed or
adopted in connection with the acquisitions of Netcom, Zarak and Caw.

At
June 2, 2003 the following options and purchase rights over Ordinary shares had been granted and remained outstanding under our various employee share schemes. Figures for the
options outstanding and the exercise price per Ordinary share have each been adjusted, where relevant for the 3:1 share split effected in May 2000 and for the rights issues effected in
1993 and December 2000 in accordance with the individual scheme rules:

|Option Scheme                                 |  | Option/purchase right exercise dates |  | Exercise price
per share (p) |  | Number of
outstanding options/
purchase rights
|--------------------------------------------- |  | ------------------------------------ |  | ---------------------------- |  | ----------------------------------------------
|Discretionary Schemes:                        |  |                                      |  |                              |  |                                               
|1985 Executive Share Option Scheme            |  | 04.22.9704.26.05                    |  | 102108                      |  | 68,739                                        
|1995 Executive Share Option Scheme            |  | 04.29.9924.03.13                    |  | 16598                       |  | 23,337,799                                    
|International Executive Share Option Scheme   |  | 04.11.9804.10.05                    |  | 104                          |  | 174,139                                       
|Spirent Stock Option Plan                     |  | 11.05.0105.07.10                    |  | 6617                        |  | 78,451,151                                    
|Acquisition Related Schemes:                  |  |                                      |  |                              |  |                                               
|Netcom Amended and Restated Stock Option Plan |  | 07.23.9919.07.09                    |  | 15151                       |  | 11,962,306                                    
|Zarak Amended and Restated Stock Option Plan  |  | 11.14.0012.11.10                    |  | 127572                      |  | 826,853                                       
|Caw Amended and Restated Stock Plan(1)        |  | 15.08.0226.06.12                    |  | 17.723.6(1)                 |  | 870,523                                       
|All Employee Share Save Schemes:              |  |                                      |  |                              |  |                                               
|UK Savings Related Share Option Scheme(2)     |  | 01.01.0305.31.10                    |  | 41583                       |  | 4,734,050                                     
|US Employee Stock Purchase Plan(3)            |  | 01.01.04                             |  | 14                           |  | 3,500,000                                     
|Global All Employee Share Purchase Plan(3)    |  | 01.01.04                             |  | 14                           |  | 350,000                                       
|                                              |  |                                      |  |                              |  |                                               
|Total                                         |  |                                      |  |                              |  | 124,275,560                                   
|                                              |  |                                      |  |                              |  |                                               

---

67

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We
also operated the Stock Appreciation Rights Plan and the Long Term Share Purchase Plan, both of which have utilized shares purchased in the market and have not involved the issue of
new shares. As at June 2, 2003 the following were outstanding under each plan:

Stock Appreciation Rights Plan

|Rights exercise dates |  | Rights price
(pence) |  | Number of
rights outstanding
|--------------------- |  | -------------------- |  | ----------------------------
|9.10.00-06.29.10      |  | 182-416              |  | 3,555,723                   

Long Term Share Purchase Plan

|Performance unit vesting date |  | Value of
performance unit
(pence) |  | Number of
performance units
|----------------------------- |  | --------------------------------- |  | ---------------------------
|04.09.07                      |  | 305                               |  | 258,000                    

Shares
held in an Employee Share Ownership Trust may be used to satisfy awards under the Stock Appreciation Rights Plan and the Long Term Share Purchase Plan. At June 2, 2003 the
Trust held 9,064,985 Ordinary shares.

Further
information on our share incentive plans are provided in Note 10 and Note 32 of Notes to the Financial Statements included elsewhere in this document.

The
following tables provide further summary information in respect of options and other rights to purchase our Ordinary shares and awards of performance units under the Spirent Long
Term Share Purchase Plan for each of our directors as at June 2, 2003. Other than as set forth below, none of our directors holds any options to purchase our shares or performance units under
the Long Term Share Purchase Plan. Each option or performance unit was granted without monetary consideration. Information relating to ownership of share options or performance units by employees,
other than executive directors, is not required to be, and has not been, disclosed by us in the United Kingdom. Our directors and senior management as a group held options, purchase rights and stock
appreciation rights to purchase 15,178,091 shares and also 235,000 performance units as of June 2, 2003.

Options to Acquire SharesDirectors

|          |  | Plan type(1) |  | Options over
/rights to
acquire Ordinary
shares |  | Date of grant |  | Exercise
price
(pence) |  | Date first
exercisable |  | Expiry date
|--------- |  | ------------ |  | ----------------------------------------------- |  | ------------- |  | ---------------------- |  | ---------------------- |  | -----------
|N Brookes |  | ESOS         |  | 221,068                                         |  | 09.30.96      |  | 136                    |  | 09.30.99               |  | 09.29.06   
|          |  | ESOS         |  | 30,410                                          |  | 04.23.97      |  | 118                    |  | 04.23.00               |  | 04.22.07   
|          |  | ESOS         |  | 43,922                                          |  | 04.27.98      |  | 152                    |  | 04.27.01               |  | 04.26.08   
|          |  | ESOS         |  | 149,590                                         |  | 05.11.00      |  | 334                    |  | 05.11.03               |  | 05.10.10   
|          |  | ESOS         |  | 205,000                                         |  | 04.09.01      |  | 305                    |  | 04.09.04               |  | 04.08.11   
|          |  | SRSOS        |  | 18,145                                          |  | 10.05.01      |  | 93                     |  | 12.01.06               |  | 05.03.07   
|          |  | ESOS         |  | 468,000                                         |  | 04.02.02      |  | 134                    |  | 04.02.05               |  | 04.01.12   
|          |  | ESOS         |  | 774,000                                         |  | 05.02.02      |  | 113                    |  | 05.02.05               |  | 05.01.12   
|          |  | ESOS         |  | 1,692,000                                       |  | 03.25.03      |  | 16                     |  | 03.25.06               |  | 03.24.13   
|          |  |              |  |                                                 |  |               |  |                        |  |                        |  |            

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|M Chung      |  | ESOS  |     | 93,482    |  | 07.16.98 |  | 163 |  | 07.16.01 |  | 07.15.08
|------------ |  | ----- | --- | --------- |  | -------- |  | --- |  | -------- |  | --------
|             |  | ESOS  |     | 112,734   |  | 04.01.99 |  | 133 |  | 04.01.02 |  | 03.31.09
|             |  | SSOP  |     | 341,921   |  | 05.11.00 |  | 334 |  | 05.11.01 |  | 05.10.07
|             |  | ESOS  |     | 65,819    |  | 05.11.00 |  | 334 |  | 05.11.03 |  | 05.10.10
|             |  | SARP  |     | 42,740    |  | 05.12.00 |  | 335 |  | 05.12.01 |  | 05.11.10
|             |  | SSOP  |     | 250,000   |  | 12.08.00 |  | 613 |  | 12.08.01 |  | 12.07.07
|             |  | SSOP  |     | 195,000   |  | 04.09.01 |  | 305 |  | 04.09.02 |  | 04.08.08
|             |  | ESOS  |     | 80,000    |  | 04.09.01 |  | 305 |  | 04.09.04 |  | 04.08.11
|             |  | SSOP  |     | 750,000   |  | 04.02.02 |  | 134 |  | 04.02.03 |  | 04.01.09
|             |  | ESPP  | (2) | 17,653    |  | 01.01.03 |  | 14  |  | 01.01.04 |  | 01.01.04
|             |  | ESOS  |     | 225,000   |  | 03.25.03 |  | 16  |  | 03.25.06 |  | 03.24.13
|             |  | SSOP  |     | 1,000,000 |  | 03.25.03 |  | 16  |  | 03.25.04 |  | 03.24.10
|E Hutchinson |  | ESOS  |     | 17,652    |  | 04.27.95 |  | 108 |  | 04.27.98 |  | 04.26.05
|             |  | ESOS  |     | 42,928    |  | 04.29.96 |  | 140 |  | 04.29.99 |  | 04.28.06
|             |  | ESOS  |     | 33,786    |  | 04.23.97 |  | 118 |  | 04.23.00 |  | 04.22.07
|             |  | ESOS  |     | 29,586    |  | 04.27.98 |  | 152 |  | 04.27.01 |  | 04.26.08
|             |  | SRSOS |     | 12,363    |  | 10.22.98 |  | 83  |  | 01.01.06 |  | 06.30.06
|             |  | ESOS  |     | 75,156    |  | 04.01.99 |  | 133 |  | 04.01.02 |  | 03.31.09
|             |  | ESOS  |     | 55,562    |  | 05.11.00 |  | 334 |  | 05.11.03 |  | 05.10.10
|             |  | ESOS  |     | 105,000   |  | 04.09.01 |  | 305 |  | 04.09.04 |  | 04.08.11
|             |  | SRSOS |     | 8,693     |  | 10.05.01 |  | 93  |  | 12.01.08 |  | 05.31.09
|             |  | ESOS  |     | 234,000   |  | 04.02.02 |  | 134 |  | 04.02.05 |  | 04.01.12
|             |  | ESOS  |     | 387,000   |  | 05.02.02 |  | 113 |  | 05.02.05 |  | 05.01.12
|             |  | ESOS  |     | 1,128,000 |  | 03.25.03 |  | 16  |  | 03.25.06 |  | 03.24.13

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69

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Performance Units Under the Long Term Share Purchase PlanDirectors

|Name                                       |  | Performance
units(1) |  | Date of grant |  | Value on date
of award
(pence) |  | Vesting date
subject to
performance
criteria being
achieved
|------------------------------------------ |  | -------------------- |  | ------------- |  | ------------------------------ |  | -----------------------------------------------------------
|N Brookes                                  |  | 123,000              |  | 4.9.01        |  | 305                            |  | 4.9.07                                                     
|M Chung                                    |  | 50,000               |  | 4.9.01        |  | 305                            |  | 4.9.07                                                     
|E Hutchinson                               |  | 62,000               |  | 4.9.01        |  | 305                            |  | 4.9.07                                                     
|                                           |  |                      |  |               |  |                                |  |                                                            
|Total Performance Units held by Directors: |  | 235,000              |  |               |  |                                |  |                                                            
|                                           |  |                      |  |               |  |                                |  |                                                            

---

Rights under the Stock Appreciation Rights PlanDirectors

|                                |  | Number of
rights |  | Rights price
(pence) |  | Date of
grant |  | Date first
exercisable |  | Expiry
date
|------------------------------- |  | ---------------- |  | -------------------- |  | ------------- |  | ---------------------- |  | -----------
|N Brookes                       |  |                 |  |                     |  |              |  |                       |  |           
|E Hutchinson                    |  |                 |  |                     |  |              |  |                       |  |           
|M Chung                         |  | 42,740           |  | 335                  |  | 5.15.00       |  | 5.15.01                |  | 5.14.10    
|                                |  |                  |  |                      |  |               |  |                        |  |            
|Total Rights held by Directors: |  | 42,740           |  |                      |  |               |  |                        |  |            
|                                |  |                  |  |                      |  |               |  |                        |  |            

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ITEM 7.    MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

Major Shareholders

The table below sets forth certain information regarding notifiable interests in our shares as of June 12, 2003 (being the last practicable date prior to
the publication of this report) for each person notified to us who owns more than 3% of our shares.

|Name of substantial shareholder                |  | Number of shares held |  | Percentage held
|---------------------------------------------- |  | --------------------- |  | ---------------
|Lexa BV(1)                                     |  | 131,000,000           |  | 13.89          
|FMR Corporation and Fidelity International Ltd |  | 81,984,043            |  | 8.69           
|Prudential plc                                 |  | 46,771,586            |  | 4.96           
|Morgan Stanley Securities Ltd                  |  | 35,579,131            |  | 3.77           
|Legal & General plc                            |  | 34,193,296            |  | 3.63           

---

To
our knowledge, as of June 12, 2003, no other shareholder held more than 3% of our issued shares.

The
acquisitions made during 2000 were each funded in part through the issue of new Ordinary shares, which resulted in the dilution of the relative holdings of shareholders existing
prior to these transactions and a new significant shareholder as shown in the table above. In addition, the ongoing exercise of stock options and purchase rights under various employee stock plans
continues to further dilute the relative holding of significant shareholders.

At
February 20, 2002, Lexa BV was our largest shareholder with 11.61% of our issued share capital and Prudential plc, Halifax plc and Legal &
General plc were our second, third and fourth largest shareholders, holding 4.93%, 3.59%, and 3.01% of our issued share capital respectively. At February 28, 2001, Lexa BV was our
largest shareholder with 11.7% of our issued share capital, and Prudential plc was our second largest shareholder with 5.03% of our issued share capital. At March 2, 2000, Prudential was
our largest shareholder, holding 10.96% of our issued share capital, and Halifax was our second largest shareholder, with 4.94% of our issued share capital. At March 10, 1999 Prudential was our
largest shareholder, holding 10.10% of our issued share capital, and Halifax plc was still the second largest shareholder, with 4.89% of our issued share capital.

Under
Sections 198-201 of the Companies Act 1985 shareholders have a duty to give notice to a company when their beneficially held interest first reaches 3% of the issued
share capital, when it falls below that level and when the beneficially held interest changes by at least one percentage point. If a shareholder holds beneficial and non-beneficial
interests of 10% or more of the issued share capital, he must notify the company when the aggregate holding falls below that level and when aggregate holdings change by at least one percentage point.
Once a shareholder has beneficial and non-beneficial interests representing less than 10% of the issued capital, only the beneficially held element of the shareholding needs be disclosed.
As a result of these differing reporting and notification requirements, the figures given in the paragraph above may show a volatility in the holdings of our larger investors, which is not
representative of the true figure.

The
shareholders listed in the above table do not have voting rights different from those of our other shareholders.

71

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As
at June 2, 2003, 3,820,179 of our Ordinary shares were held by shareholders who had a US address on the share register. There were 194 record holders of our Ordinary shares in
the United States. As at June 2, 2003, 8,699,028 Ordinary shares represented by ADSs were held in the United States, of which 8,694,236 are registered to the Depository Trust Company. As the
share register does not hold records of trusts or complete details of nominees holdings, it is possible that there are greater numbers of beneficial shareholdings held by residents in the United
States. We believe approximately 10% of our Ordinary issued share capital is held by US investors either directly, through the ADS facility or through nominee accounts.

To
our knowledge, we are not directly or indirectly owned or controlled by another corporation or other corporations, by any foreign government or by any other natural or legal person or
persons severally or jointly.

To
our knowledge, there are no arrangements the operation of which may at a subsequent date result in a change of our control.

Related Party Transactions

Except for the disposal of our interests in the WAGO joint venture (as further described in "Liquidity and Capital Resources" in Item 5 above and in "Material
Contracts" in Item 10 below), we have not engaged in any related party transactions since January 1, 2002, other than any such transactions between us and our subsidiaries or among our
subsidiaries.

72

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ITEM 8.    FINANCIAL INFORMATION

Historical Financial Information

Our audited consolidated financial statements as of December 31, 2002 and 2001 and for each of the three years in the period ended December 31, 2002
are set out elsewhere in this annual report.

Earnings
and dividends per share for prior periods have been restated to reflect the 3:1 share split approved by our shareholders on May 11, 2000.

Significant Changes

Other than as described in "Recent Developments" in Item 5 above and Note 36 of Notes to the Financial Statements no significant change has occurred to our
financial position since December 31, 2002, the date of the most recent financial statements included in this annual report.

Dividend Policy

Under English law, payment of dividends is subject to the Companies Act, which requires that all dividends be approved by our board of directors and, in some
cases, our shareholders. Moreover, under English law, we may pay dividends on our shares only out of profits available for distribution determined in accordance with the Companies Act and UK GAAP,
which differ in some respects from US GAAP. If we declare dividends holders of our ADSs will be entitled to receive payments in U.S. dollars in respect of dividends on the underlying Ordinary shares
in accordance with the deposit agreement.

An
interim dividend of 1.35 pence per share was paid to shareholders in November 2002. A final dividend will not be paid in respect of the year ending December 31,
2002 nor will a dividend be paid in respect of the year ending December 31, 2003. This compares to a final dividend for the year ended December 31, 2001 of 3.00 pence and a total
dividend that year of 4.35 pence. The Board intends to keep future dividend policy under review but any future dividend payments will be dependent on trading outlook and the availability of
distributable reserves.

In
addition as a result of amendments to our borrowing terms, we are restricted from paying dividends, until certain financial requirements are met (which cannot occur prior to
June 30, 2004) (see "Liquidity and Capital Resources" in Item 5 below).

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ITEM 9.    THE OFFER AND LISTING

Our American depositary shares, or ADSs, are listed on the New York Stock Exchange under the symbol SPM. Each ADS represents four Ordinary shares. ADSs are
evidenced by American depositary receipts, or ADRs. Our Ordinary shares have a nominal value of 31/3p each.

Our
shares are listed on the UK Listing Authority's Official List and traded on the London Stock Exchange. Until May 15, 2000, our shares traded on the London Stock Exchange under
the ticker symbol BWTH and, since May 15, 2000, they have traded under the ticker symbol SPT. We established a "sponsored" ADR facility in 1999 to facilitate
over-the-counter trading in our shares by US investors, but there was no regular public market for our shares in the United States. In order to list our ADSs on the New York
Stock Exchange, we filed a registration statement on Form 20-F in June 2001 and became subject to the periodic reporting requirements of the Securities Exchange Act of 1934,
as amended. See "Item 10 Additional InformationDocuments on Display".

The
following table shows, for the periods indicated, the high and low closing price of a Spirent share as reported in the Daily Official List of the UK Listing Authority, as adjusted
for the 3:1 share split which took effect in May 2000 and the bonus element of the 5:24 rights issue completed in

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December 2000
and the high and low closing price of our ADSs on the New York Stock Exchange since we listed on July 10, 2001.

|                                                           |                                       | Spirent Shares |      | Spirent ADSs
|---------------------------------------------------------- | ------------------------------------- | -------------- | ---- | ------------
|
|
|Most recent six months                                     |                                       |                |      |             
|                                                           | May 2003                              |                | 0.29 |             
|                                                           | April 2003                            |                | 0.21 |             
|                                                           | March 2003                            |                | 0.19 |             
|                                                           | February 2003                         |                | 0.23 |             
|                                                           | January 2003                          |                | 0.23 |             
|                                                           | December 2002                         |                | 0.19 |             
|Two most recent full financial years and subsequent period |                                       |                |      |             
|2003                                                       |                                       |                |      |             
|                                                           | Second quarter (through May 31, 2003) |                | 0.29 |             
|                                                           | First quarter                         |                | 0.23 |             
|2002                                                       |                                       |                |      |             
|                                                           | Fourth Quarter                        |                | 0.37 |             
|                                                           | Third Quarter                         |                | 0.87 |             
|                                                           | Second Quarter                        |                | 1.34 |             
|                                                           | First Quarter                         |                | 1.92 |             
|2001                                                       |                                       |                |      |             
|                                                           | Fourth quarter                        |                | 1.99 |             
|                                                           | Third quarter                         |                | 2.29 |             
|                                                           | Second quarter                        |                | 4.39 |             
|                                                           | First quarter                         |                | 6.10 |             
|Five most recent full financial years                      |                                       |                |      |             
|2002                                                       |                                       | 1.92           |      | 0.06        
|2001                                                       |                                       | 6.10           |      | 0.72        
|2000                                                       |                                       | 6.88           |      | 2.78        
|1999                                                       |                                       | 3.35           |      | 1.06        
|1998                                                       |                                       | 1.87           |      | 0.95        

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ITEM 10.    ADDITIONAL INFORMATION

Memorandum and Articles of Association

Our registration statement on Form 20-F which we filed with the SEC on June 27, 2001, contains a full description of our Memorandum and
Articles of Association under "Item 10. Additional Information," which is incorporated herein by reference.

Material Contracts

Following is a summary of the contracts entered into by any member of our group during the last two years which are material to our group as a whole:



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Exchange Controls

There are currently no UK foreign exchange control restrictions on the conduct of our operations or the remittance of dividends. Any dividends we pay to holders
of the shares or ADSs may be subject to UK or other taxation. See "Taxation" below, for a more detailed discussion of the tax consequences of investing in the shares or ADSs. There are no restrictions
under our Memorandum and Articles of Association or under English law that limit the right of non-resident or foreign holders to hold or vote our shares.

Taxation

The following discussion summarizes the material US federal income tax and UK tax consequences of the acquisition, ownership and disposition of our Ordinary
shares, including shares represented by ADSs evidenced by ADRs. This summary applies to you only if you are a beneficial owner of Ordinary shares or ADSs and the dividends on them and you are:



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



The
following summary is of a general nature and does not address all of the tax consequences that may be relevant to you in light of your particular situation. For example, this summary
does not apply to US expatriates, insurance companies, regulated investment companies, tax-exempt organizations, financial institutions, persons subject to the alternative minimum tax,
securities broker-dealers, investors that use a mark-to-market accounting method, holders who hold ADSs or Ordinary shares as part of hedging, straddling, or conversion
transactions or holders who own directly, indirectly or by attribution, 10% or more of the voting power of our issued share capital and holders whose functional currency for US tax purposes is not the
US dollar. In addition, the following summary of UK tax considerations does not, except where indicated otherwise, apply to you if:



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You
should consult your own tax advisors as to the particular tax consequence to you under UK, US federal, state and local and other foreign laws, of the acquisition, ownership and
disposition of ADSs or Ordinary shares. For US federal income tax purposes, holders of ADSs will be treated as owners of the underlying Ordinary shares attributable thereto and the discussion of US
federal income tax consequences to holders of ADSs applies as well to holders of Ordinary shares except as otherwise indicated.



The following discussion of material UK tax consequences is the opinion of Linklaters, our UK tax counsel.

Taxation of Dividends and Distributions

Under current UK taxation legislation, no tax will be withheld from cash dividend payments by us.

The
New Treaty applies to dividend payments from May 1, 2003. Had you been entitled to greater benefits under the Prior Treaty, you could elect to continue to apply the Prior
Treaty up to and including April 30, 2004.

New Treaty

Because payments of dividends by us to you are not subject to a UK withholding tax, it is not necessary to apply under the New Treaty in order to receive
dividends free of, or subject to a reduced rate of, withholding. Unlike the Prior treaty (see below), the New Treaty does not provide for US holders of Ordinary shares or ADSs to have any entitlement
in respect of any tax credit to which an individual resident in the United Kingdom would be entitled on dividends paid by us.

Prior TreatyEffect of UK Tax Credit

Although the Prior Treaty provides for US holders of Ordinary shares or ADSs to have an entitlement in respect of tax credits on dividends paid by us, to which an
individual resident in the United Kingdom would have been entitled had he received the dividend, you will not receive any actual payment from the UK Inland Revenue in respect of any such tax credit.
This is because the Prior Treaty provides for a notional UK withholding tax, at the rate of 15%, which exceeds the tax credit of 10%.

Taxation of Capital Gains

Subject to the provisions set out in the next paragraph in relation to temporary non-residents, you will not ordinarily be liable for UK tax on capital gains
realized on the sale or other disposal of Ordinary shares or ADSs, unless you carry on a trade, profession or vocation in the United Kingdom through a branch or agency and the Ordinary shares or ADSs
are or have been used for the purposes of the branch or agency, in which case you may, depending on the circumstances, be liable to UK tax on capital gains on any sale or other disposal of the
Ordinary shares or ADSs. Proposed legislation, intended to enter into force in 2003, would amend the above so that corporate US holders of Ordinary shares or ADSs would be liable to UK tax on capital
gains if they carried on a trade through a United Kingdom permanent establishment. The proposed legislation is not final and may be subject to change.

A
holder of Ordinary shares or ADSs who is an individual and who has on or after March 17, 1998 ceased to be resident or ordinarily resident for tax purposes in the United Kingdom
but who again becomes resident or ordinarily resident in the United Kingdom within a period of, broadly, less

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than
five years and who disposes of Ordinary shares or ADSs during that period may also be subject to UK tax on capital gains (subject to any available exemption or relief), notwithstanding that he is
not resident or ordinarily resident in the United Kingdom at the time of the disposal.

United Kingdom Inheritance Tax

The Ordinary shares and ADSs are assets situated in the United Kingdom for the purposes of UK inheritance tax. A gift of such assets by, or the death of, an
individual holder of such assets may (subject to certain exemptions and reliefs) give rise to a liability to UK inheritance tax even if the holder is neither domiciled in the United Kingdom nor deemed
to be domiciled there under special rules relating to long residence or previous domicile. For UK inheritance tax purposes, a transfer of assets at less than full market value may be treated as a gift
and particular rules apply to gifts where the donor reserves or retains some benefit. Special rules also apply to close companies and to trustees of settlements holding Ordinary shares or ADSs,
bringing them within the charge to inheritance tax.

An
Ordinary share or ADS held by an individual whose domicile is determined to be the United States for the purposes of the Estate Tax Treaty, and who is not a national of the United
Kingdom for the purposes of that treaty generally, will not be subject to UK inheritance tax on the individual's death or on a gift of the Ordinary share or ADS during the individual's lifetime
provided that any applicable US federal gift or estate tax liability is paid except where the Ordinary share or ADS:



In
the exceptional case where the Ordinary shares or ADSs are subject to both UK inheritance tax and US federal gift or estate tax, the Estate Tax Treaty generally provides for the tax paid in the
United Kingdom to be credited against federal income tax in the United States or for federal tax paid in the
United States to be credited against tax payable in the United Kingdom based on priority rules set out in the Estate Tax Treaty.

United Kingdom Stamp Duty and Stamp Duty Reserve Tax (SDRT)

UK stamp duty (rounded up to the nearest £5) or SDRT will (subject to specific exceptions) be payable at the higher rate of 1.5% or the amount or
value of the consideration or in some circumstances the value of shares in registered form on a transfer or issue;



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Clearance
services may opt, with the UK Revenue's approval, under certain conditions for the normal rate of stamp duty and SDRT (0.5%) to apply to a transfer of shares into, and to
transactions within, the service instead of the higher rate applying to a transfer of shares into the clearance service.

No
UK stamp duty will be payable on the acquisition of any ADS or on any subsequent transfer of an ADS, provided that the transfer and any subsequent instrument of transfer remain at all
times outside the United Kingdom and that the instrument of transfer is not executed in or brought into the United Kingdom. An agreement to transfer an ADS will not give rise to SDRT.

Subject
to some exceptions, a conveyance, transfer or sale of Ordinary shares in registered form will attract ad valorem UK stamp duty at the rate of 0.5% (rounded up to the nearest
£5) of the dutiable amount, usually the amount or value of the consideration for the transfer. Generally, ad valorem stamp duty applies neither to gifts nor on a transfer from a nominee to
the beneficial owner, although in cases of transfers where no ad valorem stamp duty arises, a fixed UK stamp duty of £5 may be payable. SDRT at a rate of 0.5% of the amount or value of the
consideration for the transfer will normally be payable on an agreement to transfer shares. If, within six years of the date on which such agreement was made (or, if such agreement was conditional,
the date on which the condition is satisfied), an instrument transferring the shares is executed and stamped, any SDRT paid may be repaid or, if it has not been paid the liability to pay such tax, but
not necessarily interest and penalties, would be canceled. Stamp duty and SDRT are chargeable whether the agreement is made or effected in the United Kingdom or elsewhere and whether or not any party
is resident or situated in any part of the United Kingdom.



The following discussion of material US federal income tax consequences is the opinion of Debevoise & Plimpton, our US counsel.

Taxation of Dividends

The gross amount of a distribution paid on an Ordinary share or ADS, including the full amount of any related UK tax credit, will be a dividend for US federal
income tax purposes to the extent paid out of our current or accumulated earnings and profits (as determined for US federal income tax purposes). To the extent that a distribution exceeds our earnings
and profits, it will be treated as a nontaxable return of capital to the extent of your basis in such shares and thereafter as a capital gain. Dividends paid by us generally will be treated as foreign
source income and will not be eligible for the dividends received deduction allowed to corporate shareholders under the US federal income tax law.

Recently
enacted legislation reduces to 15% the maximum tax rate for certain dividends received by individuals through taxable years beginning on or before December 31, 2008, so
long as certain holding period requirements are met. Unless we are classified as a passive foreign investment company (see below), dividends paid with respect to our ADSs will qualify for the 15%
maximum rate. We believe that dividends paid to direct holders of our Ordinary shares will likewise qualify for the 15% maximum rate, but no assurance in this regard can be given until the US Treasury
Department issues further guidance. Special rules apply for purposes of determining a recipient's investment income (which limits deductions for investment interest) and foreign income (which may
affect the amount of foreign tax credit) and to certain extraordinary dividends. We urge each US holder who is an individual to consult his or her own tax advisor regarding the possible applicability
of the reduced rate under the new legislation and the related restrictions and special rules.

The
amount of any distribution will equal the fair market value in US dollars of the pounds sterling or other property received on the date received by you in the case of Ordinary
shares, or by The Bank of New York, as depositary, in the case of ADSs, based on the spot exchange rate on such date. You will have a basis in any pounds sterling distributed, equal to the dollar
value of pounds

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sterling
on the date received by you, in the case of Ordinary shares, or by The Bank of New York in the case of ADSs. Any gain or loss recognized upon a subsequent disposition of pounds sterling will
generally be US source ordinary income or loss.

Under
the Prior Treaty, certain holders of our Ordinary shares and ADSs were eligible to claim a US foreign tax credit for certain notional UK withholding taxes if the holder elected to
include the UK tax credit amount in income. You should be aware, however, that under the New Treaty, you will no longer be able to claim this foreign tax credit. However, you may elect to continue to
apply the previous treaty in this respect up to and including April 30, 2004. You are urged to consult your own tax advisor with regard to your eligibility for claiming a US foreign tax credit
and the procedures for claiming the credit.

Taxation of Capital Gains

Upon the sale or exchange of an Ordinary share or ADS, you will recognize a gain or a loss for US federal income tax purposes in an amount equal to the difference
between the amount realized and your adjusted tax basis in the Ordinary share or ADS. Subject to the discussion below under ``Passive Foreign Investment Company Considerations," such gain or loss will
be a capital gain or loss and will be a long-term capital gain if you have held the Ordinary share or ADS for more than one year. Gain or loss will generally be treated as US source gain or loss.
Recently enacted legislation generally reduces to 15% the maximum tax rate for long-term capital gains of individuals from the sale of shares in taxable years beginning on or before
December 31, 2008.

The
surrender of ADSs in exchange for Ordinary shares and the surrender of Ordinary shares in exchange for ADSs will not be a taxable event for US federal income tax purposes.
Accordingly, you will not recognize any gain or loss upon such surrender.

Passive Foreign Investment Company Considerations

We believe that we will not be treated as a passive foreign investment company (PFIC) for US federal income tax purposes for our current taxable year, or for
future taxable years. However, an actual determination of PFIC status is factual in nature and generally cannot be made until the close of the applicable taxable year. We will be a PFIC if either:



If
we were classified as a PFIC, you would be subject to certain adverse US tax consequences, including the possible characterization of gain with respect to the Ordinary shares or ADSs
as ordinary, the possible imposition of an interest charge on taxes you would be deemed to have deferred and the unavailability of the reduced 15% tax rate on dividends.

You
are urged to consult your own tax advisor concerning the potential application of the PFIC rules to your ownership and disposition of Ordinary shares or ADSs.

Reportable Transactions

Under recently promulgated US Treasury Department regulations, you must attach to your US federal income tax return a disclosure statement on Form 8886 if
you participate in a "reportable transaction." You should consult your own tax advisor as to the possible obligation to file Form 8886 with respect to the purchase, ownership or disposition of
Ordinary shares or ADSs, or any related

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transaction,
including the disposition of any pounds sterling received as a dividend or as proceeds from the sale of Ordinary shares or ADSs.

United States Information Reporting and Backup Withholding

Dividend payments with respect to Ordinary shares or ADSs and proceeds from the sale, exchange or redemption of Ordinary shares or ADSs may be subject to
information reporting to the IRS and possible US backup withholding. Backup withholding will not apply to you, however, if you furnish a correct taxpayer identification number or certificate of
foreign status and make any other required certification or if you are otherwise exempt from backup withholding. If you are required to establish your exempt status you generally must provide such
certification on IRS Form W-9 in the case of US persons and on IRS Form W-8 in the case of non-US persons. Treasury regulations applicable to payments
made on or after December 31, 2000, generally expand the circumstances under which information reporting and backup withholding may apply unless the holder provides the information described
above.

Amounts
withheld as backup withholding may be credited against your US federal income tax liability, and you may obtain a refund of any excess amounts withheld under the backup
withholding rules, by filing the appropriate claim for refund with the IRS and furnishing any required information.

Documents on Display

We are subject to the reporting requirements of the Exchange Act, as applicable to foreign private issuers. In accordance with the requirements, we will file
annual reports on Form 20-F with, and furnish other information under cover of Form 6-K to, the SEC. We furnish copies of these reports to the depositary promptly
after they have been filed with or furnished to the SEC. Our consolidated financial statements included in such annual reports are prepared in accordance
with UK GAAP, with a reconciliation of net income and shareholders' equity to US GAAP. These financial statements are presented in pounds sterling. These reports and other information may be inspected
and copied at the public reference facility maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549.

Copies
of this material may be obtained from the Public Reference Room of the SEC at 450 Fifth Street, N.W. Washington, D.C. 20549 at prescribed rates. Information on the operation of
the Public Reference Room may be obtained by calling the SEC at (800) 732-0330. The material may also be accessed electronically by means of the Securities and Exchange Commission's
home page on the Internet at http://www.sec.gov. This Internet site contains reports, proxy and information statements, and other information regarding issuers that file electronically with the
Securities and Exchange Commission.

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ITEM 11.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

Finance and Treasury Objectives Policies and Strategies

Treasury management encompasses the funding, interest and foreign exchange activities of our Group.

The
major treasury activities involve raising finance and managing the Group's interest rate and currency exposures. Financial instruments are used to manage these exposures when deemed
appropriate. A framework of policies and guidelines has been laid down by the Board and are subject to regular review. Speculative treasury transactions are expressly forbidden.

Our
policy is to finance our operations through a combination of retained earnings and external financing. Spirent raises the majority of the funding for the Group. Debt is principally
sourced from the syndicated bank market and the US private placement market.

Interest rate management

Through an optimum mix of fixed and floating debt and the use of interest rate swaps, our aim is to reduce the volatility of the interest charge. At
December 31, 2002, the Group's borrowings were composed of 20% of fixed rate debt. This excludes $163.4 million of private placement notes which have been swapped into floating rates
through the use of a seven-year swap, callable at the counterparties' option at six monthly intervals commencing May 2003.

We
use derivative instruments, as approved by our Board, to manage our interest rate exposures on our debt and cash positions as appropriate.

Currency management

Currency exposures arise from trading transactions undertaken by our subsidiaries in foreign currencies and on translation of the operating results and net assets
of our overseas subsidiaries.

Exposure
to the US dollar is our largest single currency exposure and a movement against the pound sterling by 1% from the rate at December 31, 2002, if maintained over the whole
year based on 2002 results, would affect reported profits by approximately £0.2 million.

Subsidiaries
are required to hedge material transactional exposures against their local currency, using forward contracts. The Group Treasury, by means of forward foreign exchange
contracts, carries out the majority of this hedging activity.

We
do not hedge translation exposures on translation of the operating results or net assets of our overseas subsidiaries since these are accounting not cash exposures. Where possible we
aim to match the currency of borrowing with the currency profile of profits and net assets, this provides a partial hedge against these translation exposures.

Details
of the currencies of financial assets and liabilities are illustrated in Note 30 of Notes to the consolidated financial statements. At December 31, 2002 our balance
sheet was 70% hedged against translation exposure.

Interest Rate Sensitivity

The tables below provide information about our financial instruments excluding finance lease obligations that are sensitive to changes in interest rates. For
long-term debt obligations (excluding debt due entirely within one year), the table presents notional amounts and weighted average interest rates by expected maturity dates. Weighted
average variable rates are based on rates set at the balance sheet date. The information is presented in pounds sterling, which is our reporting currency. The actual currencies of the instruments are
indicated in parentheses.

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|                              |  | Expected to Mature Before December 31
|----------------------------- |  | -------------------------------------
|
|
|Long-term Debt:               |  |                                      
|Fixed rate (US$)              |  | 0.2                                  
|Average interest rate         |  | 7.0                                  
|Fixed rate (other currencies) |  | 0.2                                  
|Average interest rate         |  | 10.2                                 
|Variable rate (US$)           |  |                                     
|Average interest rate         |  |                                     
|Variable rate (£)             |  |                                     
|Average interest rate         |  |                                     

Exchange Rate Sensitivity

The following information provides details of our derivative and other financial instruments by currency presented in pound sterling equivalents. The tables above
provide details of non-sterling denominated long-term debt obligations which are subject to foreign currency exchange rate movements while the table below presents amounts and
weighted average contractual exchange rates of foreign currency forward exchange contracts held as at December 31, 2002. All forward exchange agreements mature within one year.



|Currency   |  | Pay for £
Contract
Amount |  | Average
Contractual
Exchange Rate
|---------- |  | ------------------------- |  | ---------------------------------
|
|US dollars |  | 19.2                      |  | 1.51                             
|Others     |  |                          |  |                                  
|           |  |                           |  |                                  
|Total      |  | 19.2                      |  |                                  
|           |  |                           |  |                                  
|Deal value |  | 19.9                      |  |                                  
|           |  |                           |  |                                  

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Currency Exposure of Financial Assets and Liabilities

The table shows the net unhedged monetary assets and liabilities of our Group companies as at December 31, 2002 that are not denominated in their
functional currency and therefore give rise to exchange gains and losses in the profit and loss account.



|                                       |  | Sterling |   | US dollar |  | Euro |   | Other |   | Total |  
|-------------------------------------- |  | -------- | - | --------- |  | ---- | - | ----- | - | ----- | -
|
|Functional currency of Group operation |  |          |   |           |  |      |   |       |   |       |  
|Sterling                               |  |         |   | 0.2       |  | 1.0  |   | (0.1  | ) | 1.1   |  
|US dollar                              |  | (0.3     | ) |          |  | (0.1 | ) |      |   | (0.4  | )
|Euro                                   |  | 0.3      |   | 0.3       |  |     |   | 0.2   |   | 0.8   |  
|Other                                  |  | (0.4     | ) | 2.8       |  |     |   | 0.1   |   | 2.5   |  
|                                       |  |          |   |           |  |      |   |       |   |       |  
|                                       |  | (0.4     | ) | 3.3       |  | 0.9  |   | 0.2   |   | 4.0   |  
|                                       |  |          |   |           |  |      |   |       |   |       |  

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ITEM 15.    CONTROLS AND PROCEDURES

As of a date within 90 days prior to the filing date of this Annual Report (the "Evaluation Date"), an evaluation was performed under the supervision, and
with the participation, of the Company's management, including the Chief Executive and Group Finance Director, of the effectiveness of the design and operation of Spirent's disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14(c) and 15d-14(c)). Based on that evaluation, Spirent's management, including the Chief Executive and Group Finance Director, concluded that
Spirent's disclosure controls and procedures were effective in all material regards to ensure that information required to be disclosed in the reports Spirent files and submits under the Exchange Act
are recorded, processed, summarized and reported within the time periods specified in the rules and procedures of the SEC. There have been no significant changes in Spirent's internal controls or in
other factors that could significantly affect our internal controls subsequent to the Evaluation Date.

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PART III

ITEM 18.    FINANCIAL STATEMENTS

The following audited financial statements, together with the related auditors' reports and financial statement schedule of Spirent are filed as part of this
annual report:

Financial Statements

|Spirent plc                                                   |                                                                                                                  | Page 
|------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------- | -----
|Report of Independent Auditors                                |                                                                                                                  | F-1  
|Consent of Independent Auditors                               |                                                                                                                  | F-2  
|Audited Financial Statements                                  |                                                                                                                  |      
|                                                              | Consolidated Profit and Loss Account for the year ended December 31, 2002                                        |      
|                                                              | Consolidated Profit and Loss Account for the year ended December 31, 2001                                        |      
|                                                              | Consolidated Profit and Loss Account for the year ended December 31, 2000                                        |      
|                                                              | Consolidated Statement of Total Recognized Gains and Losses for the years ended December 31, 2002, 2001 and 2000 |      
|                                                              | Consolidated Balance Sheets at December 31, 2002 and 2001                                                        |      
|                                                              | Consolidated Cash Flow Statements for the years ended December 31, 2002, 2001 and 2000                           |      
|                                                              | Consolidated Statements of Movement in Shareholders' Funds for the years ended December 31, 2002, 2001 and 2000  |      
|                                                              | Notes to the Financial Statements                                                                                |      
|WAGO-Kontakttechnik GmbH and WAGO Contact S.A. and Affiliates |                                                                                                                  |      
|Report and Consent of Independent Auditors                    |                                                                                                                  | F-129
|Report and Consent of Independent Auditors                    |                                                                                                                  | F-130
|Audited Financial Statements                                  |                                                                                                                  |      
|                                                              | Combined Balance Sheets as of December 31, 2002 and 2001                                                         |      
|                                                              | Combined Statements of Operations for the years ended December 31, 2002, 2001 and 2000                           |      
|                                                              | Combined Statements of Shareowners' Equity for the years period ended December 31, 2002, 2001 and 2000           |      
|                                                              | Combined Statements of Cash Flows for the years ended December 31, 2002, 2001 and 2000                           |      
|                                                              | Notes to Combined Financial Statements                                                                           |      
|Financial Statement Schedule of Spirent plc                   |                                                                                                                  |      
|                                                              | Schedule IIValuation and Qualifying Accounts for the years ended December 31, 2002, 2001 and 2000               |      

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ITEM 19.    EXHIBITS

All exhibits except those marked * (which are exhibited in this Annual Report) are exhibited in our Registration Statement filed with the Securities and Exchange
Commission on Form 20-F or the Annual Report for the year end December 31, 2001 filed with the SEC on Form 20-F and are incorporated herein by reference.

|Exhibit No |   | Description                                                                                                                                                                                                                                                                                                                                                                                                                        
|---------- | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1.1        |   | Memorandum and Articles of Association of Spirent plc                                                                                                                                                                                                                                                                                                                                                                              
|2.1        |   | Form of Deposit Agreement as amended and restated as of May 5, 2000, as further amended and restated as of March 23, 2001, as further amended and restated as of July 10, 2001, among Spirent plc, the Bank of New York as
Depositary and all Owners and holders from time to time of American Depositary Receipts issued thereunder (incorporated by reference to Spirent plc's annual report on Form F-6, filed on June 27, 2001)
|4.1        |   | Credit facility, dated December 15, 2000, for a loan facility of £50 million between Spirent plc arranged by Deutsche Bank AG London and HSBC Investment Bank plc                                                                                                                                                                                                                                                                  
|4.2        |   | Stock purchase agreement, dated November 16, 2000, between Lexa BV, Antonia Ax:son Johnson, Spirent plc and Spirent Holdings Corporation                                                                                                                                                                                                                                                                                           
|4.3        |   | Supplemental agreement dated November 15, 2000 between Spirent plc and HSBC Investment Bank plc                                                                                                                                                                                                                                                                                                                                    
|4.4        |   | Credit Facility Agreement, dated June 14, 1999, for loan facilities of £440 million for Bowthorpe plc arranged by Deutsche Bank AG London and HSBC Investment Bank plc                                                                                                                                                                                                                                                             
|4.5        |   | Stock Purchase Agreement, dated September 10, 2001 between Spirent plc, Spirent BV, Spirent International Inc, Spirent GmbH and the General Electric Company                                                                                                                                                                                                                                                                       
|4.6        |   | Stock and Asset Purchase Agreement dated February 19, 2002 between Spirent International Inc, Autronics Corporation, Penny & Giles International plc, Spirent GmbH, Spirent plc and Curtiss-Wright Flight Systems
Inc.                                                                                                                                                                                                             
|4.7        |   | Supplemental Agreement, dated March 6, 2002 between Spirent plc and HSBC Investment Bank plc as agent                                                                                                                                                                                                                                                                                                                              
|4.8        | * | Stock Purchase Agreement dated October 16, 2001 between Caw Networks, Inc. and Spirent Holdings Corporation and Merger Agreement dated July 21, 2002 between the shareholders of Caw Networks, Inc. and Spirent
Holdings Corporation                                                                                                                                                                                               
|4.9        | * | Amended and Restated Note Purchase Agreement dated March 11, 2003 between US Noteholders and Spirent plc                                                                                                                                                                                                                                                                                                                           
|4.10       | * | Supplemental Agreement dated March 11, 2003 between HSBC and Spirent plc                                                                                                                                                                                                                                                                                                                                                           
|4.11       | * | Share Sale and Purchase Agreement dated March 11, 2003 between Spirent GmbH, Hohorst Familien Holding (Minden) Beteiligungs GmbH and Hohorst Familien Holding (Schweiz) Beteiligungs GmbH                                                                                                                                                                                                                                          
|4.12       | * | Share Sale and Purchase Agreement dated March 11, 2003 between Spirent GmbH and Sven Michael Hohorst                                                                                                                                                                                                                                                                                                                               
|4.13       | * | Share Sale and Purchase Agreement dated March 11, 2003 between Spirent BV, Hohorst Familien Holdings (Schweiz) Beteiligungs GmbH and Hohorst Familien Holding (Minden) Beteiligungs GmbH                                                                                                                                                                                                                                           
|4.14       | * | Share Sale and Purchase Agreement dated March 11, 2003 between Spirent GmbH and Gesellschaft burgerlichen Rechts Wolfgang und Sven Michael Hohorst                                                                                                                                                                                                                                                                                 
|8.1        | * | List of subsidiaries of Spirent plc, their jurisdiction of incorporation and the names under which they do business                                                                                                                                                                                                                                                                                                                
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                    

89

---

|12.1 |   | Consent of Ernst & Young LLP (included on page F-2)                                            
|---- | - | -----------------------------------------------------------------------------------------------
|12.2 |   | Consent of Allrevision Dornhof Kloss and Partner GmbH (included on page F-129)                 
|12.3 |   | Consent of Cherry, Bekaert & Holland LLP (included on page F-130)                              
|12.4 | * | Certification of Chief Executive Officer of Spirent plc pursuant to 18 United States Code §1350
|12.5 | * | Certification of Chief Financial Officer of Spirent plc pursuant to 18 United States Code §1350

90

---



SPIRENT plc
REPORT OF INDEPENDENT AUDITORS

We
have audited the consolidated balance sheets of Spirent plc as at December 31, 2002 and 2001, and the related consolidated profit and loss accounts and statements of total recognized gains
and losses, cash flows and movements in shareholders' funds for each of the three years in the period ended December 31, 2002. Our audits also included the financial statement schedule listed
in the Index at Item 18. These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and
schedule based on our audits. We did not audit the financial statements of WAGO-Kontakttechnik GmbH and WAGO Contact SA, in which the Company has 51% interests and included within the
consolidated loss before taxation of £1,053.1 million, consolidated loss before taxation of £730.7 million and consolidated profit before taxation of
£81.8 million for the years ended December 31, 2002, 2001 and 2000, respectively, are their combined profits before taxation of £6.7 million,
£8.8 million and £12.7 million, respectively. Those statements were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as
it relates to the amounts included for WAGO-Kontakttechnik GmbH and WAGO Contact SA, is based solely on the reports of the other auditors.

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

In
our opinion, based on our audits and the reports of the other auditors, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of
Spirent plc at December 31, 2002 and 2001, and the consolidated results of its operations and its consolidated cash flows for each of the three years in the period ended December 31,
2002 in conformity with accounting principles generally accepted in the United Kingdom which differ in certain respects from those generally accepted in the United States (see Note 37 of Notes
to the Consolidated Financial Statements). Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents
fairly in all material respects the information set forth therein.

|                              |  | ERNST & YOUNG LLP
|----------------------------- |  | -----------------
|London, England
April 4, 2003 |  |                  

F-1

---

CONSENT OF INDEPENDENT AUDITORS

We
consent to the incorporation by reference in the Registration Statement (Form S-8 No 333-98607) pertaining to the Spirent plc employee benefit plans listed on
the facing sheets thereof of our report dated April 4, 2003, with respect to the consolidated financial statements and schedule of Spirent plc included in its Annual Report
(Form 20-F) for the year ended December 31, 2002 filed with the Securities and Exchange Commission.

|                              |  | ERNST & YOUNG LLP
|----------------------------- |  | -----------------
|London, England
June 17, 2003 |  |                  

F-2

---



SPIRENT plc        CONSOLIDATED PROFIT AND LOSS ACCOUNT

|                                                                    |                     |       |   | Year ended December 31, 2002 |  
|------------------------------------------------------------------- | ------------------- | ----- | - | ---------------------------- | -
|
|
|
|Turnover: Group and share of joint venture                          |                     |       |   | 634.5                        |  
|Less: share of joint venture's turnover                             |                     |       |   | (75.6                        | )
|                                                                    |                     |       |   |                              |  
|Group Turnover                                                      |                     | 2,3   |   | 558.9                        |  
|Cost of sales                                                       |                     |       |   | (336.4                       | )
|                                                                    |                     |       |   |                              |  
|Manufacturing Margin                                                |                     |       |   | 222.5                        |  
|Operating expenses                                                  |                     | 4     |   | (228.1                       | )
|                                                                    |                     |       |   |                              |  
|Operating Loss                                                      |                     | 2,3,5 |   | (5.6                         | )
|                                                                    |                     |       |   |                              |  
|Operating Exceptional Items                                         |                     |       |   |                              |  
|                                                                    | Goodwill impairment |       | 7 |                              | 
|                                                                    | Other               |       | 6 |                              | 
|Goodwill Amortization                                               |                     |       |   | 56.1                         |  
|Operating Profit before Goodwill Amortization and Exceptional Items |                     |       |   | 50.5                         |  
|                                                                    |                     |       |   |                              |  
|Income from interest in joint venture                               |                     |       |   | 7.4                          |  
|Income from interests in associates                                 |                     |       |   | 1.0                          |  
|Amortization of goodwill on associates                              |                     |       |   | (0.2                         | )
|                                                                    |                     |       |   |                              |  
|Operating Loss of the Group, Joint Venture and Associates           |                     |       |   | 2.6                          |  
|Non-operating Exceptional Items                                     |                     |       |   |                              |  
|Loss on the disposal and closure of operations                      |                     | 35    |   |                             |  
|Provision against investment in own shares                          |                     |       |   |                             |  
|                                                                    |                     |       |   |                              |  
|Loss before Interest                                                |                     |       |   | 2.6                          |  
|                                                                    |                     |       |   |                              |  
|Interest receivable and similar income                              |                     |       |   | 4.0                          |  
|Interest payable                                                    |                     | 9     |   | (16.3                        | )
|                                                                    |                     |       |   |                              |  
|Net interest payable                                                |                     |       |   | (12.3                        | )
|                                                                    |                     |       |   |                              |  
|Loss before Taxation                                                |                     | 2     |   | (9.7                         | )
|Taxation                                                            |                     | 11    |   | (8.4                         | )
|                                                                    |                     |       |   |                              |  
|Loss after Taxation                                                 |                     |       |   | (18.1                        | )
|                                                                    |                     |       |   |                              |  
|Minority shareholders' interestequity                              |                     |       |   |                              |  
|Minority shareholders' interestjoint venture                       |                     |       |   |                              |  
|                                                                    |                     |       |   |                              |  
|Loss Attributable to Shareholders(1)                                |                     |       |   |                              |  
|                                                                    |                     |       |   |                              |  
|Dividends:                                                          |                     |       |   |                              |  
|Interim 1.35 pence                                                  |                     |       |   |                              |  
|Proposed final nil                                                  |                     |       |   |                              |  
|                                                                    |                     |       |   |                              |  
|Dividends                                                           |                     |       |   |                              |  
|                                                                    |                     |       |   |                              |  
|Loss for the Year                                                   |                     |       |   |                              |  
|                                                                    |                     |       |   |                              |  
|Basic Loss per Share                                                |                     | 12    |   |                              |  
|Headline Earnings per Share                                         |                     | 12    |   |                              |  
|Diluted Loss per Share                                              |                     | 12    |   |                              |  

---

The Notes to the Financial Statements form part of these Financial Statements.

F-3

---



|                                                                    |                     |       |   | Year ended December 31, 2001 |  
|------------------------------------------------------------------- | ------------------- | ----- | - | ---------------------------- | -
|
|
|
|Turnover: Group and share of joint venture                          |                     |       |   | 803.3                        |  
|Less: share of joint venture's turnover                             |                     |       |   | (78.3                        | )
|                                                                    |                     |       |   |                              |  
|Group Turnover                                                      |                     | 2,3   |   | 725.0                        |  
|Cost of sales                                                       |                     |       |   | (425.3                       | )
|                                                                    |                     |       |   |                              |  
|Manufacturing Margin                                                |                     |       |   | 299.7                        |  
|Operating expenses                                                  |                     | 4     |   | (280.3                       | )
|                                                                    |                     |       |   |                              |  
|Operating Loss                                                      |                     | 2,3,5 |   | 19.4                         |  
|                                                                    |                     |       |   |                              |  
|Operating Exceptional Items                                         |                     |       |   |                              |  
|                                                                    | Goodwill impairment |       | 7 |                              | 
|                                                                    | Other               |       | 6 |                              | 
|Goodwill Amortization                                               |                     |       |   | 85.4                         |  
|Operating Profit before Goodwill Amortization and Exceptional Items |                     |       |   | 104.8                        |  
|                                                                    |                     |       |   |                              |  
|Income from interest in joint venture                               |                     |       |   | 9.6                          |  
|Income from interests in associates                                 |                     |       |   | 1.3                          |  
|Amortization of goodwill on associates                              |                     |       |   | (0.1                         | )
|                                                                    |                     |       |   |                              |  
|Operating Loss of the Group, Joint Venture and Associates           |                     |       |   | 30.2                         |  
|Non-operating Exceptional Items                                     |                     |       |   |                              |  
|Profit on the disposal and closure of operations                    |                     | 35    |   |                             |  
|                                                                    |                     |       |   |                              |  
|Loss before Interest                                                |                     |       |   | 30.2                         |  
|                                                                    |                     |       |   |                              |  
|Interest receivable and similar income                              |                     |       |   |                              |  
|Interest payable                                                    |                     | 9     |   |                              |  
|                                                                    |                     |       |   |                              |  
|Net interest payable                                                |                     |       |   |                              |  
|                                                                    |                     |       |   |                              |  
|Loss before Taxation                                                |                     | 2     |   |                              |  
|Taxation                                                            |                     | 11    |   |                              |  
|                                                                    |                     |       |   |                              |  
|Loss after Taxation                                                 |                     |       |   |                              |  
|Minority shareholders' interestequity                              |                     |       |   |                              |  
|Minority shareholders' interestjoint venture                       |                     |       |   |                              |  
|                                                                    |                     |       |   |                              |  
|Loss Attributable to Shareholders(1)                                |                     |       |   |                              |  
|                                                                    |                     |       |   |                              |  
|Dividends:                                                          |                     |       |   |                              |  
|Interim 1.35 pence                                                  |                     |       |   |                              |  
|Proposed final 3.00 pence                                           |                     |       |   |                              |  
|                                                                    |                     |       |   |                              |  
|Dividends                                                           |                     |       |   |                              |  
|                                                                    |                     |       |   |                              |  
|Loss for the Year                                                   |                     |       |   |                              |  
|                                                                    |                     |       |   |                              |  
|Basic Loss per Share                                                |                     | 12    |   |                              |  
|Headline Earnings per Share                                         |                     | 12    |   |                              |  
|Diluted Loss per Share                                              |                     | 12    |   |                              |  

---

The Notes to the Financial Statements form part of these Financial Statements.

F-4

---



|                                                                    |  |       |  | Year ended December 31, 2000 |  
|------------------------------------------------------------------- |  | ----- |  | ---------------------------- | -
|
|
|
|Turnover: Group and share of joint venture                          |  |       |  | 682.0                        |  
|Less: share of joint venture's turnover                             |  |       |  | (76.0                        | )
|                                                                    |  |       |  |                              |  
|Group Turnover                                                      |  | 2,3   |  | 606.0                        |  
|Cost of sales                                                       |  |       |  | (317.5                       | )
|                                                                    |  |       |  |                              |  
|Manufacturing Margin                                                |  |       |  | 288.5                        |  
|Operating expenses                                                  |  | 4     |  | (186.2                       | )
|                                                                    |  |       |  |                              |  
|Operating Profit                                                    |  | 2,3,5 |  | 102.3                        |  
|                                                                    |  |       |  |                              |  
|Operating Exceptional Items                                         |  | 6     |  |                             |  
|Goodwill Amortization                                               |  |       |  | 24.3                         |  
|Operating Profit before Goodwill
Amortization and Exceptional Items |  |       |  | 126.6                        |  
|                                                                    |  |       |  |                              |  
|Income from interest in joint venture                               |  |       |  | 13.3                         |  
|Income from interests in associates                                 |  |       |  | 2.7                          |  
|                                                                    |  |       |  |                              |  
|Operating Profit of the Group, Joint Venture and Associates         |  |       |  | 118.3                        |  
|Non-operating Exceptional Items                                     |  |       |  |                              |  
|Loss on the disposal and closure of operations                      |  | 35    |  |                             |  
|Profit on disposal of tangible fixed assets                         |  |       |  |                             |  
|                                                                    |  |       |  |                              |  
|Profit before Interest                                              |  |       |  | 118.3                        |  
|                                                                    |  |       |  |                              |  
|Interest receivable and similar income                              |  |       |  |                              |  
|Interest payable                                                    |  | 9     |  |                              |  
|                                                                    |  |       |  |                              |  
|Net interest payable                                                |  |       |  |                              |  
|                                                                    |  |       |  |                              |  
|Profit before Taxation                                              |  | 2     |  |                              |  
|Taxation                                                            |  | 11    |  |                              |  
|                                                                    |  |       |  |                              |  
|Profit after Taxation                                               |  |       |  |                              |  
|Minority shareholders' interestequity                              |  |       |  |                              |  
|Minority shareholders' interestjoint venture                       |  |       |  |                              |  
|                                                                    |  |       |  |                              |  
|Profit Attributable to Shareholders(1)                              |  |       |  |                              |  
|                                                                    |  |       |  |                              |  
|Dividends:                                                          |  |       |  |                              |  
|Interim 1.35 pence                                                  |  |       |  |                              |  
|Proposed final 3.00 pence                                           |  |       |  |                              |  
|                                                                    |  |       |  |                              |  
|Dividends                                                           |  |       |  |                              |  
|                                                                    |  |       |  |                              |  
|Profit for the Year                                                 |  |       |  |                              |  
|                                                                    |  |       |  |                              |  
|Basic Earnings per Share                                            |  | 12    |  |                              |  
|Headline Earnings per Share                                         |  | 12    |  |                              |  
|Diluted Earnings per Share                                          |  | 12    |  |                              |  

---

The Notes to the Financial Statements form part of these Financial Statements.

F-5

---



SPIRENT plc        CONSOLIDATED STATEMENT OF TOTAL RECOGNIZED GAINS AND LOSSES

|                                                                  |  | Year ended December 31 |  
|----------------------------------------------------------------- |  | ---------------------- | -
|
|
|(Loss)/Profit Attributable to Shareholders                        |  | (1,080.4               | )
|Gain on lapsed options                                            |  | 5.2                    |  
|Exchange adjustment on subsidiaries, joint venture and associates |  | (23.0                  | )
|UK current taxation on exchange adjustment                        |  | 0.1                    |  
|                                                                  |  |                        |  
|Total Recognized Gains and Losses                                 |  | (1,098.1               | )
|                                                                  |  |                        |  

---

The
statement of comprehensive loss required under United States generally accepted accounting principles is set forth in Note 37 of Notes to the Financial Statements.

The
Notes to the Financial Statements form part of these Financial Statements.

F-6

---



SPIRENT plc        CONSOLIDATED BALANCE SHEET

|                                       |                             |                            |    | As at December 31 |     
|-------------------------------------- | --------------------------- | -------------------------- | -- | ----------------- | ----
|
|
|Fixed Assets                           |                             |                            |    |                   |     
|Intangible assets                      |                             | 13                         |    |                   |     
|Tangible assets                        |                             | 14                         |    |                   |     
|Investments                            |                             |                            |    |                   |     
|                                       | Investment in joint venture |                            | 16 |                   |     
|                                       |                             | Share of gross assets      |    |                   |     
|                                       |                             | Share of gross liabilities |    |                   |     
|                                       |                             |                            |    |                   |     
|                                       |                             |                            |    | 50.1              |     
|                                       | Investment in associates    |                            | 17 |                   | 13.3
|                                       | Other investments           |                            | 18 |                   | 2.1 
|                                       |                             |                            |    |                   |     
|                                       |                             |                            |    |                   |     
|                                       |                             |                            |    |                   |     
|                                       |                             |                            |    |                   |     
|Current Assets                         |                             |                            |    |                   |     
|Stocks                                 |                             | 19                         |    | 61.5              |     
|Debtors                                |                             | 20                         |    | 97.3              |     
|Investments                            |                             | 23                         |    | 0.1               |     
|Cash at bank and in hand               |                             | 22                         |    | 83.5              |     
|                                       |                             |                            |    |                   |     
|                                       |                             |                            |    | 242.4             |     
|                                       |                             |                            |    |                   |     
|Current Liabilities                    |                             |                            |    |                   |     
|Creditors due within one year          |                             | 24                         |    | 107.5             |     
|Loans and overdrafts                   |                             | 25                         |    | 1.8               |     
|                                       |                             |                            |    |                   |     
|                                       |                             |                            |    | 109.3             |     
|                                       |                             |                            |    |                   |     
|Net Current Assets                     |                             |                            |    |                   |     
|                                       |                             |                            |    |                   |     
|Assets less Current Liabilities        |                             |                            |    |                   |     
|Long-term Liabilities                  |                             |                            |    |                   |     
|Creditors due after more than one year |                             | 26                         |    |                   |     
|Provisions for Liabilities and Charges |                             | 27                         |    |                   |     
|                                       |                             |                            |    |                   |     
|Assets less Liabilities                |                             |                            |    |                   |     
|                                       |                             |                            |    |                   |     
|Capital and Reserves                   |                             |                            |    |                   |     
|Called up share capital                |                             |                            |    | 31.3              |     
|Share premium account                  |                             |                            |    | 696.1             |     
|Capital reserve                        |                             |                            |    | 17.6              |     
|Capital redemption reserve             |                             |                            |    | 0.7               |     
|Merger reserve                         |                             |                            |    |                  |     
|Profit and loss account                |                             |                            |    | (606.6            | )   
|                                       |                             |                            |    |                   |     
|Shareholders' FundsEquity(1)          |                             |                            |    |                   |     
|Minority InterestsEquity              |                             |                            |    |                   |     
|                                       |                             |                            |    |                   |     
|                                       |                             |                            |    |                   |     
|                                       |                             |                            |    |                   |     

---

The Notes to the Financial Statements form part of these Financial Statements.

F-7

---



SPIRENT plc        CONSOLIDATED CASH FLOW STATEMENT

|                                                |               |    |  | Year ended December 31 |    
|----------------------------------------------- | ------------- | -- |  | ---------------------- | ---
|
|
|Net Cash Inflow from Operating Activities       |               | 8  |  | 76.9                   |    
|Dividends received from:                        |               |    |  |                        |    
|                                                | Joint venture |    |  |                        | 0.2
|                                                | Associates    |    |  |                        | 0.1
|Returns on investments and servicing of finance |               | 21 |  | (10.8                  | )  
|Taxation                                        |               | 21 |  | (4.2                   | )  
|Capital expenditure and financial investment    |               | 21 |  | (25.8                  | )  
|Acquisitions and disposals                      |               | 21 |  | 6.4                    |    
|Equity dividends paid                           |               |    |  | (40.2                  | )  
|Management of liquid resources                  |               | 21 |  | 0.2                    |    
|Financing                                       |               | 21 |  | 53.8                   |    
|                                                |               |    |  |                        |    
|Net Cash Inflow/(Outflow)(1)                    |               |    |  | 56.6                   |    
|                                                |               |    |  |                        |    

Reconciliation of net cash flow to movement in net borrowings

|                                                                          |  |        |  | Year ended December 31 |  
|------------------------------------------------------------------------- |  | ------ |  | ---------------------- | -
|
|
|Net Cash Inflow/(Outflow)                                                 |  |        |  | 56.6                   |  
|Cash (inflow)/outflow arising from the change in debt and lease financing |  |        |  | (51.4                  | )
|Cash inflow arising from the change in liquid resources                   |  |        |  | (0.2                   | )
|                                                                          |  |        |  |                        |  
|Movement arising from Cash Flows                                          |  | 22     |  | 5.0                    |  
|Loans and finance leases acquired with subsidiary                         |  | 22, 34 |  | (0.2                   | )
|Loan to acquire subsidiary                                                |  | 34     |  |                       |  
|New finance leases                                                        |  | 22     |  | (0.2                   | )
|Exchange adjustment                                                       |  | 22     |  | 12.7                   |  
|                                                                          |  |        |  |                        |  
|Movement in Net Borrowings                                                |  |        |  | 17.3                   |  
|Net borrowings at January 1                                               |  | 22     |  | (179.1                 | )
|                                                                          |  |        |  |                        |  
|Net Borrowings at December 31                                             |  | 22     |  | (161.8                 | )
|                                                                          |  |        |  |                        |  

---

The
Notes to the Financial Statements form part of these Financial Statements.

F-8

---



SPIRENT plc        CONSOLIDATED STATEMENT OF MOVEMENT IN SHAREHOLDERS' FUNDS

Share Capital

|                                                         |  | Ordinary shares of 31/3 pence each
|-------------------------------------------------------- |  | ----------------------------------
|
|
|At January 1, 2000                                       |  | 675.0                             
|Share options exercised                                  |  |                                  
|Increase in authorized share capital May 11, 2000(1)     |  | 150.0                             
|Issued on acquisition of Net-HOPPER Systems, Inc         |  |                                  
|Issued on acquisition of Zarak Systems Corp              |  |                                  
|Increase in authorized share capital December 8, 2000(2) |  | 275.0                             
|Rights issue(3)                                          |  |                                  
|Issued on acquisition of Hekimian Laboratories, Inc      |  |                                  
|                                                         |  |                                   
|At December 31, 2000                                     |  | 1,100.0                           
|Share options exercised                                  |  |                                  
|Zarak deferred shares(4)                                 |  |                                  
|                                                         |  |                                   
|At December 31, 2001                                     |  | 1,100.0                           
|Increase in authorized share capital May 2, 2002(5)      |  | 150.0                             
|Share options exercised                                  |  |                                  
|Issued on acquisition of Caw Networks Inc(6)             |  |                                  
|                                                         |  |                                   
|At December 31, 2002                                     |  | 1,250.0                           
|                                                         |  |                                   

---



The Notes to the Financial Statements form part of these Financial Statements.

F-9

---



Share Capital and Reserves

|                                                                      |                              | Called up
Share
Capital |     | Share
Premium
Account(1) |   | Capital
Reserve(1) |   | Merger
Reserve(1) |       | Capital
Redemption
Reserve(1) |   | Profit and
Loss
Account |   | Total    |      
|--------------------------------------------------------------------- | ---------------------------- | ----------------------- | --- | ------------------------ | - | ------------------ | - | ----------------- | ----- | ----------------------------- | - | ----------------------- | - | -------- | -----
|
|At January 1, 2000                                                    |                              | 20.8                    |     | 185.8                    |   | 22.1               |   |                  |       | 0.7                           |   | 20.9                    |   | 250.3    |      
|Exchange adjustment on subsidiaries, joint venture and associates     |                              |                        |     |                         |   |                   |   |                  |       |                              |   | 8.8                     |   | 8.8      |      
|Taxation on exchange effect                                           |                              |                        |     |                         |   |                   |   |                  |       |                              |   | (1.7                    | ) | (1.7     | )    
|Rights issue(5)                                                       |                              | 4.7                     |     | 522.9                    |   |                   |   |                  |       |                              |   |                        |   | 527.6    |      
|Share issue                                                           |                              | 0.2                     |     | 9.8                      |   | (5.5               | ) |                  |       |                              |   |                        |   | 4.5      |      
|Share issue                                                          |                              |                         |     |                          |   |                    |   |                   |       |                               |   |                         |   |          |      
|                                                                      | acquisition of Zarak(6)      |                         | 1.4 |                          |  |                    |  |                   | 259.9 |                               |  |                         |  |          | 261.3
|                                                                      | acquisition of Net-HOPPER(6) |                         | 0.2 |                          |  |                    |  |                   | 53.7  |                               |  |                         |  |          | 53.9 
|                                                                      | acquisition of Hekimian(6)   |                         | 3.6 |                          |  |                    |  |                   | 671.7 |                               |  |                         |  |          | 675.3
|Issue expenses                                                        |                              |                        |     | (4.9                     | ) |                   |   |                  |       |                              |   |                        |   | (4.9     | )    
|Profit retained                                                       |                              |                        |     |                         |   |                   |   |                  |       |                              |   | 14.6                    |   | 14.6     |      
|Goodwill on disposal of subsidiaries acquired before 1998             |                              |                        |     |                         |   |                   |   |                  |       |                              |   | 19.9                    |   | 19.9     |      
|Obligation to issue share capitalacquisition of Zarak and Net-HOPPER |                              |                        |     |                         |   | 25.1               |   |                  |       |                              |   |                        |   | 25.1     |      
|                                                                      |                              |                         |     |                          |   |                    |   |                   |       |                               |   |                         |   |          |      
|At December 31, 2000(2)(3)(4)                                         |                              | 30.9                    |     | 713.6                    |   | 41.7               |   | 985.3             |       | 0.7                           |   | 62.5                    |   | 1,834.7  |      
|Exchange adjustment on subsidiaries, joint venture and associates     |                              |                        |     |                         |   |                   |   |                  |       |                              |   | (0.2                    | ) | (0.2     | )    
|Taxation on exchange effect                                           |                              |                        |     |                         |   |                   |   |                  |       |                              |   | (2.6                    | ) | (2.6     | )    
|Share issue                                                           |                              | 0.2                     |     | 14.4                     |   | (10.1              | ) |                  |       |                              |   |                        |   | 4.5      |      
|Share issue acquisition retention bonuses                             |                              |                        |     |                         |   | (0.5               | ) | 2.0               |       |                              |   |                        |   | 1.5      |      
|Loss for the year                                                     |                              |                        |     |                         |   |                   |   |                  |       |                              |   | (803.5                  | ) | (803.5   | )    
|Goodwill on disposal of subsidiaries acquired before 1998             |                              |                        |     |                         |   |                   |   |                  |       |                              |   | 65.1                    |   | 65.1     |      
|Lapsed acquisition related options                                    |                              |                        |     |                         |   | (3.3               | ) |                  |       |                              |   | 3.3                     |   |         |      
|Contingent shares Net-HOPPER                                          |                              |                        |     | 0.7                      |   |                   |   | (5.8              | )     |                              |   |                        |   | (5.1     | )    
|Transfer from merger reserve                                          |                              |                        |     |                         |   |                   |   | (717.1            | )     |                              |   | 717.1                   |   |         |      
|                                                                      |                              |                         |     |                          |   |                    |   |                   |       |                               |   |                         |   |          |      
|At December 31, 2001(2)(3)(4)                                         |                              | 31.1                    |     | 728.7                    |   | 27.8               |   | 264.4             |       | 0.7                           |   | 41.7                    |   | 1,094.4  |      
|Exchange adjustment on subsidiaries, joint venture and associates     |                              |                        |     |                         |   |                   |   |                  |       |                              |   | (23.0                   | ) | (23.0    | )    
|Taxation on exchange effect                                           |                              |                        |     |                         |   |                   |   |                  |       |                              |   | 0.1                     |   | 0.1      |      
|Share issue                                                           |                              | 0.1                     |     | 5.7                      |   | (4.3               | ) |                  |       |                              |   |                        |   | 1.5      |      
|Share issuerestricted stock(6)                                       |                              | 0.1                     |     | 1.8                      |   |                   |   |                  |       |                              |   |                        |   | 1.9      |      
|Obligation to issue share capitalstock compensation                  |                              |                        |     |                         |   | 0.2                |   |                  |       |                              |   |                        |   | 0.2      |      
|Obligation to issue share capitalacquisition expense                 |                              |                        |     |                         |   | 0.1                |   |                  |       |                              |   |                        |   | 0.1      |      
|Shares transferred from trust                                         |                              |                        |     |                         |   | (1.0               | ) |                  |       |                              |   |                        |   | (1.0     | )    
|Loss for the year                                                     |                              |                        |     |                         |   |                   |   |                  |       |                              |   | (1,092.9                | ) | (1,092.9 | )    
|Goodwill on disposal of subsidiaries acquired before 1998             |                              |                        |     |                         |   |                   |   |                  |       |                              |   | 157.8                   |   | 157.8    |      
|Lapsed acquisition related options                                    |                              |                        |     |                         |   | (5.2               | ) |                  |       |                              |   | 5.2                     |   |         |      
|Reclassified to merger reserve                                        |                              |                        |     | (40.1                    | ) |                   |   | 40.1              |       |                              |   |                        |   |         |      
|Transfer on disposal and impairment                                   |                              |                        |     |                         |   |                   |   | (304.5            | )     |                              |   | 304.5                   |   |         |      
|                                                                      |                              |                         |     |                          |   |                    |   |                   |       |                               |   |                         |   |          |      
|At December 31, 2002(2)(3)(4)                                         |                              | 31.3                    |     | 696.1                    |   | 17.6               |   |                  |       | 0.7                           |   | (606.6                  | ) | 139.1    |      
|                                                                      |                              |                         |     |                          |   |                    |   |                   |       |                               |   |                         |   |          |      

---

F-10

---

|Acquisition |  | Number of Ordinary
shares issued |  | Date of completion |  | Market price per
share at date of
completion
(Pence)
|----------- |  | -------------------------------- |  | ------------------ |  | ----------------------------------------------------
|Zarak       |  | 41,084,292                       |  | November 13, 2000  |  | 605                                                 
|Net-HOPPER  |  | 8,430,925                        |  | November 9, 2000   |  | 625                                                 
|Hekimian    |  | 108,398,257                      |  | December 18, 2000  |  | 650                                                 
|Caw         |  | 2,712,811                        |  | August 15, 2002    |  | 70                                                  

The Notes to the Financial Statements form part of these Financial Statements.

F-11

---



SPIRENT plc

NOTES TO THE FINANCIAL STATEMENTS

1.     Accounting Policies

Basis of Accounting

The financial statements have been prepared under the historical cost convention and in accordance with applicable United Kingdom accounting standards.

Basis of Consolidation

The consolidated profit and loss account and balance sheet incorporate the audited accounts of the Company and all its subsidiaries made up to the balance sheet date.

Results
of subsidiaries acquired in the year are consolidated from the date of acquisition. The consolidated financial statements include the Group's share of profits of its joint venture and
associates.

Associates
are entities in which the Group has a continuing participating interest, other than subsidiaries, and exercises significant influence over their operating and financial policies.
Results are based on management accounts to December 31.

Entities
in which the Group holds an interest on a long-term basis and which are jointly controlled by the Group and other parties are treated as joint ventures. Joint ventures are accounted for
using the gross equity method. Results are based on management accounts to December 31.

Foreign Currencies

Transactions in foreign currencies are recorded at the rate ruling at the date of transaction. The results of overseas subsidiaries, joint venture and associates are
translated into sterling using average rates.

Monetary
assets and liabilities denominated in foreign currencies are translated at the rates ruling at the balance sheet date. Profits and losses arising from the retranslation of opening net
assets of overseas subsidiaries, treating long-term intra-group loans as part of the equity investment, and exchange adjustments arising from the translation of the results of overseas
subsidiaries, joint venture and associates, are dealt with through reserves.

All
other exchange profits and losses are taken to the profit and loss account, with the exception of differences on foreign currency borrowings used to finance or provide a hedge against Group
equity investments in overseas subsidiaries, which are taken directly to reserves together with the exchange differences on the carrying amount of the related investments.

Key
exchange rates used are as follows:

|          |  | Average Rates
Year ended
December 31 |  | Year-end
Rates
December 31
|--------- |  | ------------------------------------ |  | --------------------------
|
|US dollar |  | 1.51                                 |  | 1.44                      
|Euro      |  | 1.59                                 |  | 1.61                      

Financial Instruments

The Group uses derivative financial instruments to hedge its exposures to fluctuations in interest and foreign exchange rates. The Group's policy is not to undertake any
trading activity in financial

F-12

---

instruments. Financial instruments will be accounted for as hedges when designated as hedges at the inception of the contract.

Forward
exchange contracts are used to hedge foreign exchange exposures arising on forecast receipts and payments in foreign currencies. The rates under these contracts are used to record the
hedged item, and as such gains and losses on foreign currency contracts are off-set against the foreign exchange gains and losses on the related financial assets and liabilities.
Where the contract is a hedge against future transactions, gains and losses are deferred until the transaction occurs.

Interest
rate swaps are occasionally used to hedge the Group's exposure to movements in interest rates. Receipts and payments on interest rate instruments are recognized on an accruals basis,
over the life of the underlying financial instrument. Interest rate swaps are not revalued to fair value or shown in the Group balance sheet at the year end but are disclosed in the fair value
table in note 30.

Gains
or losses arising on hedging instruments, which are canceled due to termination of the underlying exposure, are taken to the profit and loss account immediately.

Finance
costs associated with debt issuances are charged to the profit and loss account over the life of the instruments.

The
aggregate fair values at the balance sheet date of the hedging instruments described above are disclosed in note 30.

Liquid
resources include short-term deposits, government securities and similar securities, which are readily convertible into known amounts of cash.

Short-term
debtors and creditors that meet the definition of a financial asset or liability, respectively, have been excluded from all analyses prepared under Financial Reporting Standard (FRS)
13 "Derivatives and Other Financial Instruments: Disclosures", including numerical disclosures except for the analysis of net currency exposure, as permitted by the Standard.

Turnover

Represents the amounts invoiced to customers for goods and services during the year, excluding tax and intra-group transactions.

Revenue Recognition

Revenue from product sales of hardware and software is recognized at time of delivery and acceptance.

Terms
of acceptance are dependent upon the specific contractual arrangement agreed with the customer. Where the sale is to a new customer and installation is to be performed, revenue recognition
is deferred until acceptance has occurred. Revenue recognition is also deferred until acceptance where a new product is supplied to an existing customer.

Revenue
from multiple element contracts is allocated based on prices charged for each individual element when sold separately.

Revenue
from services is recognized ratably over the period of performance.

F-13

---

The
Group does not enter into a significant number of long-term contracts. Revenue and estimated profits on long-term contracts are recognized under the
percentage-of-completion method of accounting. When estimates of total contract revenues and costs indicate a loss, a provision for the entire amount of the contract loss
is recognized in the period in which the loss becomes evident.

The
Group does not enter into bill and hold transactions.

In
addition, revenue is only recognized when collectibility is probable.

Product Development

Expenditure is charged to profit and loss account in the year in which it is incurred.

Pension Contributions

In the United Kingdom the Group operates two pension schemes for the benefit of employees. These schemes require contributions to be made to separately administered funds,
based on triennial actuarial valuations.

Contributions
to the pension funds are charged to the profit and loss account so as to spread the cost of pensions over the employees' working lives within the Group. Differences between the
amounts funded and the amounts charged to profit and loss account are treated as either creditors or prepayments in the balance sheet.

Variations
in the pension costs, which are identified as a result of actuarial valuations, are amortized over the average expected working lives of employees.

Contributions
payable to the other overseas defined contribution plans are charged to the profit and loss account in the year for which they are due.

Deferred Taxation

Deferred taxation is provided on an undiscounted basis on all timing differences that have originated but not reversed at the balance sheet date except as referred to
below. Amounts provided are calculated with reference to tax rates that are expected to apply in the periods in which the timing differences are expected to reverse, based on tax rates and laws
that have been enacted or substantively enacted by the balance sheet date.

Provision
is made for tax that would arise on the remittance of the retained earnings of overseas subsidiaries, associates and joint ventures, only to the extent that, at the balance sheet date,
the dividends have been accrued as receivable.

Deferred
tax assets are recognized only to the extent that it is considered more likely than not that there will be suitable taxable profits from which the future reversal of the underlying
timing differences can be deducted.

Deferred
tax is not provided on gains on fair value adjustments to fixed assets arising at acquisition, or gains on disposal of fixed assets that have been rolled over into replacement assets,
unless there is a binding agreement to dispose of the assets concerned. Provision will not be made

F-14

---

where it is considered more likely than not that the taxable gain will be rolled over into replacement assets and charged to tax only when the replacement assets are sold.

Goodwill

Goodwill arising on the acquisition of subsidiaries and representing the excess of cost over the fair value of the attributable assets and liabilities acquired, is
capitalized as an intangible asset and amortized over its estimated useful economic life up to a maximum of 20 years. Goodwill is reviewed for impairment at the end of the first full
financial year following acquisition and in other periods if events or changes in circumstances indicate the carrying value may not be recoverable. Goodwill arising prior to 1998 and previously
written off against reserves has not been reinstated but, in accordance with FRS 10 "Goodwill and Intangible Assets" would be charged to the profit and loss account on the subsequent disposal of
the business to which it related. Where impairment has been identified in accordance with FRS 11, goodwill arising prior to 1998 has also been reviewed for impairment.

Other Intangible Assets

Other separately identifiable intangible assets such as patent fees, license fees and trade marks are capitalized in the balance sheet only when the value can be measured
reliably or the intangible asset is purchased in the acquisition of a business. Such intangible assets are amortized over their useful economic lives up to a maximum of 20 years. The
carrying value of intangible assets is reviewed for impairment at the end of the first full year following acquisition and in other periods if events or changes in circumstances indicate the
carrying value may not be recoverable.

Tangible Assets

Depreciation is not provided on freehold land. Depreciation is provided to write off all other assets over their estimated useful lives at rates which take into account
commercial conditions at their location. Usual asset lives are as follows:

|Freehold buildings                |                           | 50 years                        
|--------------------------------- | ------------------------- | --------------------------------
|Leasehold properties              |                           | 50 years or lease period if less
|Plant and machinery               |                           | 3 to 8 years                    
|Fixtures, fittings and equipment: |                           |                                 
|                                  | Building installations    |                                 
|                                  | Fittings and equipment    |                                 
|                                  | Motor vehicles            |                                 
|                                  | Business systems software |                                 

The
carrying values of tangible fixed assets are reviewed for impairment in periods if events or changes in circumstances indicate the carrying value may not be recoverable.

Capital
grants are treated as deferred income and are released to the profit and loss account over the estimated useful lives of the assets to which they relate.

F-15

---

Assets
obtained under finance leases and hire purchase contracts are capitalized in the balance sheet and are depreciated over their estimated useful lives. The interest elements of the rental
obligations are charged to the profit and loss account over the periods of the leases and hire purchase contracts in proportion to the balance of capital repayments outstanding.

Operating
lease rentals are charged to the profit and loss account over the period of the lease.

Stocks

Stocks are valued at the lower of cost and estimated net realizable value. Cost includes all costs in bringing each product to its present location and condition, being
the full manufacturing cost on a first-in-first-out basis, including all attributable overheads based on a normal level of activity. Net realizable value
represents selling price less further costs to be incurred to completion and on sale.

Shipping and Handling Costs

Shipping and handling costs are included within selling and distribution costs.

Trade Debtors

Trade debtors are stated at cost less a provision for doubtful accounts. Trade debtors are provided for based on exposures on specific customer accounts as soon as that
exposure is identified by management through the process of regular reviews.

Advertising Costs

Advertising costs are expensed as incurred.

Research and Development Costs

Research and development expenditure is charged to the profit and loss account in the year in which it is incurred.

Development
costs related to software products are expensed as incurred until the technological feasibility of the product has been established. Technological feasibility in Spirent's
circumstances occurs when a working model is completed. After technological feasibility is established, additional costs are capitalized. Spirent believes its process for developing software is
essentially completed with the establishment of technological feasibility, and, accordingly, no software development costs have been capitalized to date.

Repairs and Maintenance Costs

Repairs and maintenance costs are expensed as incurred.

Use of Estimates

The preparation of financial statements requires management to make estimates that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the balance sheet date, and the reported amount of revenues and expenses for the reporting period. Actual results could differ from those estimates.

F-16

---

2.     Segmental Analysis

The Company is an international network technology company providing state-of-the-art systems and solutions for a broad range of
customers worldwide.

Our
operations are organized into three operating groups: Communications, Network Products and Systems.

The
Company evaluates performance for each reportable segment based on turnover and operating profit for ongoing operations before goodwill amortization and exceptional items. Under UK GAAP, the
disposal of Sensing Solutions in the year ended December 31, 2001 qualifies to be treated as a discontinued operation.

The
reportable segments are:

Communications Group

Our Communications group is a worldwide provider of integrated performance analysis and service assurance systems for next-generation network technologies. Spirent's
solutions accelerate the development and deployment of network equipment and services by emulating real-world conditions and assuring end-to-end performance of large-scale networks.

a) Performance Analysis division

The Performance Analysis division was built through acquisition and continued development of the Adtech, CAW, the Digital Subscriber line testing division of
Consultronics, Edgcumbe, Global Simulation Systems, Netcom Systems, Telecom Analysis Systems and Zarak product lines. This division develops testing solutions for a broad range of communications
technologies critical to the deployment of next-generation networks. Our systems test wireless and wireline networks and equipment, including core terabit routers, broadband access devices,
next-generation wireless handsets, Internet infrastructure and storage area networks. Our systems enable customers to emulate large-scale networks, introduce impairments and stress test equipment
to ensure maximum performance and conformance to industry standards.

b) Service Assurance division

The Service Assurance division was formed at the end of 2000 with the acquisitions of Hekimian and Net-HOPPER. The Service Assurance division provides network
monitoring and management systems for service providers to assure the quality of their high bandwidth services. Our systems enable efficient delivery and maintenance of leased line voice and
data, digital subscriber line, wireless, optical and converged packet networks. The division provides operations support systems, remote test probes, network test access systems and the expertise
to implement solutions over a national or global scale.

Network Products group

The Network Products group provides innovative solutions for fastening, identifying, insulating, organizing, routing and connectivity that add value to electrical and
communication networks in a wide range of applications.

F-17

---

Systems group

Our Systems group now comprises two businesses which develop, manufacture and sell integrated systems for the power controls market and aerospace market.

Sensing Solutions group

The Sensing Solutions group provided products and subsystems for sensing temperature, humidity, pressure and gas this group was sold in November 2001.

Turnover

|                        |                      | Year ended December 31
|----------------------- | -------------------- | ----------------------
|
|
|Continuing operations   |                      |                       
|                        | Performance Analysis |                       
|                        | Service Assurance    |                       
|                        |                      |                       
|                        | Communications       |                       
|                        | Network Products     |                       
|                        | Systems              |                       
|                        |                      |                       
|                        |                      | 533.9                 
|                        | Divested operations  |                       
|                        | Systems              |                       
|Discontinued operations |                      |                       
|                        | Sensing Solutions    |                       
|                        |                      |                       
|                        |                      | 558.9                 
|                        |                      |                       

Major customers

There were no customers which individually exceeded 10% of total turnover in any of the three years in the period ended December 31, 2002.

F-18

---



Inter-segmental Transactions

|                        |                      | Year ended December 31
|----------------------- | -------------------- | ----------------------
|
|
|
|Turnover                |                      |                       
|Continuing operations   |                      |                       
|                        | Performance Analysis |                       
|                        | Service Assurance    |                       
|                        |                      |                       
|                        | Communications       |                       
|                        | Network Products     |                       
|                        | Systems              |                       
|                        |                      |                       
|                        |                      | 533.9                 
|                        | Divested operations  |                       
|                        | Systems              |                       
|Discontinued operations |                      |                       
|                        | Sensing Solutions    |                       
|                        |                      |                       
|                        |                      | 558.9                 
|                        |                      |                       

Corporate Charge Allocation

Corporate charges, which are not significant, are allocated among segments in line with operating results.

F-19

---

(Loss)/Profit before Taxation

|                                                                     |                      | Year ended December 31 |       
|-------------------------------------------------------------------- | -------------------- | ---------------------- | ------
|
|
|Operating profit before goodwill amortization and exceptional items: |                      |                        |       
|Continuing operations                                                |                      |                        |       
|                                                                     | Performance Analysis |                        | 9.4   
|                                                                     | Service Assurance    |                        | 21.4  
|                                                                     |                      |                        |       
|                                                                     | Communications       |                        | 30.8  
|                                                                     | Network Products     |                        | 15.0  
|                                                                     | Systems              |                        | 3.4   
|                                                                     |                      |                        |       
|                                                                     |                      | 49.2                   |       
|                                                                     | Divested operations  |                        |       
|                                                                     | Systems              |                        | 1.3   
|Discontinued operations                                              |                      |                        |       
|                                                                     | Sensing Solutions    |                        |      
|                                                                     |                      |                        |       
|                                                                     |                      | 50.5                   |       
|                                                                     |                      |                        |       
|Operating exceptional item, goodwill impairment:                     |                      |                        |       
|Continuing operations                                                |                      |                        |       
|                                                                     | Performance Analysis |                        | (330.7
|                                                                     | Service Assurance    |                        | (530.4
|                                                                     |                      |                        |       
|                                                                     | Communications       |                        | (861.1
|                                                                     | Network Products     |                        | (21.7 
|                                                                     | Systems              |                        | (40.5 
|                                                                     |                      |                        |       
|                                                                     |                      | (923.3                 | )     
|                                                                     |                      |                        |       
|Operating exceptional items, other:                                  |                      |                        |       
|Continuing operations                                                |                      |                        |       
|                                                                     | Performance Analysis |                        | (28.3 
|                                                                     | Service Assurance    |                        | (8.6  
|                                                                     |                      |                        |       
|                                                                     | Communications       |                        | (36.9 
|                                                                     | Network Products     |                        | (3.3  
|                                                                     | Systems              |                        | (1.4  
|                                                                     |                      |                        |       
|                                                                     |                      | (41.6                  | )     
|                                                                     |                      |                        |       

F-20

---

|                                                        |                      | Year ended December 31 |      
|------------------------------------------------------- | -------------------- | ---------------------- | -----
|
|
|Goodwill amortization:                                  |                      |                        |      
|Continuing operations                                   |                      |                        |      
|                                                        | Performance Analysis |                        | (20.8
|                                                        | Service Assurance    |                        | (33.5
|                                                        |                      |                        |      
|                                                        | Communications       |                        | (54.3
|                                                        | Network Products     |                        | (1.5 
|                                                        | Systems              |                        | (0.2 
|                                                        |                      |                        |      
|                                                        |                      | (56.0                  | )    
|                                                        | Divested operations  |                        |      
|                                                        | Systems              |                        | (0.1 
|Discontinued operations                                 |                      |                        |      
|                                                        | Sensing Solutions    |                        |     
|                                                        |                      |                        |      
|                                                        |                      | (56.1                  | )    
|                                                        |                      |                        |      
|Operating (Loss)/Profit                                 |                      | (970.5                 | )    
|Income from interest in joint venture                   |                      | 7.4                    |      
|Income from interests in associates                     |                      | 1.0                    |      
|Amortization of goodwill on associates                  |                      | (0.2                   | )    
|Net interest payable                                    |                      | (12.3                  | )    
|(Loss)/profit on the disposal and closure of operations |                      | (48.4                  | )    
|Profit on disposal of tangible fixed assets             |                      |                       |      
|Provision against investment in own shares              |                      | (30.1                  | )    
|                                                        |                      |                        |      
|(Loss)/Profit before Taxation                           |                      | (1,053.1               | )    
|                                                        |                      |                        |      

F-21

---

Depreciation

|                        |                      | Year ended December 31
|----------------------- | -------------------- | ----------------------
|
|
|Continuing operations   |                      |                       
|                        | Performance Analysis |                       
|                        | Service Assurance    |                       
|                        |                      |                       
|                        | Communications       |                       
|                        | Network Products     |                       
|                        | Systems              |                       
|                        |                      |                       
|                        |                      | 32.8                  
|                        | Divested operations  |                       
|                        | Systems              |                       
|Discontinued operations |                      |                       
|                        | Sensing Solutions    |                       
|                        |                      |                       
|                        |                      | 33.6                  
|                        |                      |                       

Product Development

|                        |                      | Year ended December 31
|----------------------- | -------------------- | ----------------------
|
|
|Continuing operations   |                      |                       
|                        | Performance Analysis |                       
|                        | Service Assurance    |                       
|                        |                      |                       
|                        | Communications       |                       
|                        | Network Products     |                       
|                        | Systems              |                       
|                        |                      |                       
|                        |                      | 75.4                  
|                        | Divested operations  |                       
|                        | Systems              |                       
|Discontinued operations |                      |                       
|                        | Sensing Solutions    |                       
|                        |                      |                       
|                        |                      | 77.7                  
|                        |                      |                       

F-22

---

Operating Assets

|                                       |                      | As at December 31 |      
|-------------------------------------- | -------------------- | ----------------- | -----
|
|
|Continuing operations                  |                      |                   |      
|                                       | Performance Analysis |                   | 115.0
|                                       | Service Assurance    |                   | 68.1 
|                                       |                      |                   |      
|                                       | Communications       |                   | 183.1
|                                       | Network Products     |                   | 96.8 
|                                       | Systems              |                   | 5.5  
|                                       |                      |                   |      
|                                       |                      | 285.4             |      
|                                       | Divested operations  |                   |      
|                                       | Systems              |                   |     
|Discontinued operations                |                      |                   |      
|                                       | Sensing Solutions    |                   |     
|                                       |                      |                   |      
|Segmental operating assets             |                      | 285.4             |      
|Investment in joint venture            |                      | 50.1              |      
|Investment in associates               |                      | 13.3              |      
|Other investments                      |                      | 2.1               |      
|Corporation tax payable                |                      | (19.5             | )    
|Proposed dividend                      |                      |                  |      
|                                       |                      |                   |      
|Operating Assets                       |                      | 331.4             |      
|Net borrowings                         |                      | (161.8            | )    
|Provisions for liabilities and charges |                      | (28.4             | )    
|Deferred tax asset                     |                      |                  |      
|                                       |                      |                   |      
|Assets less Liabilities                |                      | 141.2             |      
|                                       |                      |                   |      

F-23

---

Long-lived Assets

|                        |                      | As at December 31
|----------------------- | -------------------- | -----------------
|
|
|Continuing operations   |                      |                  
|                        | Performance Analysis |                  
|                        | Service Assurance    |                  
|                        |                      |                  
|                        | Communications       |                  
|                        | Network Products     |                  
|                        | Systems              |                  
|                        |                      |                  
|                        |                      | 110.0            
|                        | Divested operations  |                  
|                        | Systems              |                  
|Discontinued operations |                      |                  
|                        | Sensing Solutions    |                  
|                        |                      |                  
|                        |                      | 110.0            
|                        |                      |                  

Total Assets

|                            |                      | As at December 31
|--------------------------- | -------------------- | -----------------
|
|
|Continuing operations       |                      |                  
|                            | Performance Analysis |                  
|                            | Service Assurance    |                  
|                            |                      |                  
|                            | Communications       |                  
|                            | Network Products     |                  
|                            | Systems              |                  
|                            |                      |                  
|                            |                      | 466.0            
|                            | Divested operations  |                  
|                            | Systems              |                  
|Discontinued operations     |                      |                  
|                            | Sensing Solutions    |                  
|                            |                      |                  
|Segmental total assets      |                      | 466.0            
|Investment in joint venture |                      | 50.1             
|Investment in associates    |                      | 13.3             
|Other investments           |                      | 2.1              
|                            |                      |                  
|                            |                      | 531.5            
|                            |                      |                  

F-24

---

Capital Expenditure

|                        |                      | Year ended December 31
|----------------------- | -------------------- | ----------------------
|
|
|Continuing operations   |                      |                       
|                        | Performance Analysis |                       
|                        | Service Assurance    |                       
|                        |                      |                       
|                        | Communications       |                       
|                        | Network Products     |                       
|                        | Systems              |                       
|                        |                      |                       
|                        |                      | 27.6                  
|                        | Divested operations  |                       
|                        | Systems              |                       
|Discontinued operations |                      |                       
|                        | Sensing Solutions    |                       
|                        |                      |                       
|                        |                      | 27.8                  
|                        |                      |                       

F-25

---

3.     Geographical Analysis

Turnover by Market

|                         |                                        | Year ended December 31
|------------------------ | -------------------------------------- | ----------------------
|
|
|Continuing operations:   |                                        |                       
|                         | Europe                                 |                       
|                         | North America*                         |                       
|                         | Asia Pacific, Rest of Americas, Africa |                       
|                         |                                        |                       
|                         |                                        | 533.9                 
|                         |                                        |                       
|                         | Divested operations                    |                       
|                         | Europe                                 |                       
|                         | North America*                         |                       
|                         | Asia Pacific, Rest of Americas, Africa |                       
|                         |                                        |                       
|                         |                                        | 25.0                  
|                         |                                        |                       
|Discontinued operations: |                                        |                       
|                         | Europe                                 |                       
|                         | North America*                         |                       
|                         | Asia Pacific, Rest of Americas, Africa |                       
|                         |                                        |                       
|                         |                                        |                      
|                         |                                        |                       
|                         |                                        | 558.9                 
|                         |                                        |                       

---

* North
America, as referred to above, consists almost entirely of the United States.

United
Kingdom turnover was £48.3 million (2001 £71.4 million; 2000 £75.8 million). United Kingdom turnover in respect of
divested operations, included in the above, was £2.9 million (2001 £15.4 million; 2000 £23.5 million), and in respect of discontinued
operations nil (2001 £8.2 million; 2000 £5.4 million).

F-26

---



Turnover by Source

|                         |                                        | Year ended December 31
|------------------------ | -------------------------------------- | ----------------------
|
|
|Continuing operations:   |                                        |                       
|                         | Europe                                 |                       
|                         | North America*                         |                       
|                         | Asia Pacific, Rest of Americas, Africa |                       
|                         |                                        |                       
|                         |                                        | 533.9                 
|                         |                                        |                       
|                         | Divested operations                    |                       
|                         | Europe                                 |                       
|                         | North America*                         |                       
|                         |                                        |                       
|                         |                                        | 25.0                  
|                         |                                        |                       
|Discontinued operations: |                                        |                       
|                         | Europe                                 |                       
|                         | North America*                         |                       
|                         | Asia Pacific, Rest of Americas, Africa |                       
|                         |                                        |                       
|                         |                                        |                      
|                         |                                        |                       
|                         |                                        | 558.9                 
|                         |                                        |                       

---

* North
America as referred to above, consists almost entirely of the United States.

United
Kingdom turnover was £71.6 million (2001 £107.5 million; 2000 £115.8 million). United Kingdom turnover in respect of
divested operations, included in the above, was £5.6 million (2001 £30.5 million; 2000 £39.2 million) and in respect of discontinued operations
nil (2001 £13.3 million; 2000 £14.3 million). Exports from the United Kingdom were £32.4 million (2001 £46.3 million; 2000
£49.0 million), representing 5.8% of total sales (2001 5.8%: 2000 7.0%).

F-27

---

Operating (Loss)/Profit

|                                                                     |                                        | Year ended December 31 |       
|-------------------------------------------------------------------- | -------------------------------------- | ---------------------- | ------
|
|
|Operating profit before goodwill amortization and exceptional items: |                                        |                        |       
|Continuing operations:                                               |                                        |                        |       
|                                                                     | Europe                                 |                        | 18.8  
|                                                                     | North America*                         |                        | 29.5  
|                                                                     | Asia Pacific, Rest of Americas, Africa |                        | 0.9   
|                                                                     |                                        |                        |       
|                                                                     |                                        | 49.2                   |       
|                                                                     |                                        |                        |       
|                                                                     | Divested operations                    |                        |       
|                                                                     | Europe                                 |                        | 0.6   
|                                                                     | North America*                         |                        | 0.7   
|                                                                     |                                        |                        |       
|                                                                     |                                        | 1.3                    |       
|                                                                     |                                        |                        |       
|Discontinued operations:                                             |                                        |                        |       
|                                                                     | Europe                                 |                        |      
|                                                                     | North America*                         |                        |      
|                                                                     | Asia Pacific, Rest of Americas, Africa |                        |      
|                                                                     |                                        |                        |       
|                                                                     |                                        |                       |       
|                                                                     |                                        |                        |       
|                                                                     |                                        | 50.5                   |       
|                                                                     |                                        |                        |       
|Operating exceptional item, goodwill impairment:                     |                                        |                        |       
|Continuing operations:                                               |                                        |                        |       
|                                                                     | Europe                                 |                        | (19.5 
|                                                                     | North America*                         |                        | (901.8
|                                                                     | Asia Pacific, Rest of Americas, Africa |                        | (2.0  
|                                                                     |                                        |                        |       
|                                                                     |                                        | (923.3                 | )     
|                                                                     |                                        |                        |       
|Operating exceptional items, other:                                  |                                        |                        |       
|Continuing operations:                                               |                                        |                        |       
|                                                                     | Europe                                 |                        | (3.6  
|                                                                     | North America*                         |                        | (37.3 
|                                                                     | Asia Pacific, Rest of Americas, Africa |                        | (0.7  
|                                                                     |                                        |                        |       
|                                                                     |                                        | (41.6                  | )     
|                                                                     |                                        |                        |       

F-28

---

|Goodwill amortization:   |                                        |        |       |        |       |       |      
|------------------------ | -------------------------------------- | ------ | ----- | ------ | ----- | ----- | -----
|Continuing operations:   |                                        |        |       |        |       |       |      
|                         | Europe                                 |        | (1.6  | )      | (1.4  | )     | (1.2 
|                         | North America*                         |        | (54.3 | )      | (83.5 | )     | (22.0
|                         | Asia Pacific, Rest of Americas, Africa |        | (0.1  | )      | (0.1  | )     | (0.7 
|                         |                                        |        |       |        |       |       |      
|                         |                                        | (56.0  | )     | (85.0  | )     | (23.9 | )    
|                         |                                        |        |       |        |       |       |      
|                         | Divested operations                    |        |       |        |       |       |      
|                         | North America*                         |        | (0.1  | )      | (0.4  | )     | (0.4 
|                         |                                        |        |       |        |       |       |      
|Discontinued operations: |                                        |        |       |        |       |       |      
|                         | Europe                                 |        |      |        | (0.1  | )     | (0.1 
|                         | North America*                         |        |      |        | (0.9  | )     | (1.0 
|                         | Asia Pacific, Rest of Americas, Africa |        |      |        | (0.2  | )     | (0.3 
|                         |                                        |        |       |        |       |       |      
|                         |                                        |       |       | (1.2   | )     | (1.4  | )    
|                         |                                        |        |       |        |       |       |      
|                         |                                        | (56.1  | )     | (86.6  | )     | (25.7 | )    
|                         |                                        |        |       |        |       |       |      
|Operating (Loss)/Profit  |                                        | (970.5 | )     | (733.2 | )     | 110.0 |      
|                         |                                        |        |       |        |       |       |      

---

* North
America Operating (Loss)/Profit as referred to above consists almost entirely of the United States.

United
Kingdom operating loss was £9.3 million (2001 £11.8 million profit; 2000 £11.3 million). United Kingdom operating profit
in respect of divested operations, included in the above, was £0.5 million (2001 £3.3 million; 2000 £2.8 million) and in respect of
discontinued operations nil (2001 £1.8 million; 2000 £1.3 million).

United
Kingdom operating exceptional items were £2.1 million (2001 £2.5 million; 2000 £0.8 million).

United
Kingdom goodwill impairment was £19.5 million (2001 nil; 2000 nil).

United
Kingdom goodwill amortization was £1.6 million (2001 £1.4 million; 2000 £1.3 million). United Kingdom goodwill
amortization in respect of discontinued operations included in the above was nil (2001 £0.1 million; 2000 £0.1 million).

F-29

---

|                         |                                        | As at December 31
|------------------------ | -------------------------------------- | -----------------
|
|
|Operating Assets         |                                        |                  
|Continuing operations:   |                                        |                  
|                         | Europe                                 |                  
|                         | North America*                         |                  
|                         | Asia Pacific, Rest of Americas, Africa |                  
|                         |                                        |                  
|                         |                                        | 285.4            
|                         |                                        |                  
|                         | Divested operations                    |                  
|                         | Europe                                 |                  
|                         | North America*                         |                  
|                         |                                        |                  
|                         |                                        |                 
|                         |                                        |                  
|Discontinued operations: |                                        |                  
|                         | Europe                                 |                  
|                         | North America*                         |                  
|                         | Asia Pacific, Rest of Americas, Africa |                  
|                         |                                        |                  
|                         |                                        |                 
|                         |                                        |                  
|                         | Segmental operating assets             |                  
|                         |                                        |                  

---

* North
America as referred to above consists almost entirely of the United States.

United
Kingdom operating assets were £30.2 million (2001 £28.7 million; 2000 £40.8 million). United Kingdom operating assets in
respect of divested operations, included in the above, were nil (2001 £10.8 million; 2000 £14.4 million) and in respect of discontinued operations nil (2001 nil;
2000 £9.6 million).

F-30

---

Long-lived Assets

|                         |                                        | As at December 31
|------------------------ | -------------------------------------- | -----------------
|
|
|Continuing operations:   |                                        |                  
|                         | Europe                                 |                  
|                         | North America*                         |                  
|                         | Asia Pacific, Rest of Americas, Africa |                  
|                         |                                        |                  
|                         |                                        | 110.0            
|                         |                                        |                  
|                         | Divested operations                    |                  
|                         | Europe                                 |                  
|                         | North America*                         |                  
|                         |                                        |                  
|                         |                                        |                 
|                         |                                        |                  
|Discontinued operations: |                                        |                  
|                         | Europe                                 |                  
|                         | North America*                         |                  
|                         | Asia Pacific, Rest of Americas, Africa |                  
|                         |                                        |                  
|                         |                                        |                 
|                         |                                        |                  
|                         |                                        | 110.0            
|                         |                                        |                  

---

* North
America as referred to above consists almost entirely of the United States.

United
Kingdom long-lived assets were £21.0 million (2001 £29.1 million; 2000 £35.3 million). United Kingdom
long-lived assets in respect of divested operations, included in the above, were nil (2001 £3.3 million; 2000 £5.1 million) and in respect of
discontinued operations nil (2001 nil; 2000 £2.7 million).

F-31

---

4.     Net Operating Expenses

|                                                                          |                     | Year ended December 31 |      
|------------------------------------------------------------------------- | ------------------- | ---------------------- | -----
|
|
|
|Selling and distribution                                                  |                     | 124.6                  |      
|Administration                                                            |                     | 1,064.6                |      
|Other operating income                                                    |                     | (0.6                   | )    
|                                                                          |                     |                        |      
|Net operating expenses                                                    |                     | 1,188.6                |      
|                                                                          |                     |                        |      
|Included within administration costs above:                               |                     |                        |      
|                                                                          |                     |                        |      
|Operating exceptional items                                               |                     |                        |      
|                                                                          | Goodwill impairment |                        | 923.3
|                                                                          | Other               |                        | 37.2 
|Goodwill amortization                                                     |                     | 56.1                   |      
|                                                                          |                     |                        |      
|Net operating expenses before goodwill amortization and exceptional items |                     | 172.0                  |      
|                                                                          |                     |                        |      

5.     Operating (Loss)/Profit

Operating (loss)/profit is arrived at after charging:

|                                                             |                                                      | Year ended December 31
|------------------------------------------------------------ | ---------------------------------------------------- | ----------------------
|
|
|Goodwill amortization                                        |                                                      | 56.1                  
|Goodwill impairment (note 7)                                 |                                                      | 923.3                 
|Exceptional items (note 6)                                   |                                                      | 41.6                  
|Depreciationowned assets                                    |                                                      | 33.2                  
|finance leased assets                                       |                                                      | 0.4                   
|Operating lease costsplant and equipment                    |                                                      | 0.3                   
|land and buildings                                          |                                                      | 10.4                  
|Advertising costs                                            |                                                      | 7.0                   
|Product development costs                                    |                                                      | 77.7                  
|Impact of exchange rate movements on profit before taxation: |                                                      |                       
|                                                             | (Cost)/benefit                                       |                       
|Auditors' remuneration:                                      |                                                      |                       
|                                                             | Ernst & Young LLP and associates                     |                       
|                                                             | Other fees paid to Ernst & Young LLP, United Kingdom |                       
|                                                             | Other fees paid to Ernst & Young overseas            |                       

Other
fees comprise taxation advice of £1.5 million (2001 £0.7 million) and stock exchange regulatory matters and US Listing matters of nil
(2001 £0.6 million). In addition other fees paid to Ernst & Young of nil (2001 £0.8 million; 2000 £1.3 million) have been included
in expenses for acquisitions, and in 2000 share issue expenses.

F-32

---

6.     Exceptional Items

Operating Exceptional Items

|                                 |  | Year ended December 31
|-------------------------------- |  | ----------------------
|
|
|Reorganization costs             |  | 8.6                   
|Tangible fixed asset write-downs |  | 3.6                   
|Lease provisions                 |  | 20.2                  
|Stock provisions                 |  | 4.4                   
|Receivables provisions           |  |                      
|Acquisition retention bonuses    |  | 4.8                   
|                                 |  |                       
|                                 |  | 41.6                  
|                                 |  |                       

Reorganization
costs include the costs of redundancy resulting from the actions taken by the Group in response to the deterioration in trading and are primarily within the Communications Group.
Lease provisions for vacated properties have been charged amounting to £20.2 million, these are primarily within the Communications Group.

7.     Goodwill Impairment

In accordance with FRS 10 "Goodwill and Intangible Assets', goodwill is reviewed for impairment at the end of the first full financial year following acquisition and in
other periods if events or changes in circumstances indicate the carrying value may not be recoverable.

The
deterioration in trading in the second half year in the telecommunications market together with the significant fall in the Spirent share price have necessitated a further review of our
businesses. This review has resulted in impairment losses totaling £923.3 million being recognized during the period. A similar impairment loss of
£724.6 million was recognized during 2001. These losses are the aggregate from the impairment reviews of each individual income-generating unit and determined in accordance
with FRS 11 "Impairment of Fixed Assets and Goodwill'. The impairment loss restates the assets to value in use and has been measured using pre-tax discount rates of between 15 to 20%,
that take account of the particular risks of the income-generating unit.

Impairment
losses of £330.7 million relate to the Performance Analysis division, £530.4 million in respect of the Service Assurance division,
£21.7 million for Network Products and £40.5 million for the Systems group.

In
calculating the impairment losses the directors, in line with best practice, have also reviewed pre-1998 goodwill previously written off to reserves for those businesses in which
an impairment loss had been identified. An amount of £87.0 million has consequently been reinstated and included in the total impairment charge of
£923.3 million.

F-33

---

8.     Reconciliation of Operating (Loss)/Profit to Net Cash Inflow from Operating Activities

|                                                   |  | Year ended December 31 |  
|-------------------------------------------------- |  | ---------------------- | -
|
|
|Operating (loss)/profit                            |  | (970.5                 | )
|Depreciation                                       |  | 33.6                   |  
|Loss/(profit) on disposal of tangible fixed assets |  | 4.1                    |  
|Goodwill impairment                                |  | 923.3                  |  
|Amortization of goodwill                           |  | 56.1                   |  
|Acquisition retention bonusesnon-cash             |  | 0.5                    |  
|Deferred income released                           |  | (4.8                   | )
|Decrease/(increase) in debtors                     |  | 2.9                    |  
|Decrease/(increase) in stocks                      |  | 15.2                   |  
|(Decrease)/increase in creditors                   |  | (1.9                   | )
|Increase in provisions                             |  | 18.4                   |  
|                                                   |  |                        |  
|Net cash inflow from operating activities          |  | 76.9                   |  
|                                                   |  |                        |  

9.     Interest Payable

|                                   |  | Year ended December 31
|---------------------------------- |  | ----------------------
|
|
|Senior unsecured loan notes        |  | 11.8                  
|Bank loans and overdrafts          |  | 3.1                   
|Other loans                        |  | 0.6                   
|Interest on finance leases         |  | 0.1                   
|                                   |  |                       
|                                   |  | 15.6                  
|Discount on deferred consideration |  |                      
|                                   |  |                       
|                                   |  | 15.6                  
|Share of joint venture's interest  |  | 0.7                   
|                                   |  |                       
|                                   |  | 16.3                  
|                                   |  |                       

F-34

---



10.   Employees

The average number of people employed by the Group during the year was:

|                         |  | Year ended December 31
|------------------------ |  | ----------------------
|
|
|Manufacturing            |  | 3,276                 
|Selling and distribution |  | 1,397                 
|Administration           |  | 506                   
|                         |  |                       
|                         |  | 5,179                 
|                         |  |                       

Payroll
costs were:

|                      |  | Year ended December 31
|--------------------- |  | ----------------------
|
|
|Remuneration          |  | 176.7                 
|Social security costs |  | 19.7                  
|Other pension costs   |  | 5.3                   
|                      |  |                       
|                      |  | 201.7                 
|                      |  |                       

(i) Executive Directors' Remuneration Policy

The Company's remuneration policy, which has not changed during the year and will apply for the following financial year, is to:



The
Remuneration Committee has developed remuneration packages which fit this policy on an integrated and total reward basis. This is achieved by providing base salary plus benefits, pension
entitlements, an annual short-term incentive bonus and discretionary awards under the Company's share incentive plans, the latter two elements of which are performance-related. In normal
circumstances, it is the Remuneration Committee's policy that over 50% of an executive director's target total annual remuneration package is based on performance-related elements. The Company's
recent history of share price volatility and its consequent impact on the "value" of the long-term incentive component of the total remuneration package means in practice that the actual balance
of performance versus non-performance elements can vary from year to year. In designing the performance-related elements of remuneration, the Committee has followed the provisions set
out in Schedule A to the Combined Code on Corporate Governance.

F-35

---

In
subsequent years, the Remuneration Committee will continue to monitor and review the level and constituent elements of remuneration packages and will consult with its major institutional
shareholders as appropriate with regards to any proposed changes.

Executive Directors' Remuneration

(a) Base Salary and Benefits

The level of base salary is reviewed and established annually by reference to both the performance and responsibilities of the individual and prevailing market rates for
executives of similar status in comparable companies. When reviewing salaries, the Remuneration Committee is mindful of and sensitive to the wider scene, especially regarding employees' pay and
employment conditions
elsewhere in the Group. No increase in salary was awarded to the executive directors either during 2002 or in respect of their January 1, 2003 annual pay review.

Pension
and other benefits have regard to competitor practice in the home country of each executive. Benefits include a company car or car allowance, healthcare, disability and life insurance
coverage. Pension details are on pages F-37 and F-42.

(b) Annual Incentive Bonus Scheme

The Remuneration Committee reviews annual incentive bonus scheme targets and performance conditions each year to incentivize the executive to meet the short-term strategic
objectives of the Company.

In
respect of 2002, Messrs Brookes and Hutchinson participated in an annual scheme which, consistent with UK market practice and levels, was structured around a formula providing for an
on-target performance bonus of 50% of base salary with a maximum of 100% of base salary for exceptional performance. Performance was measured against growth targets in the Company's
Headline Earnings per Share (headline EPS), however, as the threshold target was not met, no bonus was payable for 2002.

In
respect of 2003, the same 50% on-target and 100% exceptional performance bonus opportunities will be available to Messrs Brookes and Hutchinson. Performance for 2003 will be
measured against targets in headline EPS and other financial objectives (accounting for 80% of any bonus) and also against the achievement of certain personal and strategic objectives selected by
the Committee (accounting for 20% of any bonus).

My
Chung (who is US-based) also participates in a similar annual incentive bonus scheme. Consistent with US market practice and levels, for 2002, he had a target bonus opportunity of
50% and he was capped at 200% of salary for exceptional performance. Performance was measured against growth targets in profit for the Communications group, however, as the threshold target was
not met, no bonus was payable for 2002.

In
respect of 2003, the same 50% on-target and 200% exceptional performance bonus opportunities will be available to My Chung. Performance for 2003 will again be measured against
profit targets for the Communications group, subject to threshold performance in respect of other appropriate financial measures (accounting for 90% of any bonus) and also against other personal
and strategic objectives as selected by the Committee (accounting for 10% of any bonus).

F-36

---

(c) Directors' Pensions

All three executive directors participate in Group pension plans as described below.

The
UK executives participate in the non-contributory funded senior executive level of the Spirent Group Staff Pension and Life Assurance Plan (the Staff Plan). This defined benefit
arrangement will provide them at normal retirement age of 60, and dependent on length of service, with a pension of up to two-thirds of salary, subject to Inland Revenue limits and
other statutory conditions. It also provides for dependants' Pensions and a cash lump sum on death. Pensionable salary is the director's base salary only.

The
Company has undertaken to Nicholas Brookes, whose salary for approved pension purposes under the Staff Plan is capped by the provisions of the Finance Act 1989 (£97,200 for the
tax year 2002/2003), that his benefit entitlements shall be as if the "cap" did not apply. The Company will be liable for making payment of any unapproved pension in excess of the approved
maximum and a balance sheet provision exists in respect of this obligation. The Company has taken out insurance to cover that part of his life assurance in excess of the cap. As Eric Hutchinson
was a member of the pension plan prior to 1989, his pension entitlements are not subject to the capping provisions of the Finance Act 1989.

The
pensions earned by the UK executives during the year under the Staff Plan are given in paragraph (iv)(b).

My
Chung participates in the Spirent International Inc Retirement and Profit Share Plan, a defined contribution plan approved under section 401(k) of the US Internal Revenue Service Code
(the IRS Code). The Company makes matching contributions of up to 2% and is permitted to make discretionary profit sharing contributions of up to 8% of the maximum compensation permitted for
these purposes under the IRS Code. The normal retirement age under this plan is 65 and, consistent with local practice, bonuses are pensionable for all participating US employees, including My
Chung.

(d) Medium and Long Term Incentive Plans

The Remuneration Committee approves the grant of all options under the Executive Share Option Scheme (ESOS) and the Spirent Stock Option Plan (SSOP) in which executive
directors participate (see below). All grants are subject to prior satisfactory individual performance and grant amounts vary with the individual's potential impact on longer term business
results. Executive directors also continue to participate in the Long Term Share Purchase Plan (LTSPP). However, following
shareholder approval in 2002 of the closure of the LTSPP and the substitution of future annual awards with equivalent value supplemental grants of options under the ESOS, no further grants have
been made under the LTSPP since 2001. The executives are also eligible to participate in either the Company's UK or US all employee share plans, as appropriate (further details of which are
provided in note 32).

ESOS

All ESOS grants made after May 11, 2000 to executive directors are subject to enhanced performance conditions on exercise which the Remuneration Committee believes
represent challenging criteria that align the interests of executives to that of shareholders. The performance

F-37

---

conditions require the Company's headline EPS to increase over a period of three consecutive financial years within a range of 9% (minimum performance for 25% option vesting) and 15% (for 100%
option vesting), with a sliding scale between these points. In addition, performance testing over the ten-year option term is measured from a base point fixed at the date of grant. Performance
will be tested on the third anniversary of grant and, if the target conditions at that time have not yet been met in full, performance will be tested again on the fourth and fifth anniversaries
of grant only, with the performance hurdle being increased in proportion to the extended period. The Remuneration Committee's current grant policy is to provide each executive director with the
opportunity to receive options up to an annual limit of 3 times base salary, however the size of grant each year will have due regard to prevailing relevant circumstances.

ESOS
grants made before May 11, 2000 to executive directors are subject to a performance condition which was in line with prevailing market practice at that time. The performance condition
on exercise is that over a period of three consecutive financial years, there has been an increase in the Company's headline EPS which is at least 6% more than the increase in the Retail Price
Index over the same period. The same performance condition is tested on the third anniversary of grant and, if the performance condition has not been met at that time, at each subsequent
anniversary of grant until the expiry of the option (on the tenth anniversary of grant).

SSOP

The SSOP was approved by shareholders in May 2000 for Communications group employees and will expire in May 2003. The Remuneration Committee is currently
reviewing medium and long term incentive arrangements for employees within the Communications group (which include My Chung) and shareholders will be informed as appropriate with regards to any
new initiatives which require shareholder approval.

In
addition to participating in the ESOS, with due regard to the competitive US recruitment and retention practices to which the Company is exposed, the Committee has concluded that My Chung (who
is Group President of Spirent Communications, a US citizen and resident in the United States) should also continue to participate in the SSOP. This plan is not open to current UK executive
directors. Options normally vest over four years, with 25% exercisable on the first anniversary of the date of grant, and thereafter in equal proportions on a monthly basis. In line with
prevailing market practice and as previously approved by shareholders, no pre-exercise performance conditions attach to options granted under the SSOP. In normal circumstances, My
Chung will have the opportunity to receive an annual grant of up to 4.5 times base salary under the SSOP (subject to prevailing relevant circumstances), in addition to any ESOS award. The
Committee reviews the most appropriate balance of awards between ESOS and SSOP options for My Chung prior to any grant.

LTSPP

As noted above, although the LTSPP is closed, there are still outstanding awards which were granted prior to the plan's closure. The LTSPP was introduced in 1999 and only
executive directors and members of the Operations Management Team are eligible to participate. All grants under the LTSPP with the exception of those made in 2001 have lapsed as they have failed
to meet the minimum performance conditions of (i) a real (ie above inflation) growth in the Spirent share

F-38

---

price of at least 5% per annum, and (ii) a total shareholder return (ie capital appreciation, dividends paid, plus any other issues or distributions) performance ranked above the 60th
percentile against a comparator group. In respect of the 2001 LTSPP grant, the Remuneration Committee agreed at the time of grant that the FTSE 100 index would be an appropriate comparator group
and is a broad equity market index against which the performance of the LTSPP grants could be fairly compared. The Remuneration Committee believes that the LTSPP performance conditions remain
extremely challenging.

Further
information on the ESOS, SSOP and LTSPP is provided in note 32.

The
Remuneration Committee believes that the grant structure, performance conditions and grant levels under the ESOS and SSOP represent the most appropriate medium to long-term incentive
arrangements which will enable Spirent to compete for, motivate and retain the highest caliber executives which it needs to drive the business forward and increase shareholder value. In order to
assist further in aligning the interests of executives and shareholders, shareholding guidelines were introduced in 2000 which encourage executive directors and certain senior managers to build
up a meaningful level of shareholding of up to two years' salary over a period of five years.

(e) Service Contracts

In respect of 2002, Nicholas Brookes was subject to a service contract entered into on May 5, 1995 which currently has an unexpired term of 50 months and was
terminable at any time by the Company on 24 months' notice and by Mr Brookes on 12 months' notice. Eric Hutchinson entered into a service contract on December 13, 1999 which
currently has an unexpired term of 146 months and is terminable at any time by either party on 12 months' notice. My Chung entered into a service contract on May 9, 2001
which currently has an unexpired term of 171 months and is terminable at any time by the Company on 12 months' notice and by Mr Chung on six months' notice. All contracts contain
provisions for the Company to make payment in lieu of notice and for removal of the director for poor performance or misconduct without compensation. The Company will seek to apply practical
mitigation measures to any payment of compensation on termination, taking into account all relevant circumstances.

The
Remuneration Committee is aware the Combined Code on Corporate Governance states there is a strong case for service contract notice periods not to exceed 12 months. However, Mr
Brookes' service contract was originally agreed prior to the introduction of the Code, when notice periods of 24 months were in line with prevailing market practice. Nevertheless, having
due regard to current best practice, Mr Brookes and the Board agreed to amend his service contract with effect from January 1, 2003, so that the service contract is terminable at any time
by either party on 12 months' notice. The Remuneration Committee's policy is to offer service contracts to newly appointed executives which provide for only 12 months' notice from
the Company in normal circumstances, and this was applied in the cases of Messrs Hutchinson and Chung.

(f) External Appointments

Spirent recognizes the mutual benefit for executive directors to serve as non-executives of companies in other industries outside the Group. Such appointments
are subject to prior Board approval and, with effect from January 1, 2003, any related fee entitlements are for the account of the executive concerned.

F-39

---

(ii) Non-executive Directors' Remuneration

The remuneration of non-executive directors is determined by the Board following a recommendation by the Chief Executive and after consultation with
independent external advisers concerning competitive market practice. The Company's remuneration policy (which has not changed during the year and will apply for the following financial year)
with regards to
non-executive directors is to pay fees which are in line with market practice. No fee increase was awarded either during 2002 or at the remuneration review at January 1, 2003.

Non-executive
directors are not eligible to participate in bonus or share incentive arrangements and their service does not qualify for pension purposes or other benefits. No element
of their fees are performance-related. Non-executive directors do not have service contracts and are normally appointed, subject to the Company's Articles of Association, for an
initial three year term. Any subsequent extension to the term by the Board is not automatic and is subject to prior recommendation of the Nomination Committee.

Further
information on non-executive directors' fees is provided in paragraph (iv)(a) below.

(iii) Total Shareholder Return (TSR) Performance

The graph below shows TSR performance (ie growth in the value of a share or index, assuming dividends and other distributions are reinvested) for the last five financial
years of Spirent plc as shown against the FTSE 350 index and the FTSE Information Technology Index (FTSE IT). The Remuneration Committee believes that both the FTSE 350 and the FTSE IT provide a
broad equity market index against which the performance of Spirent can be fairly compared, and that the FTSE IT index provides a particularly representative collection of comparator companies.

CHART

F-40

---

(iv) Directors' Remuneration

(a) Individual and total remuneration of the directors holding office during 2002

|      |  |       |  |                         |  | 2002 Remuneration(1) |  |       |  |     
|----- |  | ----- |  | ----------------------- |  | -------------------- |  | ----- |  | ----
|
|
|
|
|      |  |       |  | Executive Directors     |  |                      |  |       |  |     
|500.0 |  | 0.5   |  | N Brookes               |  | 500.0                |  | 0.5   |  | 44.8
|217.4 |  | 0.5   |  | M Chung(5)              |  | 231.8                |  | 0.5   |  | 18.9
|250.0 |  | 0.5   |  | E Hutchinson            |  | 250.0                |  | 0.5   |  | 22.4
|      |  |       |  | Non-executive Directors |  |                      |  |       |  |     
|     |  | 37.0  |  | M Beresford             |  |                     |  | 37.0  |  |    
|     |  | 35.0  |  | P Cheng                 |  |                     |  | 35.0  |  |    
|     |  | 30.0  |  | G Ennerfelt             |  |                     |  | 30.0  |  |    
|     |  | 35.0  |  | R Moley                 |  |                     |  | 35.0  |  |    
|     |  |      |  | G Sarney                |  |                     |  | 66.7  |  | 1.4 
|     |  | 150.0 |  | J Weston                |  |                     |  | 22.5  |  |    
|     |  | 37.0  |  | J Wyness                |  |                     |  | 89.3  |  |    
|      |  |       |  |                         |  |                      |  |       |  |     
|      |  |       |  | Total 2002              |  | 981.8                |  | 317.0 |  | 87.5
|      |  |       |  |                         |  |                      |  |       |  |     
|      |  |       |  | Total 2001              |  | 907.2                |  | 375.3 |  | 65.7
|      |  |       |  |                         |  |                      |  |       |  |     
|      |  |       |  | Total 2000              |  | 585.0                |  | 282.7 |  | 42.0
|      |  |       |  |                         |  |                      |  |       |  |     

---



F-41

---



(b) Directors' Pensions

The pensions earned during the year from the non-contributory defined benefit arrangements in place for the UK executives during 2002 were as follows:

|             |  |    |  |    |  |      |  |     |  | Accumulated total accrued
pension
|------------ |  | -- |  | -- |  | ---- |  | --- |  | ---------------------------------
|
|
|
|
|N Brookes(2) |  | 55 |  | 15 |  | 16.7 |  | 9.5 |  | 261.1                            
|E Hutchinson |  | 47 |  | 19 |  | 8.3  |  | 3.8 |  | 162.5                            

|             |  |     |  |     |  |       |  |       |  |     |  | Increase before inflation, in total transfer value of pension during the year
|------------ |  | --- |  | --- |  | ----- |  | ----- |  | --- |  | -----------------------------------------------------------------------------
|
|
|
|
|N Brookes    |  | 278 |  | 156 |  | 4,425 |  | 4,086 |  | 339 |  | 218                                                                          
|E Hutchinson |  | 87  |  | 40  |  | 1,703 |  | 1,581 |  | 122 |  | 75                                                                           

---

F-42

---



(c)    Directors' Remuneration and Payments to Former DirectorsSummary

|                                                                                  |  | Year ended December 31
|--------------------------------------------------------------------------------- |  | ----------------------
|
|
|Total emoluments for all directors (as per the remuneration table in (a) above)   |  | 1,386                 
|Gains made on exercise of share options(1)                                        |  | 6                     
|Company contribution to 401(k) Retirement and Profit Share Plan(2)                |  | 13                    
|Pension and fees of the Life President (2002: £28,204 and £4,865 respectively)(3) |  | 33                    
|Emoluments and ex-gratia pension to former directors(4)                           |  | 19                    
|Consultancy payments and fee payments to former directors                         |  | 6                     
|                                                                                  |  |                       
|                                                                                  |  | 1,463                 
|                                                                                  |  |                       

---

(v)    Directors' Interests

The beneficial and non-beneficial interests of the directors (and their immediate families and any connected persons) in the Ordinary share capital of the Company
at the beginning and end of the year are set out

F-43

---

below. The Company's statutory register of directors' interests is available for inspection at its registered office during normal business hours on any business day.

|                        |  |             |  |        |     |           |  |         |  | January 1, 2002(1)
|----------------------- |  | ----------- |  | ------ | --- | --------- |  | ------- |  | ------------------
|
|
|
|Executive Directors     |  |             |  |        |     |           |  |         |  |                   
|N Brookes               |  | 2,947,083   |  | 26,315 | (3) | 1,910,135 |  | 208,480 |  | 127,083           
|M Chung                 |  | 8,977       |  | 39,620 | (4) | 1,937,818 |  | 88,893  |  | 8,113             
|E Hutchinson            |  | 726,210     |  | 12,171 | (3) | 1,003,190 |  | 90,849  |  | 43,411            
|Non-Executive Directors |  |             |  |        |     |           |  |         |  |                   
|M Beresford             |  | 15,225      |  |       |     |          |  |        |  | 15,225            
|P Cheng                 |  | 7,250       |  |       |     |          |  |        |  | 7,250             
|G Ennerfelt(5)          |  | 128,398,257 |  |       |     |          |  |        |  | 108,398,257       
|R Moley                 |  | 1,010,000   |  |       |     |          |  |        |  | 10,000            
|J Weston                |  | 1,600,000   |  |       |     |          |  |        |  | 1,600,000         
|J Wyness                |  | 346,037     |  |       |     |          |  |        |  | 46,037            

---

F-44

---



|             |  | Plan
type(1) |  | At
December 31,
2002 |  | Exercised (E)/
lapsed (L)
during the
year |  | Granted
during
the
Year |  | At
January 1,
2002 |  | Date of
grant |  | Exercise
price(p) |  | Date first
exercisable |  | Expiry
date
|------------ |  | ------------ |  | -------------------- |  | ----------------------------------------- |  | ----------------------- |  | ------------------ |  | ------------- |  | ----------------- |  | ---------------------- |  | -----------
|N Brookes    |  | ESOS         |  | 221,068              |  |                                          |  |                        |  | 221,068            |  | 09.30.96      |  | 136               |  | 09.30.99               |  | 09.29.06   
|             |  | SRSOS        |  |                     |  | (L)15,886                                 |  |                        |  | 15,886             |  | 10.21.96      |  | 109               |  | 01.01.02               |  | 06.30.02   
|             |  | ESOS         |  | 30,410               |  |                                          |  |                        |  | 30,410             |  | 04.23.97      |  | 118               |  | 04.23.00               |  | 04.22.07   
|             |  | ESOS         |  | 43,922               |  |                                          |  |                        |  | 43,922             |  | 04.27.98      |  | 152               |  | 04.27.01               |  | 04.26.08   
|             |  | ESOS         |  | 149,590              |  |                                          |  |                        |  | 149,590            |  | 05.11.00      |  | 334               |  | 05.11.03               |  | 05.10.10   
|             |  | ESOS         |  | 205,000              |  |                                          |  |                        |  | 205,000            |  | 04.09.01      |  | 305               |  | 04.09.04               |  | 04.08.11   
|             |  | SRSOS        |  | 18,145               |  |                                          |  |                        |  | 18,145             |  | 10.05.01      |  | 93                |  | 12.01.06               |  | 05.31.07   
|             |  | ESOS         |  | 468,000              |  |                                          |  | 468,000                 |  |                   |  | 04.02.02      |  | 134               |  | 04.02.05               |  | 04.01.12   
|             |  | ESOS         |  | 774,000              |  |                                          |  | 774,000                 |  |                   |  | 05.02.02      |  | 113               |  | 05.02.05               |  | 05.01.12   
|M Chung      |  | ESOS         |  | 93,482               |  |                                          |  |                        |  | 93,482             |  | 07.16.98      |  | 163               |  | 07.16.01               |  | 07.15.08   
|             |  | ESOS         |  | 112,734              |  |                                          |  |                        |  | 112,734            |  | 04.01.99      |  | 133               |  | 04.01.02               |  | 03.31.09   
|             |  | SSOP         |  | 341,921              |  |                                          |  |                        |  | 341,921            |  | 05.11.00      |  | 334               |  | 05.11.01               |  | 05.10.07   
|             |  | ESOS         |  | 65,819               |  |                                          |  |                        |  | 65,819             |  | 05.11.00      |  | 334               |  | 05.11.03               |  | 05.10.10   
|             |  | SARP         |  | 42,740               |  |                                          |  |                        |  | 42,740             |  | 05.12.00      |  | 335               |  | 05.12.01               |  | 05.11.10   
|             |  | SSOP         |  | 250,000              |  |                                          |  |                        |  | 250,000            |  | 12.08.00      |  | 613               |  | 12.08.01               |  | 12.07.07   
|             |  | SSOP         |  | 195,000              |  |                                          |  |                        |  | 195,000            |  | 04.09.01      |  | 305               |  | 04.09.02               |  | 04.08.08   
|             |  | ESOS         |  | 80,000               |  |                                          |  |                        |  | 80,000             |  | 04.09.01      |  | 305               |  | 04.09.04               |  | 04.08.11   
|             |  | ESPP(2)      |  | 6,122                |  |                                          |  |                        |  | 6,122              |  | 01.01.02      |  | 14                |  | 01.01.03               |  | 01.01.03   
|             |  | SSOP         |  | 750,000              |  |                                          |  | 750,000                 |  |                   |  | 04.02.02      |  | 134               |  | 04.02.03               |  | 04.01.09   
|E Hutchinson |  | SRSOS(3)     |  |                     |  | (E) 5,128                                 |  |                        |  | 5,128              |  | 10.21.94      |  | 76                |  | 12.01.01               |  | 05.31.02   
|             |  | ESOS         |  | 17,652               |  |                                          |  |                        |  | 17,652             |  | 04.27.95      |  | 108               |  | 04.27.98               |  | 04.26.05   
|             |  | SRSOS        |  | 1,464                |  |                                          |  |                        |  | 1,464              |  | 10.31.95      |  | 106               |  | 12.01.02               |  | 05.31.03   
|             |  | ESOS         |  | 42,928               |  |                                          |  |                        |  | 42,928             |  | 04.29.96      |  | 140               |  | 04.29.99               |  | 04.28.06   
|             |  | ESOS         |  | 33,786               |  |                                          |  |                        |  | 33,786             |  | 04.23.97      |  | 118               |  | 04.23.00               |  | 04.22.07   
|             |  | ESOS         |  | 29,586               |  |                                          |  |                        |  | 29,586             |  | 04.27.98      |  | 152               |  | 04.27.01               |  | 04.26.08   
|             |  | SRSOS        |  | 12,363               |  |                                          |  |                        |  | 12,363             |  | 10.22.98      |  | 83                |  | 01.01.06               |  | 06.30.06   
|             |  | ESOS         |  | 75,156               |  |                                          |  |                        |  | 75,156             |  | 04.01.99      |  | 133               |  | 04.01.02               |  | 03.31.09   
|             |  | ESOS         |  | 55,562               |  |                                          |  |                        |  | 55,562             |  | 05.11.00      |  | 334               |  | 05.11.03               |  | 05.10.10   
|             |  | ESOS         |  | 105,000              |  |                                          |  |                        |  | 105,000            |  | 04.09.01      |  | 305               |  | 04.09.04               |  | 04.08.11   
|             |  | SRSOS        |  | 8,693                |  |                                          |  |                        |  | 8,693              |  | 10.05.01      |  | 93                |  | 12.01.08               |  | 05.31.09   
|             |  | ESOS         |  | 234,000              |  |                                          |  | 234,000                 |  |                   |  | 04.02.02      |  | 134               |  | 04.02.05               |  | 04.01.12   
|             |  | ESOS         |  | 387,000              |  |                                          |  | 387,000                 |  |                   |  | 05.02.02      |  | 113               |  | 05.02.05               |  | 05.01.12   

---

F-45

---



(b)    Performance Units interests under the Long Term Share Purchase Plan (LTSPP)

|             |  | Performance
units at
December 31,
2002 |     | Granted
during
the year |  | Lapsed
during
the year |     | Performance
units at
January 1,
2002 |  | Date of
grant |  | Performance
unit value
at date of grant
(pence) |  | Vesting
date
|------------ |  | -------------------------------------- | --- | ----------------------- |  | ---------------------- | --- | ------------------------------------ |  | ------------- |  | ----------------------------------------------- |  | ------------
|N Brookes    |  |                                       |     |                        |  | 219,719                | (1) | 219,719                              |  | 06.18.99      |  | 166                                             |  | 06.18.05    
|             |  | 85,480                                 | (2) |                        |  |                       |     | 85,480                               |  | 05.11.00      |  | 334                                             |  | 05.11.06    
|             |  | 123,000                                | (3) |                        |  |                       |     | 123,000                              |  | 04.09.01      |  | 305                                             |  | 04.09.07    
|M Chung      |  | 38,893                                 | (2) |                        |  |                       |     | 38,893                               |  | 05.11.00      |  | 334                                             |  | 05.11.06    
|             |  | 50,000                                 | (3) |                        |  |                       |     | 50,000                               |  | 04.09.01      |  | 305                                             |  | 04.09.07    
|E Hutchinson |  | 28,849                                 | (2) |                        |  |                       |     | 28,849                               |  | 05.11.00      |  | 334                                             |  | 05.11.06    
|             |  | 62,000                                 | (3) |                        |  |                       |     | 62,000                               |  | 04.09.01      |  | 305                                             |  | 04.09.07    
|            



|Year of grant |  | Real share price growth
(minimum 5% pa) |   | Total shareholder return
ranking (minimum 60th
percentile position)
|------------- |  | --------------------------------------- | - | -------------------------------------------------------------------
|2001          |  | -97                                     | % | 3rd                                                                



F-46

---



(vi)    Pension Costs

The Group continues to account for pension costs under Statement of Standard Accounting Practice (SSAP) 24, disclosures are provided under both SSAP 24 and under FRS 17 as
required by the Standards.

(a)    Disclosures under SSAP 24

The Group operates a number of pension schemes around the world. Defined benefit schemes cover 11% of members (2001 19%; 2000 32%) and defined contribution schemes cover 89%
(2001 81%; 2000 68%). The assets of all the major schemes are held in separate trustee administered funds independent of the Group's finances.

United Kingdom

The Group operates two United Kingdom pension plans: the Staff Pension Plan which is on a defined benefit basis and the Retirement Cash Plan which is on a defined contribution
basis with a defined benefit underpin.

Pension
costs and the assets and liabilities of these plans are reviewed regularly by an independent professionally qualified actuary. The latest actuarial valuations of the plans were undertaken as
at April 1, 2000 using the projected unit method. The principal results and assumptions were as follows:

|Assumption                 |  | Staff Pension Plan |  | Retirement Cash Plan
|-------------------------- |  | ------------------ |  | --------------------
|Return on investments      |  | 7.1% pa            |  | 4.8% pa             
|Salary inflation average   |  | 4.3% pa            |  | 4.3% pa             
|Price inflation            |  | 2.8% pa            |  | 2.8% pa             
|Pension increases          |  | 3.6% pa            |  | 3.6% pa             
|Market value of assets     |  | £109.9 million     |  | £8.5 million        
|Level of funding           |  | 106%               |  | 113%                
|Employer contribution rate |  | 11%                |  | 4%                  

The
level of funding represents the market value of assets expressed as a percentage of the value of liabilities, on an ongoing basis.

The
employer contribution rate was increased at January 1, 2003 to 13.4% for the staff pension plan.

F-47

---

For
accounting treatment purposes the actuarial surpluses are being spread over the average expected remaining service of plan members being 13 years. The pension costs for 2002 for these plans
were £1.7 million (2001 £2.8 million; 2000 £2.2 million).

The
above plans are funded and have full UK Inland Revenue tax-exempt approval by which benefits are limited due to the statutory earnings cap (an Inland Revenue limit on the amount of
earnings that can be made pensionable under the plans for members who joined after May 1989). Certain members whose salaries are in excess of this cap, have had their benefits increased through
unapproved, unfunded arrangements, to the level that would otherwise have applied in respect of the basic salary only. The Company has contractually agreed to pay the additional retirement benefits
itself and a provision is made in respect of this obligation in the balance sheet at December 31, 2002 of £4.3 million (2001 £4.1 million; 2000
£3.0 million). This represents the actuarial value as confirmed by the Company's pension advisers, of the unapproved benefit entitlements accrued at that date. The value is assessed
and reviewed on a Market Value basis, in line with the Main Plan Valuation and adjusted each year by the charge for the year (equivalent to a contribution to a funded plan) of
£0.1 million (2001 £1.0 million; 2000 £0.3 million) and interest on the unfunded liability of £0.3 million (2001
£0.2 million; 2000 £0.2 million). The additional death-in-service benefits over the statutory cap are separately insured by the Company
under an unapproved scheme.

Additionally
the Company made a provision in respect of pensions being paid to former directors of the Company in 2001 of £0.4 million and in 2000 of
£0.4 million. No provision is required at December 31, 2002.

United States

The Group maintains defined contribution pension benefit plans for employees of its US subsidiaries. These plans, also known as 401(k) Plans, allows employees to defer a
percentage of their salary for retirement. There are five different 401(k) Plans within the US Group and each of these plans has different features regarding company contributions, maximum deferral
percentages and investment choices. The investment choices offered are among a selection of diversified mutual funds offering a broad mix of investment return potential with varying levels of risk. In
aggregate the company contributions to the various US plans totaled $4.8 million for 2002 (2001 $5.6 million: 2000 $4.5 million). Total assets in the defined contribution plans at
the end of 2002 were $137.1 million (2001 $111.0 million: 2000 $74.9 million). There were no defined benefit plans in the United States in 2002.

Other Jurisdictions

Outside the United Kingdom and the United States employees are provided with pension arrangements determined in accordance with approved local practice and regulations and are
defined contribution schemes.

Total
contributions for 2002, in respect of these schemes amounted to £0.1 million (2001 £0.2 million; 2000 £0.2 million).

The
total pension charge for the Group for 2002 was £5.3 million (2001 £8.2 million; 2000 £6.9 million).

F-48

---

Total
company contributions to defined benefit schemes were £1.7 million (2001 £2.7 million; 2000 £1.9 million) and defined contribution
schemes were £ 3.6 million (2001 £5.5 million; 2000 £5.0 million).

(b)    Disclosures under FRS 17

The only significant defined benefit plans under FRS17 are in the United Kingdom and comprise the Staff Pension Plan and Retirement Cash Plan as described above. These plans
have been combined for the purposes of the following disclosures.

The
most recent actuarial valuation at April 1, 2000 has been used and updated by our independent actuaries

|                                                           |  | UK defined benefit plans
as at December 31
|---------------------------------------------------------- |  | ------------------------------------------
|
|
|Valuation method                                           |  | projected unit                            
|Inflation                                                  |  | 2.3                                       
|Rate of increase in salaries                               |  | 3.0                                       
|Rate of increase for pensions in payment pre 2001 service  |  | 3.0                                       
|Rate of increase for pensions in payment post 2001 service |  | 2.3                                       
|Rate of increase in deferred pensions                      |  | 2.3                                       
|Rate used to discount scheme liabilities                   |  | 5.5                                       
|                                                           |  |                                           

F-49

---



|                                                                                               |  | 2002
Long-term
rate of return
expected |  | As at December 31,
2002 |   | 2001
Long-term
rate of return
expected |  | As at
December 31,
2001 |  
|---------------------------------------------------------------------------------------------- |  | -------------------------------------- |  | ----------------------- | - | -------------------------------------- |  | ----------------------- | -
|
|Equities                                                                                       |  | 7.5                                    |  | 52.5                    |   | 7.5                                    |  | 76.2                    |  
|Gilts                                                                                          |  | 4.5                                    |  | 15.7                    |   | 5.0                                    |  | 12.1                    |  
|Bonds                                                                                          |  | 5.0                                    |  | 7.4                     |   | 6.0                                    |  | 1.3                     |  
|Cash                                                                                           |  | 4.0                                    |  | 2.3                     |   | 3.5                                    |  | 4.7                     |  
|Property                                                                                       |  | 6.5                                    |  | 4.3                     |   | 6.0                                    |  | 3.8                     |  
|Other                                                                                          |  | 5.5                                    |  | 6.8                     |   | 6.5                                    |  | 7.3                     |  
|                                                                                               |  |                                        |  |                         |   |                                        |  |                         |  
|Total market value of assets                                                                   |  |                                        |  | 89.0                    |   |                                        |  | 105.4                   |  
|Actuarial value of liability                                                                   |  |                                        |  | (130.9                  | ) |                                        |  | (123.3                  | )
|                                                                                               |  |                                        |  |                         |   |                                        |  |                         |  
|Net deficit in the scheme                                                                      |  |                                        |  | (41.9                   | ) |                                        |  | (17.9                   | )
|Related deferred tax asset                                                                     |  |                                        |  | 12.6                    |   |                                        |  | 5.4                     |  
|                                                                                               |  |                                        |  |                         |   |                                        |  |                         |  
|Deficit in the schemes, net of tax                                                             |  |                                        |  | (29.3                   | ) |                                        |  | (12.5                   | )
|                                                                                               |  |                                        |  |                         |   |                                        |  |                         |  
|Actuarial value of unfunded pension liabilityfully provided for in these financial statements |  |                                        |  | (4.3                    | ) |                                        |  | (4.5                    | )
|Related deferred tax asset                                                                     |  |                                        |  |                        |   |                                        |  | 1.4                     |  
|                                                                                               |  |                                        |  |                         |   |                                        |  |                         |  
|Net pension liability                                                                          |  |                                        |  | (33.6                   | ) |                                        |  | (15.6                   | )
|                                                                                               |  |                                        |  |                         |   |                                        |  |                         |  

The
liability at December 31, 2002 under FRS 17 does not reflect the funding position of the plan which is calculated on an ongoing basis. This basis is used to determine contribution rates
under the scheme.

F-50

---

|                                                                                            |  | As at December 31,
2002 |   | As at December 31,
2001 |  
|------------------------------------------------------------------------------------------- |  | ----------------------- | - | ----------------------- | -
|
|Net assets as stated in the balance sheet                                                   |  | 141.2                   |   | 1,096.8                 |  
|Actuarial value of unfunded pension liability                                               |  | 4.3                     |   | 4.5                     |  
|Related deferred tax                                                                        |  |                        |   | (1.4                    | )
|                                                                                            |  |                         |   |                         |  
|Net assets excluding unfunded liability                                                     |  | 145.5                   |   | 1,099.9                 |  
|Net pension liability                                                                       |  | (33.6                   | ) | (15.6                   | )
|                                                                                            |  |                         |   |                         |  
|Net assets including amount related to defined benefit assets and liabilities               |  | 111.9                   |   | 1,084.3                 |  
|                                                                                            |  |                         |   |                         |  
|Profit and loss account excluding pension liability                                         |  | (606.6                  | ) | 41.7                    |  
|Actuarial value of unfunded pension liability                                               |  | 4.3                     |   | 4.5                     |  
|Deferred tax on unfunded liability                                                          |  |                        |   | (1.4                    | )
|                                                                                            |  |                         |   |                         |  
|                                                                                            |  | (602.3                  | ) | 44.8                    |  
|Net pension liability                                                                       |  | (33.6                   | ) | (15.6                   | )
|                                                                                            |  |                         |   |                         |  
|Profit and loss account including amounts related to defined benefit assets and liabilities |  | (635.9                  | ) | 29.2                    |  
|                                                                                            |  |                         |   |                         |  

F-51

---

|                                                                                               |  | Year ended
December 31,
2002 |  
|---------------------------------------------------------------------------------------------- |  | ---------------------------- | -
|
|Analysis of amount that would have been charged to operating costs:                            |  |                              |  
|Current service cost                                                                           |  | 1.8                          |  
|                                                                                               |  |                              |  
|Analysis of amount that would have been charged to other finance costs:                        |  |                              |  
|Expected return on pension scheme assets                                                       |  | 6.7                          |  
|Interest on pension scheme liabilities                                                         |  | (7.0                         | )
|                                                                                               |  |                              |  
|Net expense                                                                                    |  | (0.3                         | )
|                                                                                               |  |                              |  
|Net profit and loss charge                                                                     |  | 2.1                          |  
|                                                                                               |  |                              |  
|Analysis of amount that would be recognized in statement of total recognized gains and losses: |  |                              |  
|Actual return less expected return on pension scheme assets                                    |  | (20.3                        | )
|Experience gains and losses arising on the scheme's liabilities                                |  | (0.9                         | )
|Changes in assumptions underlying the present value of the scheme's liabilities                |  | (2.4                         | )
|                                                                                               |  |                              |  
|Actuarial loss recognized in the statement of total recognized gains and losses                |  | (23.6                        | )
|                                                                                               |  |                              |  
|Movement in deficit in the year:                                                               |  |                              |  
|Deficit in the schemes at January 1                                                            |  | (17.9                        | )
|Movement in the yearcurrent service cost                                                      |  | (1.8                         | )
|contributions                                                                                 |  | 1.7                          |  
|other
finance costs                                                                           |  | (0.3                         | )
|actuarial
loss                                                                                |  | (23.6                        | )
|                                                                                               |  |                              |  
|Net deficit in the schemes at December 31                                                      |  | (41.9                        | )
|                                                                                               |  |                              |  

|                                                                              |  | 2002  |  
|----------------------------------------------------------------------------- |  | ----- | -
|Difference between the expected and actual return on scheme assets            |  |       |  
|Amount (£ million)                                                            |  | (20.3 | )
|Percentage of scheme assets (%)                                               |  | (22.8 | )
|Experience gains and losses on scheme liabilities                             |  |       |  
|Amount (£ million)                                                            |  | (0.9  | )
|Percentage of the present value of scheme liabilities (%)                     |  | (0.7  | )
|Total amount recognized in the statement of total recognized gains and losses |  |       |  
|Amount (£ million)                                                            |  | (23.6 | )
|Percentage of the present value of scheme liabilities (%)                     |  | (18.0 | )

F-52

---

11.   Taxation

|                                                              |  | Year ended
December 31 |  
|------------------------------------------------------------- |  | ---------------------- | -
|
|
|(a)    Analysis of charge based on (loss)/profit for the year |  |                        |  
|Current tax:                                                  |  |                        |  
|Corporation tax                                               |  | 4.8                    |  
|Overseas taxation                                             |  | (4.4                   | )
|Tax arising on disposalsoverseas taxation                    |  | 3.0                    |  
|Exceptional tax credit                                        |  |                       |  
|Over-provision in prior yearsUK tax                          |  | (1.3                   | )
|Overseas taxation                                            |  | (4.9                   | )
|                                                              |  |                        |  
|                                                              |  | (2.8                   | )
|Share of joint venture's taxation                             |  | 2.7                    |  
|Share of associates' taxation                                 |  | 0.6                    |  
|                                                              |  |                        |  
|Total current tax charge                                      |  | 0.5                    |  
|                                                              |  |                        |  
|Deferred tax:                                                 |  |                        |  
|Origination and reversal of timing differences                |  | 7.4                    |  
|Reversal of deferred tax assets                               |  | 19.0                   |  
|                                                              |  |                        |  
|Total deferred tax charge                                     |  | 26.4                   |  
|                                                              |  |                        |  
|Total charge for the year                                     |  | 26.9                   |  
|                                                              |  |                        |  

Analyzed
by continuing and discontinued operations:

|                          |  | Year ended
December 31
|------------------------- |  | ----------------------
|
|
|Continuing operations     |  | 26.9                  
|Discontinued operations   |  |                      
|                          |  |                       
|Total charge for the year |  | 26.9                  
|                          |  |                       

The
tax effect of the operating exceptional items was a tax credit of £3.5 million (2001 £10.3 million; 2000 £0.7 million). In respect of
the non-operating exceptional items a charge of £3.0 million (2001 £13.2 million; 2000 nil) arises.

An
exceptional deferred tax charge of £19.0 million arises in 2002 as, currently, there is insufficient evidence to support recognition of a deferred tax asset under FRS 19.

F-53

---

(Loss)/profit
before taxation is analyzed as follows:

|               |  | Year ended December 31 |  
|-------------- |  | ---------------------- | -
|
|
|United Kingdom |  | (30.9                  | )
|Overseas       |  | (1,022.2               | )
|               |  |                        |  
|               |  | (1,053.1               | )
|               |  |                        |  

|                                                                        |  | Year ended December 31 |  
|----------------------------------------------------------------------- |  | ---------------------- | -
|
|
|(Loss)/profit before tax                                                |  | (1,053.1               | )
|                                                                        |  |                        |  
|(Loss)/profit before tax multiplied by standard rate of corporation tax |  | (315.9                 | )
|Expenses not deductable for tax                                         |  | 326.4                  |  
|Tax arising on disposals                                                |  | 3.0                    |  
|Different tax rates on overseas earnings and other adjustments          |  | 0.6                    |  
|Exceptional tax credit                                                  |  |                       |  
|Tax over provided in previous years                                     |  | (6.2                   | )
|Movements in timing differences                                         |  | (7.4                   | )
|                                                                        |  |                        |  
|Total current tax charge                                                |  | 0.5                    |  
|                                                                        |  |                        |  

A
reconciliation of the (loss)/profit before tax at the United Kingdom statutory rate of corporation tax to the tax charge for the year is as follows:

|                                                             |  | Year ended December 31 |  
|------------------------------------------------------------ |  | ---------------------- | -
|
|
|(Loss)/profit before tax at the UK statutory rate            |  | (315.9                 | )
|Adjusted for:                                                |  |                        |  
|Permanent differences arising on amortization and impairment |  | 293.8                  |  
|Tax over provided in previous years                          |  | (6.2                   | )
|Taxation arising on disposals                                |  | 17.5                   |  
|Exceptional tax credit                                       |  |                       |  
|Other permanent adjustments                                  |  | 9.4                    |  
|Overseas rate differences                                    |  | 0.3                    |  
|Reversal of deferred tax assets                              |  | 19.0                   |  
|Timing differences on exceptional items                      |  | 9.0                    |  
|                                                             |  |                        |  
|Tax charge for the year                                      |  | 26.9                   |  
|                                                             |  |                        |  

F-54

---

Deferred
tax assets of £23.7 million (2001 nil: 2000 nil) arising principally on timing differences in the US and UK have not been recognized. These assets can only be
realized when they reverse against suitable taxable profits.

Although
the directors ultimately expect to realize these assets, there is currently insufficient evidence under FRS 19 to recognize a deferred tax asset in respect of these timing differences.

The
Group has tax losses arising in the United States of £25.1 million (2001 £19.9 million; 2000 £4.7 million) that are available for
offset against future taxable profits of that subsidiary. A deferred tax asset has not been recognized in respect of these losses as their future recovery is uncertain.

No
deferred tax is recognized on the unremitted earnings of overseas subsidiaries, associates and the joint venture.

12.   (Loss)/Earnings per Share

(Loss)/earnings per share is calculated by reference to the (loss)/earnings for the year and the number of Ordinary shares in issue during the year as follows:

|                                                                         |                     | Year ended December 31 |      
|------------------------------------------------------------------------ | ------------------- | ---------------------- | -----
|
|
|Basic (loss)/earnings attributable to shareholders                       |                     | (1,080.4               | )    
|Operating exceptional items:                                             |                     |                        |      
|                                                                         | Other               |                        | 41.6 
|                                                                         | Goodwill impairment |                        | 923.3
|Goodwill amortization                                                    |                     | 56.1                   |      
|Exceptional itemloss/(profit) on disposal and closure of operations     |                     | 48.4                   |      
|Provision against investment in own shares                               |                     | 30.1                   |      
|Profit on disposal of tangible fixed assets                              |                     |                       |      
|Prior year tax credit                                                    |                     | (6.2                   | )    
|Exceptional tax credit                                                   |                     |                       |      
|Attributable taxation on exceptional items                               |                     | (3.5                   | )    
|Attributable taxation on the loss on disposal of operations              |                     | 3.0                    |      
|Reversal of deferred tax assets                                          |                     | 19.0                   |      
|                                                                         |                     |                        |      
|Headline earnings attributable to shareholders                           |                     | 31.4                   |      
|                                                                         |                     |                        |      
|                                                                         |                     | (Number)               |      
|Weighted average number of shares in issue (millions)basic and headline |                     | 922.5                  |      
|Dilutive potential of employee share options                             |                     |                       |      
|                                                                         |                     |                        |      
|Weighted average number of shares in issue (millions)diluted            |                     | 922.5                  |      
|                                                                         |                     |                        |      

F-55

---

The
shares in issue used to calculate basic and headline (loss)/earnings per share exclude the shares held by QUEST, by Orbis Management Limited and by Greenwood Nominees, as detailed in
note 18, in accordance with FRS 14 "Earnings per Share".

13.   Intangible Assets

|                                                |  | Goodwill |   | Other intangible
assets |   | Total
intangible
assets |  
|----------------------------------------------- |  | -------- | - | ----------------------- | - | ----------------------- | -
|
|Cost:                                           |  |          |   |                         |   |                         |  
|At January 1, 2001                              |  | 1,852.8  |   | 0.2                     |   | 1,853.0                 |  
|Decrease during the year (note 34)              |  | (0.8     | ) |                        |   | (0.8                    | )
|Disposal of operations (note 35)                |  | (27.8    | ) | (0.2                    | ) | (28.0                   | )
|Exchange adjustment                             |  | 6.8      |   |                        |   | 6.8                     |  
|                                                |  |          |   |                         |   |                         |  
|At December 31, 2001                            |  | 1,831.0  |   |                        |   | 1,831.0                 |  
|Increase during the year (note 34)              |  | 51.0     |   |                        |   | 51.0                    |  
|Disposal of operations (note 35)                |  | (8.1     | ) |                        |   | (8.1                    | )
|Exchange adjustment                             |  | (31.0    | ) |                        |   | (31.0                   | )
|                                                |  |          |   |                         |   |                         |  
|At December 31, 2002                            |  | 1,842.9  |   |                        |   | 1,842.9                 |  
|                                                |  |          |   |                         |   |                         |  
|Amortization:                                   |  |          |   |                         |   |                         |  
|At January 1, 2001                              |  | 36.1     |   | 0.1                     |   | 36.2                    |  
|Provided during the year                        |  | 86.6     |   |                        |   | 86.6                    |  
|Goodwill impairment                             |  | 724.6    |   |                        |   | 724.6                   |  
|Disposal of operations (note 35)                |  | (4.3     | ) | (0.1                    | ) | (4.4                    | )
|Exchange adjustment                             |  | 0.3      |   |                        |   | 0.3                     |  
|                                                |  |          |   |                         |   |                         |  
|At December 31, 2001                            |  | 843.3    |   |                        |   | 843.3                   |  
|Provided during the year                        |  | 56.1     |   |                        |   | 56.1                    |  
|Goodwill impairment                             |  | 836.3    |   |                        |   | 836.3                   |  
|Disposal of operations (note 35)                |  | (1.6     | ) |                        |   | (1.6                    | )
|Exchange adjustment                             |  | (4.8     | ) |                        |   | (4.8                    | )
|                                                |  |          |   |                         |   |                         |  
|At December 31, 2002                            |  | 1,729.3  |   |                        |   | 1,729.3                 |  
|                                                |  |          |   |                         |   |                         |  
|Net book value at December 31, 2001             |  | 987.7    |   |                        |   | 987.7                   |  
|                                                |  |          |   |                         |   |                         |  
|Net book value at December 31, 2002             |  | 113.6    |   |                        |   | 113.6                   |  
|                                                |  |          |   |                         |   |                         |  
|Goodwill is amortized principally over 20 years |  |          |   |                         |   |                         |  

F-56

---

SPIRENT plc

NOTES TO THE FINANCIAL STATEMENTS (Continued)

14.   Tangible Assets

|                                    |  | Land and buildings |   |      |   |      |   |       |  
|----------------------------------- |  | ------------------ | - | ---- | - | ---- | - | ----- | -
|
|
|Cost:                               |  |                    |   |      |   |      |   |       |  
|At January 1, 2001                  |  | 18.8               |   | 16.4 |   | 17.5 |   | 146.1 |  
|Exchange adjustment                 |  |                   |   | (0.1 | ) | (0.2 | ) |      |  
|Additionsowned assets              |  | 5.0                |   | 0.1  |   | 8.6  |   | 19.6  |  
|leased assets                      |  |                   |   |     |   |     |   | 0.5   |  
|Disposals                           |  |                   |   | (0.1 | ) | (0.5 | ) | (7.1  | )
|Disposal of operations (note 35)    |  | (5.6               | ) | (1.8 | ) | (0.4 | ) | (30.7 | )
|                                    |  |                    |   |      |   |      |   |       |  
|At December 31, 2001                |  | 18.2               |   | 14.5 |   | 25.0 |   | 128.4 |  
|Exchange adjustment                 |  | (1.9               | ) | (0.1 | ) | (0.9 | ) | (8.6  | )
|Additions by acquisition            |  |                   |   |     |   |     |   |      |  
|Additionsowned assets              |  | 3.2                |   | 0.2  |   | 0.9  |   | 12.8  |  
|leased assets                      |  |                   |   |     |   |     |   |      |  
|Inter-class transfers               |  | (1.5               | ) |     |   |     |   | 0.9   |  
|Disposals                           |  | (1.1               | ) | (0.1 | ) | (0.7 | ) | (2.6  | )
|Disposal of operations (note 35)    |  |                   |   | (3.6 | ) | (0.2 | ) | (12.9 | )
|                                    |  |                    |   |      |   |      |   |       |  
|At December 31, 2002                |  | 16.9               |   | 10.9 |   | 24.1 |   | 118.0 |  
|                                    |  |                    |   |      |   |      |   |       |  
|Depreciation:                       |  |                    |   |      |   |      |   |       |  
|At January 1, 2001                  |  | 3.2                |   | 1.9  |   | 2.3  |   | 94.9  |  
|Exchange adjustment                 |  |                   |   |     |   |     |   |      |  
|Provided during the year            |  | 0.4                |   | 0.5  |   | 1.2  |   | 16.3  |  
|Disposals                           |  |                   |   | (0.1 | ) | (0.4 | ) | (5.9  | )
|Disposal of operations (note 35)    |  | (0.9               | ) | (0.6 | ) | (0.2 | ) | (22.6 | )
|                                    |  |                    |   |      |   |      |   |       |  
|At December 31, 2001                |  | 2.7                |   | 1.7  |   | 2.9  |   | 82.7  |  
|Exchange adjustment                 |  | (0.3               | ) |     |   | (0.3 | ) | (4.9  | )
|Provided during the year            |  | 0.4                |   | 0.6  |   | 1.9  |   | 14.4  |  
|Disposals                           |  | (0.1               | ) | (0.1 | ) | (0.2 | ) | (1.2  | )
|Disposal of operations (note 35)    |  |                   |   | (0.7 | ) |     |   | (10.0 | )
|                                    |  |                    |   |      |   |      |   |       |  
|At December 31, 2002                |  | 2.7                |   | 1.5  |   | 4.3  |   | 81.0  |  
|                                    |  |                    |   |      |   |      |   |       |  
|Net book value at December 31, 2001 |  | 15.5               |   | 12.8 |   | 22.1 |   | 45.7  |  
|                                    |  |                    |   |      |   |      |   |       |  
|Net book value at December 31, 2002 |  | 14.2               |   | 9.4  |   | 19.8 |   | 37.0  |  
|                                    |  |                    |   |      |   |      |   |       |  

F-57

---

Tangible
assets include the following amounts in respect of finance leased assets:

|                                      |  | Plant and
machinery |  | Fixtures,
fittings and
equipment |  | Total
|------------------------------------- |  | ------------------- |  | -------------------------------- |  | -----
|
|Net book value at January 1, 2001     |  | 0.2                 |  | 0.7                              |  | 0.9  
|Depreciation provided during the year |  | 0.1                 |  | 0.4                              |  | 0.5  
|Net book value at December 31, 2001   |  | 0.6                 |  | 0.5                              |  | 1.1  
|Depreciation provided during the year |  | 0.1                 |  | 0.3                              |  | 0.4  
|Net book value at December 31, 2002   |  | 0.4                 |  | 0.7                              |  | 1.1  

15.   Capital Commitments and contingent liabilities

|                                 |                             | As at December 31
|-------------------------------- | --------------------------- | -----------------
|
|
|Capital expenditure commitments: |                             |                  
|                                 | Contracted but not provided |                  

16.   Investment in Joint Venture

|                         |  | (£ millions) |  
|------------------------ |  | ------------ | -
|At January 1, 2001       |  | 40.7         |  
|Share of retained profit |  | 4.1          |  
|Exchange adjustment      |  | (0.5         | )
|                         |  |              |  
|At December 31, 2001     |  | 44.3         |  
|Share of retained profit |  | 3.5          |  
|Exchange adjustment      |  | 2.3          |  
|                         |  |              |  
|At December 31, 2002     |  | 50.1         |  
|                         |  |              |  

The
joint venture companies as at December 31, 2002 and 2001 were as follows:

|                         |  | % holding |  | Nature of business      
|------------------------ |  | --------- |  | ------------------------
|Wago Kontakttechnik GmbH |  | 51%       |  | Interconnection products
|Wago Contact SA          |  | 51%       |  | Interconnection products

As
referred to in note 36, Spirent completed the divestment of its 51% interests in the WAGO joint venture for net proceeds of £59.5 million on April 4, 2003.

F-58

---

Additional
disclosures in respect of the WAGO joint venture are as follows:

|                        |  | Year ended December 31 |  
|----------------------- |  | ---------------------- | -
|
|
|Profit and loss account |  |                        |  
|Turnover                |  | 75.6                   |  
|                        |  |                        |  
|Profit before tax       |  | 6.7                    |  
|Taxation                |  | (2.7                   | )
|                        |  |                        |  
|Profit after tax        |  | 4.0                    |  
|                        |  |                        |  

|                                         |  | As at
December 31
|---------------------------------------- |  | -----------------
|
|
|Balance sheet                            |  |                  
|Fixed assets                             |  | 34.4             
|Current assets                           |  | 38.5             
|                                         |  |                  
|Share of gross assets                    |  | 72.9             
|                                         |  |                  
|Liabilities due within one year          |  | 9.8              
|Liabilities due after more than one year |  | 11.3             
|Minority interests                       |  | 1.7              
|                                         |  |                  
|Share of gross liabilities               |  | 22.8             
|                                         |  |                  
|Share of net assets                      |  | 50.1             
|                                         |  |                  

F-59

---

17.   Investment in Associates

|                                              |  | Goodwill |   | Share of
retained profit
and reserves |   | Total |  
|--------------------------------------------- |  | -------- | - | ------------------------------------- | - | ----- | -
|
|At January 1, 2001                            |  |         |   | 12.9                                  |   | 12.9  |  
|Additions                                     |  |         |   | (0.2                                  | ) | (0.2  | )
|Share of retained profit                      |  |         |   | 0.5                                   |   | 0.5   |  
|Goodwill arising on acquisition of associates |  | 6.6      |   |                                      |   | 6.6   |  
|Amortization of goodwill                      |  | (0.1     | ) |                                      |   | (0.1  | )
|Exchange adjustment                           |  |         |   | (1.4                                  | ) | (1.4  | )
|                                              |  |          |   |                                       |   |       |  
|At December 31, 2001                          |  | 6.5      |   | 11.8                                  |   | 18.3  |  
|Share of retained profit                      |  |         |   | 0.3                                   |   | 0.3   |  
|Goodwill arising on acquisition of associates |  | (5.8     | ) | 0.6                                   |   | (5.2  | )
|Amortization of goodwill                      |  | (0.2     | ) |                                      |   | (0.2  | )
|Exchange adjustment                           |  | (0.5     | ) | 0.6                                   |   | 0.1   |  
|                                              |  |          |   |                                       |   |       |  
|At December 31, 2002                          |  |         |   | 13.3                                  |   | 13.3  |  
|                                              |  |          |   |                                       |   |       |  

At
December 31, 2001 the Group held a 16% interest in Caw Networks, Inc acquired on October 16, 2001 at a cost of £6.4 million including expenses. On
August 15, 2002 the remaining, then, 85% of Caw was acquired by the Group. From this date Caw has been fully consolidated into the Group accounts.

The
associated companies are as follows:

|                       |  | As at December 31 |  |   
|---------------------- |  | ----------------- |  | --
|
|
|Tyton Company of Japan |  | 49                |  | 49
|3M/ECC                 |  | 20                |  | 20
|Caw Networks Inc       |  |                  |  | 16

F-60

---

18.   Other Investments

|                                                          |  | Investment
in own
shares |  
|--------------------------------------------------------- |  | ------------------------ | -
|
|At January 1, 2001                                        |  | 33.4                     |  
|Shares issued to Greenwood Nominees                       |  | 2.0                      |  
|Purchased by Orbis                                        |  | 0.1                      |  
|Transferred to beneficial holders from Greenwood Nominees |  | (1.0                     | )
|Allotted to option holders                                |  | (0.4                     | )
|                                                          |  |                          |  
|At December 31, 2001                                      |  | 34.1                     |  
|Transferred to beneficial holders from Greenwood Nominees |  | (1.0                     | )
|Allotted to option holders                                |  | (0.9                     | )
|Provision against investment in own shares                |  | (30.1                    | )
|                                                          |  |                          |  
|At December 31, 2002                                      |  | 2.1                      |  
|                                                          |  |                          |  

The
investment in own shares relates to 3,508,136 (2001 4,571,286) shares held by QUEST, and 9,064,985 (2001 9,064,985) shares held by Orbis Management Limited. Shares held by QUEST will be used
to satisfy options under the Company's various savings related share option schemes. Shares in Orbis are primarily held to hedge awards under the Long Term Share Purchase Plan and Netcom Stock
Appreciation Rights Plan. 625,031 Shares held by Greenwood Nominees at December 31, 2001 were allotted in May 2002 pursuant to the acquisition agreement of Zarak Systems
Corporation.

Given
the significant fall in the Spirent share price in 2002 the directors consider it prudent to make a provision against the carrying value of the shares held by QUEST and Orbis and
accordingly have written them down to the market value at December 31, 2002 of 16.75 pence per share.

19.   Stocks

|                 |  | As at
December 31
|---------------- |  | -----------------
|
|
|Raw materials    |  | 16.6             
|Work in progress |  | 8.9              
|Finished goods   |  | 36.0             
|                 |  |                  
|                 |  | 61.5             
|                 |  |                  

F-61

---

20.   Debtors

|                               |  | As at
December 31
|------------------------------ |  | -----------------
|
|
|Due within one year:           |  |                  
|Trade debtors                  |  | 79.1             
|Owed by associates             |  | 0.4              
|Other debtors                  |  | 6.3              
|Prepayments and accrued income |  | 9.5              
|                               |  |                  
|                               |  | 95.3             
|                               |  |                  
|Due after one year:            |  |                  
|Other debtors                  |  | 0.2              
|Deferred taxation (note 27)    |  |                 
|Prepayments                    |  | 1.8              
|                               |  |                  
|                               |  | 2.0              
|                               |  |                  
|Total debtors                  |  | 97.3             
|                               |  |                  

Trade
debtors at December 31, 2002 are stated after deducting provisions for bad and doubtful debts of £7.1 million (2001 £9.3 million).

F-62

---

21.   Notes to the Cash Flow Statement

|                                                                     |  | Year ended December 31 |  
|-------------------------------------------------------------------- |  | ---------------------- | -
|
|
|Returns on Investments and Servicing of Finance                      |  |                        |  
|Interest received                                                    |  | 4.0                    |  
|Interest paid                                                        |  | (14.7                  | )
|Interest element of finance lease rental payments                    |  | (0.1                   | )
|Minority dividends paid                                              |  |                       |  
|                                                                     |  |                        |  
|Net cash outflow for returns on investments and servicing of finance |  | (10.8                  | )
|                                                                     |  |                        |  
|Taxation                                                             |  |                        |  
|Corporation tax paid                                                 |  | (11.9                  | )
|Overseas tax paid                                                    |  | 7.7                    |  
|                                                                     |  |                        |  
|Tax paid                                                             |  | (4.2                   | )
|                                                                     |  |                        |  
|Capital Expenditure and Financial Investment                         |  |                        |  
|Capital expenditure                                                  |  | (27.6                  | )
|Receipts from sales of tangible assets                               |  | 1.8                    |  
|Sale/(purchase) of own shares                                        |  |                       |  
|                                                                     |  |                        |  
|Net cash outflow for capital expenditure and financial investment    |  | (25.8                  | )
|                                                                     |  |                        |  
|Acquisitions and Disposals                                           |  |                        |  
|Acquisition of subsidiaries (note 34)                                |  | (49.2                  | )
|Acquisition of associates                                            |  |                       |  
|Disposal of shares in subsidiaries (note 35)                         |  | 55.6                   |  
|                                                                     |  |                        |  
|Net cash inflow/(outflow) for acquisitions and disposals             |  | 6.4                    |  
|                                                                     |  |                        |  
|Management of Liquid Resources                                       |  |                        |  
|Sale of investments                                                  |  | 0.2                    |  
|                                                                     |  |                        |  
|Financing                                                            |  |                        |  
|Issue of share capital                                               |  | 2.4                    |  
|New loans                                                            |  | 75.7                   |  
|Repayment of loans                                                   |  | (23.6                  | )
|Repayment of capital element of finance lease rentals                |  | (0.7                   | )
|                                                                     |  |                        |  
|Net cash inflow/(outflow) from financing                             |  | 53.8                   |  
|                                                                     |  |                        |  

F-63

---

22.   Analysis of Changes in Net Borrowings

|                                                              |  | January 1,
2000 |   | Cash
flow |   | Non cash
changes |   | Exchange
adjustment |   | December 31,
2000 |  
|------------------------------------------------------------- |  | --------------- | - | --------- | - | ---------------- | - | ------------------- | - | ----------------- | -
|
|Cash at bank and in hand                                      |  | 37.7            |   | (9.1      | ) |                 |   |                    |   | 28.6              |  
|Overdrafts                                                    |  | (0.6            | ) | (1.6      | ) |                 |   |                    |   | (2.2              | )
|                                                              |  |                 |   |           |   |                  |   |                     |   |                   |  
|Net cash                                                      |  | 37.1            |   | (10.7     | ) |                 |   |                    |   | 26.4              |  
|Current asset investments                                     |  | 51.0            |   | (50.6     | ) |                 |   | 3.5                 |   | 3.9               |  
|Senior unsecured loan notes due within one year               |  | (30.8           | ) | 31.7      |   |                 |   | (0.9                | ) |                  |  
|Bank loans due within one year                                |  | (118.1          | ) | 105.7     |   | (1.0             | ) | (3.3                | ) | (16.7             | )
|Other loans and finance lease obligations due within one year |  | (0.5            | ) | 1.1       |   | (1.5             | ) |                    |   | (0.9              | )
|                                                              |  |                 |   |           |   |                  |   |                     |   |                   |  
|Net liquid funds/(short-term borrowings)                      |  | (61.3           | ) | 77.2      |   | (2.5             | ) | (0.7                | ) | 12.7              |  
|Senior unsecured loan notes due after one year                |  | (45.1           | ) | (89.4     | ) |                 |   | (11.3               | ) | (145.8            | )
|Bank loans due after one year                                 |  | (160.3          | ) | (2.4      | ) |                 |   | (7.4                | ) | (170.1            | )
|Other loans and finance lease obligations due after one year  |  | (7.9            | ) | 1.2       |   | (16.2            | ) | (0.3                | ) | (23.2             | )
|                                                              |  |                 |   |           |   |                  |   |                     |   |                   |  
|Net borrowings                                                |  | (274.6          | ) | (13.4     | ) | (18.7            | ) | (19.7               | ) | (326.4            | )
|                                                              |  |                 |   |           |   |                  |   |                     |   |                   |  

|                                                              |  | January 1,
2001 |   | Cash
flow |   | Non cash
changes |   | Exchange
adjustment |   | December 31,
2001 |  
|------------------------------------------------------------- |  | --------------- | - | --------- | - | ---------------- | - | ------------------- | - | ----------------- | -
|
|Cash at bank and in hand                                      |  | 28.6            |   | (0.7      | ) |                 |   | (0.3                | ) | 27.6              |  
|Overdrafts                                                    |  | (2.2            | ) | 1.7       |   |                 |   | 0.1                 |   | (0.4              | )
|                                                              |  |                 |   |           |   |                  |   |                     |   |                   |  
|Net cash                                                      |  | 26.4            |   | 1.0       |   |                 |   | (0.2                | ) | 27.2              |  
|Current asset investments                                     |  | 3.9             |   | (3.6      | ) |                 |   |                    |   | 0.3               |  
|Bank loans due within one year                                |  | (16.7           | ) | 6.9       |   |                 |   | (0.2                | ) | (10.0             | )
|Other loans and finance lease obligations due within one year |  | (0.9            | ) | 0.1       |   |                 |   |                    |   | (0.8              | )
|                                                              |  |                 |   |           |   |                  |   |                     |   |                   |  
|Net liquid funds                                              |  | 12.7            |   | 4.4       |   |                 |   | (0.4                | ) | 16.7              |  
|Senior unsecured loan notes due after one year                |  | (145.8          | ) | (0.1      | ) |                 |   | (3.0                | ) | (148.9            | )
|Bank loans due after one year                                 |  | (170.1          | ) | 149.8     |   |                 |   | (3.9                | ) | (24.2             | )
|Other loans and finance lease obligations due after one year  |  | (23.2           | ) | 1.0       |   | (0.8             | ) | 0.3                 |   | (22.7             | )
|                                                              |  |                 |   |           |   |                  |   |                     |   |                   |  
|Net borrowings                                                |  | (326.4          | ) | 155.1     |   | (0.8             | ) | (7.0                | ) | (179.1            | )
|                                                              |  |                 |   |           |   |                  |   |                     |   |                   |  

F-64

---

|                                                              |  | January 1,
2002 |   | Cash
flow |   | Non cash
changes |   | Exchange
adjustment |   | December 31,
2002 |  
|------------------------------------------------------------- |  | --------------- | - | --------- | - | ---------------- | - | ------------------- | - | ----------------- | -
|
|Cash at bank and in hand                                      |  | 27.6            |   | 56.8      |   |                 |   | (0.9                | ) | 83.5              |  
|Overdrafts                                                    |  | (0.4            | ) | (0.2      | ) |                 |   |                    |   | (0.6              | )
|                                                              |  |                 |   |           |   |                  |   |                     |   |                   |  
|Net cash                                                      |  | 27.2            |   | 56.6      |   |                 |   | (0.9                | ) | 82.9              |  
|Current asset investments                                     |  | 0.3             |   | (0.2      | ) |                 |   |                    |   | 0.1               |  
|Bank loans due within one year                                |  | (10.0           | ) | 9.6       |   |                 |   |                    |   | (0.4              | )
|Other loans and finance lease obligations due within one year |  | (0.8            | ) | 0.2       |   | (0.2             | ) |                    |   | (0.8              | )
|                                                              |  |                 |   |           |   |                  |   |                     |   |                   |  
|Net liquid funds                                              |  | 16.7            |   | 66.2      |   | (0.2             | ) | (0.9                | ) | 81.8              |  
|Senior unsecured loan notes due after one year                |  | (148.9          | ) |          |   |                 |   | 13.9                |   | (135.0            | )
|Bank loans due after one year                                 |  | (24.2           | ) | (75.5     | ) |                 |   | 0.3                 |   | (99.4             | )
|Other loans and finance lease obligations due after one year  |  | (22.7           | ) | 14.3      |   | (0.2             | ) | (0.6                | ) | (9.2              | )
|                                                              |  |                 |   |           |   |                  |   |                     |   |                   |  
|Net borrowings                                                |  | (179.1          | ) | 5.0       |   | (0.4             | ) | 12.7                |   | (161.8            | )
|                                                              |  |                 |   |           |   |                  |   |                     |   |                   |  

23.   Current Asset Investments

|                                 |  | December 31
|-------------------------------- |  | -----------
|
|
|Listed                           |  | 0.1        
|Unlisted                         |  |           
|                                 |  |            
|                                 |  | 0.1        
|                                 |  |            
|Market value listed securities   |  | 0.1        
|Market value unlisted securities |  |           
|                                 |  |            
|                                 |  | 0.1        
|                                 |  |            

The
investments are United Kingdom and United States Treasury Stock.

F-65

---

24.   Creditors Due within One Year

|                                      |  | As at
December 31
|------------------------------------- |  | -----------------
|
|
|Trade creditors                       |  | 23.6             
|Payments received on account          |  | 0.4              
|Bills of exchange payable             |  |                 
|Owed to joint venture                 |  | 0.3              
|Owed to associates                    |  | 0.6              
|Other creditors                       |  | 8.7              
|Accruals and deferred income          |  | 50.1             
|Proposed dividend                     |  |                 
|Corporation taxUK and overseas       |  | 19.5             
|Other taxes and social security costs |  | 4.3              
|                                      |  |                  
|                                      |  | 107.5            
|                                      |  |                  

25.   Loans and Overdrafts

|                                                                        |  | As at
December 31
|----------------------------------------------------------------------- |  | -----------------
|
|
|Bank overdrafts:                                                        |  |                  
|Secured                                                                 |  | 0.5              
|Unsecured                                                               |  | 0.1              
|Bank loans due within one year (note 28)                                |  | 0.4              
|Other loans and finance lease obligations due within one year (note 28) |  | 0.8              
|                                                                        |  |                  
|                                                                        |  | 1.8              
|                                                                        |  |                  

Where
applicable, overdrafts are secured either by mortgages on the freehold properties or by floating charges on the assets of the borrowing subsidiaries. The weighted average interest rate
payable on the bank overdrafts is 4.1% (2001 7.8%).

F-66

---



26.   Creditors Due After More Than One Year

|                                                    |  | As at
December 31
|--------------------------------------------------- |  | -----------------
|
|
|Senior unsecured loan notes (note 29)               |  | 135.0            
|Bank loans (note 28)                                |  | 99.4             
|Other loans and finance lease obligations (note 28) |  | 9.2              
|Other creditors                                     |  | 1.6              
|Deferred income                                     |  | 2.6              
|Pension                                             |  | 4.8              
|                                                    |  |                  
|                                                    |  | 252.6            
|                                                    |  |                  

27.   Provisions for Liabilities and Charges

|                                   |  | Year ended December 31 |  
|---------------------------------- |  | ---------------------- | -
|
|
|Deferred taxation                  |  |                        |  
|At January 1                       |  | (25.7                  | )
|Exchange adjustment                |  | 1.4                    |  
|Arising on acquisition             |  |                       |  
|Disposal of subsidiaries (note 35) |  | 0.3                    |  
|Charged during the year (note 11)  |  | 26.4                   |  
|                                   |  |                        |  
|At December 31                     |  | 2.4                    |  
|                                   |  |                        |  

|                                                                            |  | As at
December 31 | 
|--------------------------------------------------------------------------- |  | ----------------- | 
|
|
|Deferred taxation provided:                                                 |  |                   | 
|Capital allowances in advance of the corresponding charges for depreciation |  | 1.7               | 
|Short-term timing differences on stock options                              |  |                  | 
|Other short-term timing differences                                         |  | 0.7               | 
|                                                                            |  |                   | 
|                                                                            |  | 2.4               | 
|                                                                            |  |                   | 
|Debtors greater than one yeardeferred taxation (note 20)                   |  |                  | 
|Provisions for liabilities and chargesdeferred tax liability               |  | 2.4               | 
|                                                                            |  |                   | 
|                                                                            |  | 2.4               | 
|                                                                            |  |                   | 

In
accordance with FRS 19, deferred tax assets have not been recognized in respect of tax losses arising in the United States of £25.1 million (2001
£19.9 million). In addition, deferred tax assets

F-67

---

of £23.7 million (2001 nil) arising principally in respect of timing differences, have not been recognized (see note 11).

|                                                      |  | Year ended
December 31
|----------------------------------------------------- |  | ----------------------
|
|
|Lease provisions                                      |  |                       
|Charged during the year                               |  | 20.2                  
|Transfers in                                          |  | 9.0                   
|Utilized during the year                              |  | (1.8                  
|Exchange adjustment                                   |  | (1.4                  
|                                                      |  |                       
|                                                      |  | 26.0                  
|                                                      |  |                       
|Provisions for liabilities and charges at December 31 |  | 28.4                  
|                                                      |  |                       

28.   Loans and Finance Lease Obligations

|                                                   |  | As at
December 31 |  
|-------------------------------------------------- |  | ----------------- | -
|
|
|Secured:                                           |  |                   |  
|Bank loans not wholly repayable within five years  |  | 2.2               |  
|Bank loans wholly repayable within five years      |  | 2.1               |  
|Finance lease obligations                          |  | 9.5               |  
|                                                   |  |                   |  
|                                                   |  | 13.8              |  
|                                                   |  |                   |  
|Unsecured:                                         |  |                   |  
|Bank loans wholly repayable within five years      |  | 96.2              |  
|Other loans not wholly repayable within five years |  |                  |  
|Other loans wholly repayable within five years     |  | 0.5               |  
|                                                   |  |                   |  
|                                                   |  | 96.7              |  
|                                                   |  |                   |  
|Less debt issuance costs                           |  | (0.7              | )
|                                                   |  |                   |  
|                                                   |  | 109.8             |  
|                                                   |  |                   |  

F-68

---

Repayment
schedules for amounts due at December 31 are as follows:

|                                       |  | As at
December 31 |  
|-------------------------------------- |  | ----------------- | -
|
|
|Bank loans:                            |  |                   |  
|After five years                       |  | 2.2               |  
|Between two and five years             |  | 1.3               |  
|Between one and two years              |  | 96.6              |  
|                                       |  |                   |  
|Due after more than one year           |  | 100.1             |  
|Less debt issuance costs               |  | (0.7              | )
|                                       |  |                   |  
|Due after more than one year (note 26) |  | 99.4              |  
|                                       |  |                   |  
|Due within one year                    |  | 0.4               |  
|Less debt issuance costs               |  |                  |  
|                                       |  |                   |  
|Due within one year (note 25)          |  | 0.4               |  
|                                       |  |                   |  
|Total bank loans                       |  | 99.8              |  
|                                       |  |                   |  
|Other loans and finance leases:        |  |                   |  
|After five years                       |  | 7.1               |  
|Between two and five years             |  | 1.5               |  
|Between one and two years              |  | 0.6               |  
|                                       |  |                   |  
|Due after more than one year (note 26) |  | 9.2               |  
|Due within one year (note 25)          |  | 0.8               |  
|                                       |  |                   |  
|Total other loans and finance leases   |  | 10.0              |  
|                                       |  |                   |  
|                                       |  | 109.8             |  
|                                       |  |                   |  

Where
applicable loans are secured either by mortgages on the freehold properties or by floating charges on the assets of the borrowing subsidiaries. The long-term secured loan is
repayable in annual installments of £214,000 until the year 2008 and bears interest at an average rate of 7.0%.

F-69

---

Repayment
schedules for loans and finance leases at December 31, 2002 are as follows:

|                             |  |      |  |     |  | Finance Leases
|---------------------------- |  | ---- |  | --- |  | --------------
|
|
|Due within one year          |  | 0.4  |  |    |  | 0.8           
|Between one and two years    |  | 95.9 |  |    |  | 0.6           
|Between two and three years  |  | 0.4  |  |    |  | 0.6           
|Between three and four years |  | 0.5  |  |    |  | 0.5           
|Between four and five years  |  | 0.4  |  |    |  | 0.4           
|After five years             |  | 2.2  |  | 0.5 |  | 6.6           
|                             |  |      |  |     |  |               
|                             |  | 99.8 |  | 0.5 |  | 9.5           
|                             |  |      |  |     |  |               

29.   Senior Unsecured Loan Notes

|                                       |  | As at
December 31 |  
|-------------------------------------- |  | ----------------- | -
|
|
|Due after more than one year           |  |                   |  
|7.94% Senior unsecured loan notes 2006 |  | 6.2               |  
|8.06% Senior unsecured loan notes 2009 |  | 39.4              |  
|8.16% Senior unsecured loan notes 2009 |  | 71.4              |  
|8.75% Senior unsecured loan notes 2009 |  | 18.4              |  
|                                       |  |                   |  
|                                       |  | 135.4             |  
|Less debt issuance costs               |  | (0.4              | )
|                                       |  |                   |  
|Due after more than one year (note 26) |  | 135.0             |  
|                                       |  |                   |  

At
December 31, 2002 the following loan notes were in issue:

Loan
notes are repayable:

F-70

---

As
discussed in note 36, post December 31, 2002 certain amendments have been made to the terms of these loan notes.

A
five-year interest rate swap for $115 million entered into on November 23, 2001 was called by the counterparties in November 2002 and replaced with an interest rate swap
for $163.4 million. The counterparties have the option to call the swap at six-monthly intervals commencing May 2003. This swap has been transacted with two counterparties and split
$100 million and $63.4 million between them. The terms of the $100 million swap allow for either party to exercise a break on November 23, 2005 or November 23,
2008. The swap for $63.4 million has an option for either party to exercise a break at November 23, 2005 only. If a break should occur a mark to market settlement will be made.

30.   Financial Risk Management

The primary objective of the treasury function is to reduce financial risk and to ensure that sufficient liquidity is available to the Group to meet its current and
anticipated needs. It operates as a service center within a framework of policies and guidelines laid down by the Board that are subject to regular review.

Objectives, Policies and Strategies

The major treasury activities involve raising finance and managing the Group's interest rate and currency exposures. Financial instruments including derivatives are used
to manage these exposures when deemed appropriate. Transactions are only undertaken if they relate to underlying exposures or business requirements. Speculative treasury transactions are
expressly forbidden.

Financing

The Group's policy is to finance operations through a combination of retained earnings and external financing. The Company raises the majority of the funding for the
Group. Debt is principally sourced from the syndicated bank market and the US private placement market. WAGO, which was a joint venture, arranged its own financing.

At
December 31, 2002, the amount of loan notes outstanding was $218 million, equivalent to £135.4 million at December 31, 2002 exchange rates. These loan
notes have maturity dates in 2006 and 2009.

Amounts
available under the committed banking facilities were £194.4 million at December 31, 2002 of which £96.2 million was drawn. These facilities
mature in July 2004.

Since
the year end the terms of the loan notes and the banking facility have been varied as discussed in note 36.

Further
details on the sources of funding are set out below.

Interest Rate Management

The objective of our interest rate management policy is to reduce the volatility of the interest charge. The exposure to interest rates is managed through an optimum mix
of fixed and floating rate debt and the use of interest rate swaps.

F-71

---

At
December 31, 2002 the Group's borrowings were composed of 20% of fixed rate debt. This excludes $163.4 million of private placement notes which have been swapped into floating
rates through the use of a seven-year swap, callable at the counterparties' option at six-monthly intervals commencing May 2003.

The
interest profile of Spirent's cash and borrowings at the year end is detailed in this note.

Net
interest payable was £12.3 million (2001 £22.8 million, 2000 £29.3 million). A one percentage point movement in short-term dollar
interest rates based on the year-end position would impact profit before tax by approximately £1 million.

Borrowings
are denominated in currencies that correspond to Spirent's net assets as described below.

The
fair value of borrowings and cash at the year end are compared to book value below.

Currency Management

Currency exposures arise from trading transactions undertaken by subsidiaries in foreign currencies and on the translation of the operating results and net assets of our
overseas subsidiaries.

Subsidiaries
are required to hedge material transactional exposures, against their local currency, using forward contracts. Group Treasury, by means of forward foreign exchange contracts, carries
out the majority of this hedging activity.

We
do not hedge translation exposures on translation of the operating results or net assets of our overseas subsidiaries since these are an accounting, not a cash, exposure. Where possible we aim
to match the currency of our borrowings with the currency profile of profits and net assets, this provides a partial hedge against these translation exposures.

Details
of the currencies of borrowings are set out in the table below.

At
the year end the balance sheet translation exposure was 70% hedged (2001 69%).

During
the year, sterling strengthened against the US dollar, the main currency to which we are exposed. A movement in the US dollar against sterling by 1% if maintained over the whole year based
on 2002 results, would affect reported profit before tax by approximately £0.2 million.

F-72

---

(a)    Interest Rate Risk

The interest rate profile of the Group's financial assets and liabilities at December 31, after taking into account interest rate swaps was as follows:

|           |  | As at December 31, 2002
|---------- |  | -----------------------
|
|
|Sterling   |  | 61.1                   
|US dollars |  | 10.1                   
|Euro       |  | 5.6                    
|Other      |  | 3.5                    
|           |  |                        
|           |  | 80.3                   
|           |  |                        

|           |  | As at December 31, 2001
|---------- |  | -----------------------
|
|
|Sterling   |  | 4.4                    
|US dollars |  | 9.3                    
|Euro       |  | 7.8                    
|Other      |  | 2.5                    
|           |  |                        
|           |  | 24.0                   
|           |  |                        

The
financial assets of the Group comprise:

|                                                                       |  | As at
December 31
|---------------------------------------------------------------------- |  | -----------------
|
|
|Debtors due after more than one year (excluding prepayments) (note 20) |  | 0.2              
|Current asset investments (note 23)                                    |  | 0.1              
|Cash at bank and in hand (note 22)                                     |  | 83.5             
|                                                                       |  |                  
|                                                                       |  | 83.8             
|                                                                       |  |                  

Floating rate financial assets comprise cash deposits at call, seven day and monthly rates.

F-73

---

The
weighted average period to maturity for financial assets on which no interest is paid is less than one year.

|           |  | As at December 31, 2002
|---------- |  | -----------------------
|
|
|Sterling   |  |                       
|US dollars |  | 37.8                   
|Euro       |  | 10.1                   
|Other      |  | 0.2                    
|           |  |                        
|           |  | 48.1                   
|           |  |                        

|           |  | As at December 31, 2001
|---------- |  | -----------------------
|
|
|Sterling   |  |                       
|US dollars |  | 75.0                   
|Euro       |  | 10.0                   
|Other      |  | 0.2                    
|           |  |                        
|           |  | 85.2                   
|           |  |                        

|           |  | As at December 31, 2002 |  | As at December 31, 2001
|---------- |  | ----------------------- |  | -----------------------
|
|
|Sterling   |  | 11.5                    |  | 3.3                    
|US dollars |  | 8.3                     |  | 6.2                    
|Euro       |  | 5.8                     |  | 13.3                   
|Other      |  | 13.9                    |  | 2.8                    
|           |  | 7.8                     |  | 7.7                    
|           |  |                         |  |                        

F-74

---

The
financial liabilities of the Group comprise:

|                                                                                      |  | As at
December 31
|------------------------------------------------------------------------------------- |  | -----------------
|
|
|Bank overdrafts, current installment of loans and finance lease obligations (note 25) |  | 1.8              
|Senior unsecured loan notes due after more than one year (note 26)                    |  | 135.0            
|Bank loans due after more than one year (note 26)                                     |  | 99.4             
|Other loans and finance lease obligations due after more than one year (note 26)      |  | 9.2              
|Other creditors falling due after more than one year (note 26)                        |  | 1.6              
|                                                                                      |  |                  
|                                                                                      |  | 247.0            
|                                                                                      |  |                  

The
floating rate liabilities at December 31, 2002 comprise primarily $163.4 million (2001 $115.0 million) of the senior unsecured loan notes for which an interest rate swap
is in place. Also included is £96.2 million (2001 £20.5 million) drawn under the syndicated credit facility.

Other
floating rate liabilities bear interest at various rates set with reference to the prevailing LIBOR or equivalent for the time period and country.

The
maturity profile of the Group's financial liabilities is as follows:

|                                                           |  | As at
December 31
|---------------------------------------------------------- |  | -----------------
|
|
|In one year or less, or on demand                          |  | 1.9              
|In more than one year but not more than two years          |  | 96.5             
|In more than two years but not more than five years        |  | 9.0              
|In more than five years                                    |  | 139.6            
|                                                           |  |                  
|                                                           |  | 247.0            
|                                                           |  |                  
|Undrawn Committed Borrowing Facilities:                    |  |                  
|Expiring in one year or less                               |  | 24.8             
|Expiring in more than one year but not more than two years |  | 73.4             
|Expiring in more than two years                            |  |                 
|                                                           |  |                  
|                                                           |  | 98.2             
|                                                           |  |                  

The
committed borrowing facilities primarily comprise:

a
$152 million five-year amortizing multi-currency revolving credit facility with a final maturity date of July 21, 2004 of which $18 million was drawn at
December 31, 2002;

a
£100 million multi-currency five-year revolving credit facility of which £85.0 million was drawn at December 31, 2002;

F-75

---

The
$152 million multi-currency credit facility is amortizing and reduces as follows:



As
discussed in note 36, post December 31, 2002 certain amendments were made to the terms of these borrowing facilities.

At
December 31, 2002 the commitment fees payable on the unutilized portion of the loan facilities are as follows:

Tranche
A50% of the Applicable Margin. The current rate is 0.3125%.

Tranche
B50% of the Applicable Margin in pounds sterling. The current rate is 0.3125%.

Tranche
C0.125% on the undrawn, uncancelled amount.

The
tables show the net unhedged monetary assets and liabilities of Group companies at December 31. These monetary assets and liabilities are not denominated in their functional currency
and therefore give rise to exchange gains and losses in the profit and loss account.

At
December 31, 2002 these exposures were as follows:

|                                       |  | Net foreign currency monetary
assets/(liabilities) |  
|-------------------------------------- |  | -------------------------------------------------- | -
|
|
|Functional currency of Group operation |  |                                                    |  
|Sterling                               |  |                                                   |  
|US dollar                              |  | (0.3                                               | )
|Euro                                   |  | 0.3                                                |  
|Other                                  |  | (0.4                                               | )
|                                       |  |                                                    |  
|                                       |  | (0.4                                               | )
|                                       |  |                                                    |  

At
December 31, 2001, these exposures were as follows:

|                                       |  | Net foreign currency monetary
assets/(liabilities)
|-------------------------------------- |  | --------------------------------------------------
|
|
|Functional currency of Group operation |  |                                                   
|Sterling                               |  |                                                  
|US dollar                              |  |                                                  
|Euro                                   |  | (0.1                                              
|Other                                  |  | (0.3                                              
|                                       |  |                                                   
|                                       |  | (0.4                                              
|                                       |  |                                                   

F-76

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|                                                                                        |  | As at December 31 |  
|--------------------------------------------------------------------------------------- |  | ----------------- | -
|
|
|
|Primary financial instruments held or issued to finance the Group's operations:         |  |                   |  
|Short-term borrowings and current portion of long-term borrowings                       |  | (1.8              | )
|Long-term senior unsecured loan notes                                                   |  | (135.0            | )
|Other long-term borrowings                                                              |  | (108.6            | )
|Cash and other liquid funds                                                             |  | 83.5              |  
|Current asset investments                                                               |  | 0.1               |  
|Other financial assets                                                                  |  | 0.2               |  
|Other financial liabilities                                                             |  | (1.6              | )
|                                                                                        |  |                   |  
|                                                                                        |  | (163.2            | )
|Derivative financial instruments held to manage the interest rate and currency profile: |  |                   |  
|Interest rate swap                                                                      |  |                  |  
|Forward foreign exchange contracts                                                      |  |                  |  
|                                                                                        |  |                   |  
|                                                                                        |  | (163.2            | )
|                                                                                        |  |                   |  

The
derivative financial instruments are as follows:

The
fair value of the Group's long-term borrowings has been estimated on the basis of market prices for the same or similar issues with the same maturity dates.

The
fair value of the Group's outstanding interest rate swap agreement has been estimated by calculating the present value of future cash flows using prevailing market conditions at the date of the
valuation.

The
Group's policy is to hedge a proportion of its transactional currency exchange exposures using forward foreign currency contracts and its interest rate exposures by using interest rate swaps.

Gains
and losses on instruments used for hedging are not recognized until the exposure that is being hedged itself is recognized.

F-77

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Unrecognized
gains and losses on instruments used for hedging are as follows:

|                                                                             |  | Year ended December 31 | 
|---------------------------------------------------------------------------- |  | ---------------------- | 
|
|
|
|Unrecognized gains/(losses) at January 1                                     |  | 0.2                    | 
|Gains/(losses) arising in previous years recognized in the year              |  | 0.2                    | 
|                                                                             |  |                        | 
|Gains/(losses) arising before January 1 that were not recognized in the year |  |                       | 
|Gains/(losses) arising in the year that were not recognized                  |  | 1.1                    | 
|                                                                             |  |                        | 
|Unrecognized gains/(losses) on hedges at December 31                         |  | 1.1                    | 
|                                                                             |  |                        | 
|Expected to be recognized:                                                   |  |                        | 
|In one year or less                                                          |  | 0.7                    | 
|In later years                                                               |  | 0.4                    | 
|                                                                             |  |                        | 
|                                                                             |  | 1.1                    | 
|                                                                             |  |                        | 

31.   Operating Lease Commitments

Annual commitments which expire:

|                                                                     |  | As at
December 31
|-------------------------------------------------------------------- |  | -----------------
|
|
|In respect of land and buildings (subject to periodic rent reviews): |  |                  
|Within one year                                                      |  | 0.6              
|In the second to fifth years                                         |  | 5.7              
|Over five years                                                      |  | 5.8              
|                                                                     |  |                  
|                                                                     |  | 12.1             
|                                                                     |  |                  
|In respect of plant and equipment:                                   |  |                  
|Within one year                                                      |  | 0.1              
|In the second to fifth years                                         |  | 0.4              
|                                                                     |  |                  
|                                                                     |  | 0.5              
|                                                                     |  |                  

F-78

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The
aggregate payments, for which there are commitments under operating leases at December 31, 2002 fall due as follows:

|                             |  | Land and
Buildings |  | Plant and
Equipment |  | Total
|---------------------------- |  | ------------------ |  | ------------------- |  | -----
|
|Due within one year          |  | 12.1               |  | 0.5                 |  | 12.6 
|Between one and two years    |  | 10.1               |  | 0.5                 |  | 10.6 
|Between two and three years  |  | 9.8                |  | 0.4                 |  | 10.2 
|Between three and four years |  | 8.4                |  | 0.3                 |  | 8.7  
|Between four and five years  |  | 7.6                |  | 0.1                 |  | 7.7  
|After five years             |  | 25.9               |  |                    |  | 25.9 
|                             |  |                    |  |                     |  |      
|                             |  | 73.9               |  | 1.8                 |  | 75.7 
|                             |  |                    |  |                     |  |      

32.   Share Options

We have the following share option schemes and share incentive arrangements.

The
Inland Revenue approved 1995 ESOS was introduced on the automatic expiry of the 1985 ESOS and incorporates the guidelines issued by the Association of British Insurers (ABI) at that time. It
was subsequently amended by the Board to facilitate the award of unapproved share options both in the UK and overseas. There are currently 351 participating executives in the ESOS.

Awards
under the 1995 ESOS, normally determined annually, are at the sole discretion of the Remuneration Committee after considering recommendations made to it by the Chief Executive. No price is
payable on the grant of an option and no options have been, or can be, granted at a discount to the market price.

The
normal exercise period for options granted under the 1985 and 1995 ESOS is between the third and tenth anniversary of the date of grant. Options awarded under the 1995 ESOS are subject to the
achievement of an Earnings per Share (EPS) performance condition before they can be exercised. The condition is that over a period of three consecutive financial years, there has been an increase
in the Company's headline EPS (as defined in the Statement of Investment Practice No.1 of the United Kingdom Society of Investment Professionals) which is at least 6% more than the increase in
the Retail Price Index over the same period.

All
ESOS grants made after May 11, 2000 to the executive directors and senior management (principally members of the Company's Operations Management Team) are subject to enhanced
performance conditions on exercise. These are more fully explained in note 10.

The
Remuneration Committee may in future impose different performance targets which they consider to be no less demanding. Options granted under the 1985 ESOS are exercisable unconditionally.

F-79

---

Certain
US executives have previously been granted unapproved options under the IESOS with participation and awards being at the discretion of the Remuneration Committee. Options are exercisable
unconditionally and normally between the third and tenth anniversary of the date of grant. Again, no options have been granted at a discount to the market price. The IESOS is closed and has been
replaced by the unapproved arrangements to the 1995 ESOS referred to in (a) above.

The
SSOP was introduced following shareholder approval at the Company's 2000 Annual General Meeting. This discretionary plan is primarily targeted at selected employees in the Communications
group (particularly in the United States) with grants normally determined annually by reference to the seniority and contribution of the individual, together with the performance of the relevant
business and prevailing local market practice. Under the SSOP, grants are also permitted to selected newly hired and promoted employees on a monthly basis.

Options
normally vest over four years, provided that the employee remains in employment. The options become 25% exercisable on the first anniversary of the date of grant, and thereafter in equal
proportions on a monthly basis. Any options not exercised will lapse on the seventh anniversary of grant. No pre-exercise performance conditions attach to options granted under the
SSOP.

In
December 2002, approximately 12.5 million options were granted under the SSOP to key selected employees for market competitive, motivation and retention purposes. This grant
provided for accelerated phased vesting over two years instead of the usual four-year period. No executive directors participated in this grant.

The
number of options available for grant each year, subject to a 9% total dilution limit, is at the discretion of the Remuneration Committee having regard to competitive market practice and the
performance of the businesses. No further grants may be made under the SSOP after the 2003 Annual General Meeting. However, the Remuneration Committee is currently reviewing medium and long term
incentive arrangements for employees within the Communications group and shareholders will be informed as appropriate with regards to any new initiatives which require shareholder approval.

No
price is payable on the grant of an option and no options have been, or can be, granted at a discount to the market price.

Spirent
completed the acquisition of Netcom Systems Inc. (Netcom) in July 1999. $44.5 million of the total consideration was satisfied through the rollover of outstanding
vested and unvested options over Netcom shares, primarily held by Netcom employees, into options over approximately 23.8 million new Spirent shares (as adjusted) on substantially similar
terms under the NARSOP as previously existed. The outstanding unvested options vest monthly from the date of acquisition during the remaining term of each individual grant and are not subject to
any pre-exercise

F-80

---

performance condition. The final unvested options will vest in July 2003 and all options have a ten year life from the original date of grant.

Out
of a total consideration of approximately 44.9 million new Spirent shares issued for the acquisition of Zarak Systems Corporation (Zarak) in November 2000, approximately
3.8 million arose in connection with the rollover of outstanding options over Zarak shares into options over Spirent shares which will vest over a period expiring in 2004 on substantially
similar terms under the ZARSOP as previously existed. These options are primarily held by Zarak employees and have either a five or ten year life from the original date of grant.

Unvested
rolled over options are capable of immediate exercise (ie prior to their respective vesting date) and any shares arising from such an event are held in trust until the relevant vesting
date. The option holder is entitled to the beneficial (but not legal) interest in the shares whilst they are held in trust but they remain subject to forfeiture (with the original option exercise
prices being refunded to the participant) if the participant's employment is terminated prior to the vesting date.

Out
of a total initial consideration for the acquisition of Caw Networks, Inc. (Caw) in August 2002 of $49 million, approximately $4 million was in respect of Spirent
Ordinary shares and options which arose on the rollover of outstanding options and shares under the previous Caw employee stock plan. The options and shares will vest over a period expiring in
2006 on substantially similar terms
under the CARSP as previously existed. The options are held by Caw employees and have a ten year life from the original date of grant. Pursuant to the terms of the Merger Agreement for Caw, an
additional cash payment of 78.8 cents is payable as each share vests or upon the vesting of an exercised option.

Pursuant
to individual agreements signed by participating Caw employees, any Ordinary shares issued under the CARSP are restricted until they have vested or are not at risk from forfeiture under
the plan rules. Unvested rolled over options are capable of immediate exercise (i.e prior to their respective vesting date) and any shares arising from such an event are held in trust until the
relevant vesting date. The option holder is entitled to the beneficial (but not legal) interest in the shares whilst they are held in trust but they remain subject to forfeiture (with the
original option exercise prices being refunded to the participant) if the participant's employment is terminated prior to the vesting date.

In
accordance with the rules of the Executive Share Option Schemes noted in (a) above, the Spirent shares subject to rolled over options for the acquisition of Netcom, Zarak, Caw and
Net-HOPPER (now expired), or granted under the SSOP, do not count toward ABI scheme limits. The plans mentioned in (d) to (f) above are now closed to new entrants and no
further awards of options can be made under them. Ongoing awards of discretionary options to Communications group employees are now being facilitated through the SSOP as described in
paragraph (c).

F-81

---

The
SRSOS is an Inland Revenue approved scheme and is open to all UK full and part time employees, subject to a qualifying service period. The employee enters into a
Save-As-You-Earn contract with the Company's savings carrier to save a regular sum of between £5 and £250 per month for a fixed period
of either three or five years.

No
price is payable on the grant of an option. The option exercise price is calculated by reference to the middle market price of a Spirent share on the last business day prior to the beginning
of the Invitation Period discounted by up to 20% at the Board's discretion. Options are normally exercisable within six months of the third, fifth or seventh anniversary of the contract
commencement date as elected by the option holder at the start of the contract.

The
Company has established a qualifying employee share ownership trust (QUEST) to honor the contractual commitment to deliver Spirent shares against the valid exercise of outstanding options
under the SRSOS. Spirent QUEST Limited, a wholly-owned subsidiary of Spirent plc, acts as sole trustee to the QUEST. During 2002 1,063,150 shares were transferred to participants. Spirent QUEST
Limited has waived all rights to receive dividends payable on its registered shareholding except for 0.01 pence per annum in aggregate and accordingly such shareholding is not included in the
Company's EPS calculation as referred to in note 12.

The
ESPP operates on a broadly similar basis to the SRSOS. It enables the Company to grant eligible US employees the right to acquire Spirent shares using proceeds of a savings contract. When
joining the ESPP, participants enter into a contract to save up to 15% of basic salary (gross), subject to an individual maximum of $1,000 (net) per month, over a contract period of
12 months by way of regular payroll deductions.

No
price is payable on the grant of a purchase right. The purchase price will be the market value of a Spirent share either on the first day of the Offering Period or on the last day of the
Offering Period, whichever is lower, less a 15% discount or, where shares are to be subscribed, their nominal value (if greater).

The
GAESPP was approved by shareholders in 2001 and offers employees in countries other than the UK or US an opportunity to share in the Company's performance through share ownership. The GAESPP
was implemented in Canada in January 2002 and operates on similar terms to the ESPP above, with participants entering into a 12 month contract to save up to 15% of basic salary
(gross), subject to an individual maximum of Cdn $1,000 (net) per month.

The
Company also operated the following incentive schemes during 2002, both of which utilize shares purchased in the market (ie they have not involved the issue of new Spirent shares). No awards
were made under either plan in the year to December 31, 2002.

F-82

---

The
SARP was introduced in September 1999 as an interim incentive arrangement for the employees of Netcom following the closure of the NARSOP described in (d) and subsequently for
certain other employees in the Communications group. Under the SARP, recruitment, promotion and recognition awards over Spirent shares have been made in line with historic and local competitive
market practice on a quarterly basis at the discretion of a committee of senior executives. The operation of the SARP reflects as far as practicable the now closed NARSOP. Accordingly, rights
under the SARP vest over four years, 25% vesting one year after the date of grant and the remainder vesting on a monthly basis over a further 36 months. Rights granted are not subject to
the fulfillment of any pre-exercise performance conditions.

The
SARP will deliver the appreciation value (i.e. the aggregated increase in the market value of a Spirent share over the rights price) in the form of existing Spirent shares which have been
purchased in the market by the Company's Employee Share Ownership Trust. The maximum number of shares over which SARP awards can be made is 5.25 million. Discretionary stock option grants
to Communications group employees are now facilitated through the SSOP (see paragraph (c)).

At
December 31, 2002, the following rights were outstanding under the SARP:

|Rights exercise dates |  | Rights price (p) |  | Number of rights outstanding
|--------------------- |  | ---------------- |  | ----------------------------
|09.10.0006.29.10     |  | 182416          |  | 3,821,097                   

At
an Extraordinary General Meeting of the Company held on May 2, 2002, shareholders approved the closure of the LTSPP and the substitution of its future annual awards with a supplemental
grant of options of equivalent value under the ESOS (see (a) above). These supplemental grants are subject to enhanced exercise performance conditions under the ESOS (see note 10
for further details).

The
LTSPP was introduced, following approval by shareholders at the Company's 1999 Annual General Meeting, to ensure continuing competitiveness and with the aim of motivating and giving
participants a more focused incentive to perform at the highest levels which, in turn, delivers sustainable performance and enhanced shareholder return. Only executive directors and senior
management (principally members of the Operations Management Team) were eligible to participate in the LTSPP. It is administered by the Remuneration Committee.

Grants
under the LTSPP have a six year performance period comprising two periods of three years each. Performance units, equivalent to shadow options, granted at the outset will only vest (in the
form of an award split between Spirent shares and cash) at the end of the first performance period. This is provided that the challenging performance criteria of both total shareholder return
(TSR), as measured against a comparator group of companies (or other relevant index), and real share price growth (ie after taking inflation into account) have been met. One-third of
the award must be retained in the form of shares until the end of the second performance period. These shares will be matched on a ratio of two shares for every one share retained. In order to
encourage superior performance and to strengthen further the alignment of interest of participants

F-83

---

with those of shareholders, participants may choose to invest some or all of their remaining cash award (ie up to two-thirds of the award) in shares and these will be matched on a
higher ratio of up to four shares for each one retained. No reward under the LTSPP can be made at the end of either performance period unless the Company's real share price growth is at least 5%
per annum and also its TSR performance is ranked above the 60th percentile against the comparator group. Because of these variables, the exact number of shares available for award, if any, cannot
be determined until the final vesting date (the sixth anniversary of the date of grant).

The
Company has established an Employee Share Ownership Trust as one method through which it can deliver Spirent shares committed under the LTSPP with shares being held in trust prior to any
vesting of awards. Any shares delivered under the LTSPP will be met by the trustees either purchasing existing shares in the market or by the Company issuing new shares or a combination of these.
In this way, full flexibility is retained to ensure that the objective of acting in shareholders' best interests is achieved at the time of delivery.

No
price is payable on the grant of a LTSPP performance unit, no performance units have been granted at a discount to the market price.

At
December 31, 2002, the following performance units were outstanding under the LTSPP:

|Performance unit vesting dates |  | Value of performance unit (p) |  | Number of performance units
|------------------------------ |  | ----------------------------- |  | ---------------------------
|05.11.0604.09.07              |  | 305334                       |  | 483,024                    

Spirent Employee Share Ownership Trust (ESOT)

At December 31, 2002 the ESOT held 11,870,877 Spirent Ordinary shares to satisfy awards under various share based incentive schemes as described above. Of this
number, 1,245,229 Ordinary shares were unconditionally vested at December 31, 2002.

F-84

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Movements
in the options outstanding under the option schemes for the three years in the period ended December 31, 2002 and the related weighted average option prices are shown in the two
tables below.

|                                         |  | 1985 and 1995 Executive Share Option Scheme |   | International Executive Share Option Scheme |  | Spirent Stock Option Plan |   | Caw Amended and Restated Stock Plan(1) |  | Netcom Amended and Restated Stock Option Plan(2)
|---------------------------------------- |  | ------------------------------------------- | - | ------------------------------------------- |  | ------------------------- | - | -------------------------------------- |  | ------------------------------------------------
|
|
|Options outstanding at January 1, 2000   |  | 11,449                                      |   | 132.81                                      |  | 238                       |   | 103.59                                 |  |                                                
|Granted/transferred into plan            |  | 2,859                                       |   | 339.66                                      |  |                          |   |                                       |  | 13,775                                          
|Exercised                                |  | (2,626                                      | ) | 127.75                                      |  | (64                       | ) | 102.14                                 |  |                                                
|Lapsed or canceled                       |  | (197                                        | ) | 196.51                                      |  |                          |   |                                       |  | (606                                            
|                                         |  |                                             |   |                                             |  |                           |   |                                        |  |                                                 
|Options outstanding at December 31, 2000 |  | 11,485                                      |   | 186.20                                      |  | 174                       |   | 104.13                                 |  | 13,169                                          
|Granted/transferred into plan            |  | 4,280                                       |   | 243.01                                      |  |                          |   |                                       |  | 39,405                                          
|Exercised                                |  | (705                                        | ) | 141.94                                      |  |                          |   |                                       |  |                                                
|Lapsed or canceled                       |  | (265                                        | ) | 204.24                                      |  |                          |   |                                       |  | (4,393                                          
|                                         |  |                                             |   |                                             |  |                           |   |                                        |  |                                                 
|Options outstanding at December 31, 2001 |  | 14,795                                      |   | 204.42                                      |  | 174                       |   | 104.13                                 |  | 48,181                                          
|Granted/transferred into plan            |  | 5,341                                       |   | 128.39                                      |  |                          |   |                                       |  | 42,115                                          
|Exercised                                |  | (72                                         | ) | 109.37                                      |  |                          |   |                                       |  |                                                
|Lapsed or canceled                       |  | (2,206                                      | ) | 213.37                                      |  |                          |   |                                       |  | (10,653                                         
|                                         |  |                                             |   |                                             |  |                           |   |                                        |  |                                                 
|Options outstanding at December 31, 2002 |  | 17,858                                      |   | 180.96                                      |  | 174                       |   | 104.13                                 |  | 79,643                                          
|                                         |  |                                             |   |                                             |  |                           |   |                                        |  |                                                 
|Options exercisable                      |  |                                             |   |                                             |  |                           |   |                                        |  |                                                 
|At December 31, 2002                     |  | 7,540                                       |   | 149.52                                      |  | 174                       |   | 104.13                                 |  | 20,995                                          
|At December 31, 2001                     |  | 4,311                                       |   | 137.75                                      |  | 174                       |   | 104.13                                 |  | 4,385                                           
|At December 31, 2000                     |  | 2,160                                       |   | 120.04                                      |  | 174                       |   | 104.13                                 |  |                                                

---

F-85

---

|                                         |  | Net-HOPPER Amended and Restated Plan(1) |   | Zarak Amended and Restated Stock Option Plan(2) |  | Savings Related Share Option Scheme |   | Employee Stock Purchase Plan(3) |  |        |   |       
|---------------------------------------- |  | --------------------------------------- | - | ----------------------------------------------- |  | ----------------------------------- | - | ------------------------------- |  | ------ | - | ------
|
|
|
|
|Options outstanding at January 1, 2000   |  |                                        |   |                                                |  |                                    |   |                                |  | 5,752  |   | 100.34
|Granted/transferred into plan            |  | 1,302                                   |   | 68.63                                           |  | 4,154                               |   | 156.24                          |  | 455    |   | 529.58
|Exercised                                |  | (226                                    | ) | 58.77                                           |  | (240                                | ) | 33.91                           |  | (957   | ) | 91.79 
|Lapsed or canceled                       |  |                                        |   |                                                |  | (76                                 | ) | 127.16                          |  | (383   | ) | 97.03 
|                                         |  |                                         |   |                                                 |  |                                     |   |                                 |  |        |   |       
|Options outstanding at December 31, 2000 |  | 1,076                                   |   | 64.89                                           |  | 3,838                               |   | 164.46                          |  | 4,867  |   | 142.04
|Granted/transferred into plan            |  |                                        |   |                                                |  |                                    |   |                                |  | 4,395  |   | 142.82
|Exercised                                |  | (899                                    | ) | 57.74                                           |  | (826                                | ) | 84.40                           |  | (591   | ) | 97.17 
|Lapsed or canceled                       |  | (15                                     | ) | 545.62                                          |  | (1,013                              | ) | 188.07                          |  | (1,947 | ) | 277.03
|                                         |  |                                         |   |                                                 |  |                                     |   |                                 |  |        |   |       
|Options outstanding at December 31, 2001 |  | 162                                     |   | 57.74                                           |  | 1,999                               |   | 185.58                          |  | 6,724  |   | 107.40
|Granted/transferred into plan            |  |                                        |   |                                                |  |                                    |   |                                |  | 3,982  |   | 41.00 
|Exercised                                |  | (162                                    | ) | 57.74                                           |  | (138                                | ) | 68.73                           |  | (757   | ) | 98.57 
|Lapsed or canceled                       |  |                                        |   |                                                |  | (810                                | ) | 158.96                          |  | (4,608 | ) | 105.50
|                                         |  |                                         |   |                                                 |  |                                     |   |                                 |  |        |   |       
|Options outstanding at December 31, 2002 |  |                                        |   |                                                |  | 1,051                               |   | 220.16                          |  | 5,341  |   | 60.79 
|                                         |  |                                         |   |                                                 |  |                                     |   |                                 |  |        |   |       
|Options exercisable                      |  |                                         |   |                                                 |  |                                     |   |                                 |  |        |   |       
|At December 31, 2002                     |  |                                        |   |                                                |  | 1,051                               |   | 220.16                          |  | 78     |   | 135.20
|At December 31, 2001                     |  | 162                                     |   | 57.74                                           |  | 1,999                               |   | 185.58                          |  | 501    |   | 102.73
|At December 31, 2000                     |  | 1,076                                   |   | 64.89                                           |  | 3,838                               |   | 164.46                          |  | 126    |   | 105.84
|                                         |  |                                         |   |                                                 |  |                                     |   |                                 |  |        |   |       

---

F-86

---



SPIRENT plc

NOTES TO THE FINANCIAL STATEMENTS (Continued)

Under Statement of Financial Accounting Standards No. 123 "Accounting for Stock Based Compensation" ("SFAS 123") the fair value of each option is estimated on the
date of grant using the Black-Scholes option-pricing model with the following assumptions:

|                        |  | Year ended December 31
|----------------------- |  | ----------------------
|
|Dividend yield          |  | 0.9%                  
|Expected volatility     |  | 70.0%                 
|Risk free interest rate |  | 2.7%                  
|Expected life           |  | 4.9 years             

The
weighted average fair values of options granted are as follows:

|                                                                           |  | Year ended December 31
|-------------------------------------------------------------------------- |  | ----------------------
|
|Options granted at market value of the underlying shares                   |  | 53p                   
|Options granted at a discount to the market value of the underlying shares |  | 23p                   

Summarized
information about options outstanding under the share option schemes at December 31, 2002 is as follows:

|                                            |                  | Options outstanding |        |  |      | Options exercisable
|------------------------------------------- | ---------------- | ------------------- | ------ |  | ---- | -------------------
|
|
|1985 Executive Share Option Scheme          |                  |                     |        |  |      |                    
|                                            | 83.81 to 107.63  |                     | 148    |  | 1.67 |                    
|                                            |                  |                     |        |  |      |                    
|1995 Executive Share Option Scheme          |                  |                     |        |  |      |                    
|                                            | 71.5             |                     | 883    |  | 8.76 |                    
|                                            | 113 to 163.31    |                     | 11,901 |  | 7.17 |                    
|                                            | 305 to 334.11    |                     | 4,901  |  | 7.84 |                    
|                                            | 598.03           |                     | 25     |  | 7.68 |                    
|                                            |                  |                     |        |  |      |                    
|International Executive Share Option Scheme |                  |                     |        |  |      |                    
|                                            | 104.14           |                     | 174    |  | 2.28 |                    
|                                            |                  |                     |        |  |      |                    
|Spirent Stock Option Plan                   |                  |                     |        |  |      |                    
|                                            | 5.75             |                     | 322    |  | 6.78 |                    
|                                            | 14.11 to 16.85   |                     | 12,902 |  | 6.95 |                    
|                                            | 54.5 to 77.75    |                     | 11,180 |  | 5.86 |                    
|                                            | 93.50 to 140.00  |                     | 3,176  |  | 6.10 |                    
|                                            | 141.25 to 197.00 |                     | 22,955 |  | 6.17 |                    
|                                            | 270.00 to 400.00 |                     | 17,238 |  | 4.91 |                    
|                                            | 488.00 to 616.75 |                     | 11,870 |  | 4.96 |                    
|                                            |                  |                     |        |  |      |                    

F-87

---

|Caw Amended and Restated Plan(1)              |                  |  |       |  |       |  |        |  |       | 
|--------------------------------------------- | ---------------- |  | ----- |  | ----- |  | ------ |  | ----- | 
|                                              | 11 to 14.66      |  | 1,086 |  | 8.95  |  | 12.11  |  | 1,086 | 
|                                              |                  |  |       |  |       |  |        |  |       | 
|Netcom Amended and Restated Stock Option Plan |                  |  |       |  |       |  |        |  |       | 
|                                              | 14.97 to 18.10   |  | 4,846 |  | 4.30  |  | 17.88  |  | 4,846 | 
|                                              | 24.33 to 36.19   |  | 3,503 |  | 4.93  |  | 24.37  |  | 3,503 | 
|                                              | 54.28            |  | 181   |  | 5.22  |  | 54.28  |  | 181   | 
|                                              | 90.78 to 121.05  |  | 3,833 |  | 5.96  |  | 96.85  |  | 3,720 | 
|                                              | 151.3            |  | 551   |  | 6.51  |  | 151.30 |  | 491   | 
|                                              |                  |  |       |  |       |  |        |  |       | 
|Zarak Amended and Restated Stock Option Plan  |                  |  |       |  |       |  |        |  |       | 
|                                              | 79.48 to 95.38   |  | 36    |  | 0.10  |  | 91.35  |  | 36    | 
|                                              | 127.16           |  | 752   |  | 6.25  |  | 127.16 |  | 752   | 
|                                              | 349.69           |  | 82    |  | 7.71  |  | 349.69 |  | 82    | 
|                                              | 572.22           |  | 181   |  | 6.77  |  | 572.22 |  | 181   | 
|                                              |                  |  |       |  |       |  |        |  |       | 
|Savings Related Share Option Scheme           |                  |  |       |  |       |  |        |  |       | 
|                                              | 41               |  | 3,853 |  | 4.52  |  | 41.00  |  |      | 
|                                              | 76.02 to 108.56  |  | 1,256 |  | 2.10  |  | 92.57  |  | 36    | 
|                                              | 142.10 to 159.87 |  | 141   |  | 2.03  |  | 147.41 |  | 42    | 
|                                              | 268              |  | 71    |  | 3.29  |  | 268.00 |  |      | 
|                                              | 518.48 to 583.06 |  | 20    |  | 3.27  |  | 531.64 |  |      | 
|                                              |                  |  |       |  |       |  |        |  |       | 
|Employee Stock Purchase Plan(2)               |                  |  |       |  |       |  |        |  |       | 
|                                              | 14.25            |  | 2,958 |  | 0.003 |  | 14.25  |  |      | 
|                                              |                  |  |       |  |       |  |        |  |       | 
|Global All Employee Share Purchase Plan(2)    |                  |  |       |  |       |  |        |  |       | 
|                                              | 14.25            |  | 300   |  | 0.003 |  | 14.25  |  |      | 
|                                              |                  |  |       |  |       |  |        |  |       | 

---

F-88

---

In
accordance with the rules of the following share option schemes, options were exercised during the three years in the period ended December 31, 2002 which resulted in new
shares being allotted or existing shares being transferred from Spirent QUEST Limited as shown below:

|                                              |  | Number of Ordinary shares
year ended December 31 |  | Total consideration received
year ended
December 31
|--------------------------------------------- |  | ------------------------------------------------ |  | ---------------------------------------------------
|
|
|Discretionary Schemes                         |  | 71,515                                           |  | 705,380                                            
|Netcom Amended and Restated Stock Option Plan |  | 2,049,378                                        |  | 1,109,529                                          
|All Employee Share Schemes                    |  | 1,841,358                                        |  | 2,214,600                                          
|Net-HOPPER Amended and Restated Plan          |  | 161,590                                          |  | 898,929                                            
|Zarak Amended and Restated Stock Option Plan  |  | 138,283                                          |  | 825,901                                            
|Caw Amended and Restated Stock Plan(1)        |  | 23,744                                           |  |                                                   
|                                              |  |                                                  |  |                                                    
|                                              |  | 4,285,868                                        |  | 5,754,339                                          
|                                              |  |                                                  |  |                                                    

---

During
the year 1,063,150 shares were transferred from Spirent QUEST Limited to option holders against the valid exercise of share options under the Company's Savings Related Share Option Scheme.

On
January 1, 2003, 3,254,422 Ordinary shares were allotted following the automatic exercise of purchase rights under the Company's US Employee Stock Purchase Plan and the Global All Employee
Share Purchase Plan.

F-89

---

At
December 31, 2002 the following options and purchase rights over Ordinary shares have been granted and remained outstanding under the company's various employee share schemes. Figures for
the options outstanding and the exercise price per Ordinary share have each been adjusted for the 3:1 subdivision of share capital in 2000 and, where relevant, for the rights issues effected in 1993
and 2000, in accordance with the individual scheme rules.

|Option Scheme                       |                                               | Option exercise
dates |                   | Exercise
price
per share
(pence) |           | Number of
outstanding options
|----------------------------------- | --------------------------------------------- | --------------------- | ----------------- | -------------------------------- | --------- | -----------------------------
|Discretionary Schemes:              |                                               |                       |                   |                                  |           |                              
|                                    | 1985 Executive Share Option Scheme            |                       | 04.15.96-04.26.05 |                                  | 91-108    |                              
|                                    | 1995 Executive Share Option Scheme            |                       | 04.29.99-05.02.12 |                                  | 72-598    |                              
|                                    | International Executive Share Option Scheme   |                       | 04.11.98-04.10.05 |                                  | 104       |                              
|                                    | Spirent Stock Option Plan                     |                       | 05.11.01-12.12.09 |                                  | 6-617     |                              
|Acquisition Related Schemes:        |                                               |                       |                   |                                  |           |                              
|                                    | Netcom Amended and Restated Stock Option Plan |                       | 07.23.99-07.19.09 |                                  | 15-151    |                              
|                                    | Zarak Amended and Restated Stock Option Plan  |                       | 11.14.00-11.12.10 |                                  | 79-572    |                              
|                                    | Caw Amended and Restated Stock Plan           |                       | 08.15.02-06.26.12 |                                  | 17.7-23.6 | (1)                          
|All Employee Share Save Schemes:(2) |                                               |                       |                   |                                  |           |                              
|                                    | UK Savings Related Share Option Scheme        |                       | 12.01.02-05.31.10 |                                  | 41-583    |                              
|                                    | US Employee Stock Purchase Plan(3)            |                       | 01.01.04          |                                  | 14        |                              
|                                    | Global All Employee Share Purchase Plan(3)    |                       | 01.01.04          |                                  | 14        |                              
|                                    |                                               |                       |                   |                                  |           |                              
|Total                               |                                               |                       |                   |                                  |           | 121,917,643                  
|                                    |                                               |                       |                   |                                  |           |                              

---

F-90

---

33.   Analysis of Changes in Financing during the year

|                                       |  | Share Capital (including premium and merger reserve) |   | Senior unsecured loan notes |   | Loans and finance lease obligations |   | Total   |  
|-------------------------------------- |  | ---------------------------------------------------- | - | --------------------------- | - | ----------------------------------- | - | ------- | -
|
|At January 1, 2000                     |  | 206.6                                                |   | 75.9                        |   | 286.8                               |   | 569.3   |  
|Cash inflow from financing (note 21)   |  | 528.1                                                |   | 57.7                        |   | (105.6                              | ) | 480.2   |  
|Inception of finance lease contracts   |  |                                                     |   |                            |   | 2.5                                 |   | 2.5     |  
|Loans and finance leases acquired      |  |                                                     |   |                            |   | 2.3                                 |   | 2.3     |  
|Loans to acquire subsidiary            |  |                                                     |   |                            |   | 13.9                                |   | 13.9    |  
|Share issue acquisitions               |  | 984.7                                                |   |                            |   |                                    |   | 984.7   |  
|Other share issues                     |  | 5.8                                                  |   |                            |   |                                    |   | 5.8     |  
|Transferred from capital reserve       |  | 5.5                                                  |   |                            |   |                                    |   | 5.5     |  
|Transferred from QUEST                 |  | (0.9                                                 | ) |                            |   |                                    |   | (0.9    | )
|Exchange adjustment                    |  |                                                     |   | 12.2                        |   | 11.0                                |   | 23.2    |  
|                                       |  |                                                      |   |                             |   |                                     |   |         |  
|At December 31, 2000                   |  | 1,729.8                                              |   | 145.8                       |   | 210.9                               |   | 2,086.5 |  
|Cash inflow from financing (note 21)   |  | 4.9                                                  |   | 0.1                         |   | (157.8                              | ) | (152.8  | )
|Inception of finance lease contracts   |  |                                                     |   |                            |   | 0.8                                 |   | 0.8     |  
|Other movements                        |  | (3.1                                                 | ) |                            |   |                                    |   | (3.1    | )
|Transfer from capital reserve          |  | 10.1                                                 |   |                            |   |                                    |   | 10.1    |  
|Transferred to profit and loss account |  | (717.1                                               | ) |                            |   |                                    |   | (717.1  | )
|Transferred from QUEST                 |  | (0.4                                                 | ) |                            |   |                                    |   | (0.4    | )
|Exchange adjustment                    |  |                                                     |   | 3.0                         |   | 3.8                                 |   | 6.8     |  
|                                       |  |                                                      |   |                             |   |                                     |   |         |  
|At December 31, 2001                   |  | 1,024.2                                              |   | 148.9                       |   | 57.7                                |   | 1,230.8 |  
|Cash inflow from financing (note 21)   |  | 2.4                                                  |   |                            |   | 51.4                                |   | 53.8    |  
|Inception of finance lease contracts   |  |                                                     |   |                            |   | 0.2                                 |   | 0.2     |  
|Acquisitions                           |  |                                                     |   |                            |   | 0.2                                 |   | 0.2     |  
|Restricted stock                       |  | 1.9                                                  |   |                            |   |                                    |   | 1.9     |  
|Transfer from capital reserve          |  | 4.3                                                  |   |                            |   |                                    |   | 4.3     |  
|Transferred to profit and loss account |  | (304.5                                               | ) |                            |   |                                    |   | (304.5  | )
|Transferred from QUEST                 |  | (0.9                                                 | ) |                            |   |                                    |   | (0.9    | )
|Exchange adjustment                    |  |                                                     |   | (13.9                       | ) | 0.3                                 |   | (13.6   | )
|                                       |  |                                                      |   |                             |   |                                     |   |         |  
|At December 31, 2002                   |  | 727.4                                                |   | 135.0                       |   | 109.8                               |   | 972.2   |  
|                                       |  |                                                      |   |                             |   |                                     |   |         |  

F-91

---

34.   Acquisition of Subsidiaries

All acquisitions have been accounted for under the purchase method of accounting. The results of the acquired businesses have been included in the consolidated financial
statements since the respective acquisition date.

For
accounting purposes an allocation of the purchase price has been made using estimated fair values of the assets acquired and the liabilities assumed at the date of acquisition.

Year ended December 31, 2002

For the year ended December 31, 2002 the most significant acquisitions, which all occurred in the Communications Group, were the following:

There
are no fair value or accounting policy adjustments being made to the book value of the assets acquired in 2002. The book values in respect of the assets acquired from Anritsu Company US are
provisional and may require adjustment in 2003.

F-92

---

Year ended December 31, 2002 (Continued)

|                                                                          |  | Total |  
|------------------------------------------------------------------------- |  | ----- | -
|
|Assets and liabilities acquired were:                                     |  |       |  
|Tangible assets                                                           |  | 0.8   |  
|Stocks                                                                    |  | 0.6   |  
|Debtors                                                                   |  | 3.6   |  
|Creditors                                                                 |  | (1.5  | )
|Cash                                                                      |  | 3.2   |  
|Loans and finance leases                                                  |  | (0.2  | )
|Minority interest                                                         |  | 0.4   |  
|                                                                          |  |       |  
|Net assets                                                                |  | 6.9   |  
|Less: Previously included as an associate                                 |  | (5.2  | )
|Goodwill                                                                  |  | 51.0  |  
|                                                                          |  |       |  
|                                                                          |  | 52.7  |  
|                                                                          |  |       |  
|Purchase consideration comprised the following:                           |  |       |  
|Restricted stock                                                          |  | 1.2   |  
|Options to acquire shares                                                 |  | 0.1   |  
|Cash (including expenses)                                                 |  | 53.4  |  
|Accrued                                                                   |  | (0.9  | )
|Consideration to be charged as compensation expenses                      |  | (1.1  | )
|                                                                          |  |       |  
|                                                                          |  | 52.7  |  
|                                                                          |  |       |  
|The cash flows in respect of the purchase of subsidiaries are as follows: |  |       |  
|Cash (including expenses)                                                 |  | (53.4 | )
|Cash (accrued in prior years)                                             |  | 1.0   |  
|Cash and overdrafts acquired                                              |  | 3.2   |  
|                                                                          |  |       |  
|Net cash outflow on acquisitions                                          |  | (49.2 | )
|                                                                          |  |       |  

F-93

---

Year ended December 31, 2001

No acquisitions occurred in the year ended December 31, 2001. The following movements relate to prior year acquisitions.

|                                                                         |  | Total |  
|------------------------------------------------------------------------ |  | ----- | -
|
|Assets and liabilities acquired were:                                    |  |       |  
|Net assets                                                               |  |      |  
|Goodwill                                                                 |  | (0.8  | )
|                                                                         |  |       |  
|                                                                         |  | (0.8  | )
|                                                                         |  |       |  
|Purchase consideration comprised the following:                          |  |       |  
|Cash (including expenses)                                                |  | 1.2   |  
|Accrued                                                                  |  | (2.0  | )
|                                                                         |  |       |  
|                                                                         |  | (0.8  | )
|                                                                         |  |       |  
|The cash flows in respect of the purchase of subsidiaries is as follows: |  |       |  
|Cash (including expenses)                                                |  | (1.2  | )
|Cash (accrued in prior years)                                            |  | 8.4   |  
|                                                                         |  |       |  
|Net cash inflow on acquisitions                                          |  | 7.2   |  
|                                                                         |  |       |  

Net
cash flow on acquisitions related to cash consideration and expenses paid of £15.1 million in respect of prior year acquisitions and cash received of
£22.3 million again in respect of prior year acquisitions.

Year ended December 31, 2000

For the year ended December 31, 2000 the most significant acquisitions, which all occurred in the Communications Group, were the following:

December 2000Hekimian
Laboratories, Inc USA ("Hekimian") a leading provider of network service assurance systems, was acquired for a total consideration of
£1.17 billion through the acquisition of the entire issued share capital of Lexa International Corporation, the indirect parent company of Hekimian. The consideration was
satisfied at completion by (1) a cash payment of £500 million, financed from the net proceeds of a 5:24 rights issue at 375 pence per share resulting in the issue of
140.7 million new Ordinary shares; and (ii) the issue of 108.4 million new Ordinary shares. The satisfaction of the total consideration resulted in the issue of new shares
representing 26.9% of the Company's enlarged share capital.

November 2000Net-HOPPER
Systems, Inc, USA, a leader in network test access systems' entire issued and outstanding issued share capital was acquired. This was
satisfied by the issue of 8.4 million new Ordinary shares in the Company, together with the roll-over of all outstanding Net-HOPPER share options (primarily held by
employees) into options over 1.2 million new Spirent Ordinary shares on substantially similar terms as existed previously.

F-94

---

Year ended December 31, 2000 (Continued)

September 2000Zarak Systems Corporation, USA, a leading designer and manufacturer of communications test equipment, entire issued and outstanding share
capital was acquired in exchange for the issue of 41.1 million new Ordinary shares in the Company. In addition, all outstanding Zarak share options, primarily held by employees, were
rolled-over into options over 3.8 million new Spirent Ordinary shares on substantially similar terms as previously existed.

Up
to a further 1.25 million new Ordinary shares were payable in two equal tranches. The first tranche was paid in 2001 and the balance is due in May 2002, respectively, to selected
employees based upon the fulfillment of post acquisition employment criteria.

In
respect of each of the above acquisitions, certain of the new shares issued as consideration to the respective vendors are subject to restricted dealing periods and lock-up
arrangements of varying durations.

Assets
and liabilities acquired were as follows:

|                                                |  | Hekimian |   | Zarak |   | Net-HOPPER |   | Other |   | Total   |  
|----------------------------------------------- |  | -------- | - | ----- | - | ---------- | - | ----- | - | ------- | -
|
|Tangible assets                                 |  | 5.2      |   | 1.6   |   | 0.2        |   | 1.1   |   | 8.1     |  
|Stocks                                          |  | 36.4     |   | 4.6   |   | 0.3        |   | 2.1   |   | 43.4    |  
|Debtors                                         |  | 19.8     |   | 7.7   |   | 0.6        |   | 4.0   |   | 32.1    |  
|Creditors                                       |  | (40.1    | ) | (4.1  | ) | (0.4       | ) | (3.1  | ) | (47.7   | )
|Taxation recoverable/(payable)                  |  | 1.2      |   | 0.3   |   |           |   | (0.5  | ) | 1.0     |  
|Cash                                            |  |         |   | 2.7   |   |           |   | 2.7   |   | 5.4     |  
|Loans and finance leases                        |  |         |   |      |   | (2.3       | ) |      |   | (2.3    | )
|Deferred taxation                               |  | 2.4      |   | 3.9   |   |           |   |      |   | 6.3     |  
|                                                |  |          |   |       |   |            |   |       |   |         |  
|Net assets                                      |  | 24.9     |   | 16.7  |   | (1.6       | ) | 6.3   |   | 46.3    |  
|Goodwill                                        |  | 1,143.4  |   | 262.7 |   | 57.6       |   | 33.9  |   | 1,497.6 |  
|                                                |  |          |   |       |   |            |   |       |   |         |  
|                                                |  | 1,168.3  |   | 279.4 |   | 56.0       |   | 40.2  |   | 1,543.9 |  
|                                                |  |          |   |       |   |            |   |       |   |         |  
|Purchase consideration comprised the following: |  |          |   |       |   |            |   |       |   |         |  
|Shares                                          |  | 675.3    |   | 261.3 |   | 48.1       |   |      |   | 984.7   |  
|Options to acquire shares                       |  |         |   | 16.8  |   | 7.0        |   |      |   | 23.8    |  
|Loan note                                       |  |         |   |      |   |           |   | 13.9  |   | 13.9    |  
|Cash (including expenses of £18.3 million)      |  | 514.5    |   | 1.3   |   | 0.9        |   | 22.1  |   | 538.8   |  
|Accrued                                         |  | (21.5    | ) |      |   |           |   | 4.2   |   | (17.3   | )
|                                                |  |          |   |       |   |            |   |       |   |         |  
|                                                |  | 1,168.3  |   | 279.4 |   | 56.0       |   | 40.2  |   | 1,543.9 |  
|                                                |  |          |   |       |   |            |   |       |   |         |  

Hekimian,
acquired on December 18, 2000, consumed £1.4 million of the Group's operating cash flows, paid nil in respect of net returns on investments and servicing of
finance, paid nil in respect of taxation and utilized £0.2 million for capital expenditure.

Zarak,
acquired on September 8, 2000, contributed £4.1 million to the Group's operating cash flows, contributed £0.2 million in respect of net returns
on investments and servicing of finance, paid £1.8 million of taxation and utilized £0.4 million for capital expenditure.

F-95

---

Year ended December 31, 2000 (Continued)

Net-HOPPER, acquired on November 9, 2000, consumed £0.5 million of the Group's operating cash lows, paid nil in respect of net
returns on investments and servicing of finance, paid nil in respect of taxation and utilized £0.1 million for capital expenditure.

The
cash flows in respect of the purchase of subsidiaries are as follows:

|                                 |  | Hekimian |   | Zarak |   | Net-HOPPER |   | Other |   | Total  |  
|-------------------------------- |  | -------- | - | ----- | - | ---------- | - | ----- | - | ------ | -
|
|Cash (including expenses)        |  | (514.5   | ) | (1.3  | ) | (0.9       | ) | (22.1 | ) | (538.8 | )
|Cash (accrued in prior years)    |  |         |   |      |   |           |   | (16.3 | ) | (16.3  | )
|Cash and overdrafts acquired     |  |         |   | 2.7   |   |           |   | 2.7   |   | 5.4    |  
|                                 |  |          |   |       |   |            |   |       |   |        |  
|Net cash outflow on acquisitions |  | (514.5   | ) | 1.4   |   | (0.9       | ) | (35.7 | ) | (549.7 | )
|                                 |  |          |   |       |   |            |   |       |   |        |  

Results
(prepared under US GAAP) prior to acquisition were as follows:

|                                                            |  | Hekimian
January 1, 2000 to December 17, 2000 |  | Zarak
January 1, 2000 to
September 7, 2000
|----------------------------------------------------------- |  | --------------------------------------------- |  | ------------------------------------------
|
|Turnover                                                    |  | 169.8                                         |  | 32.5                                      
|Operating profit                                            |  | 44.1                                          |  | 13.6                                      
|Profit before taxation                                      |  | 41.3                                          |  | 13.8                                      
|Taxation                                                    |  | 16.5                                          |  | 4.2                                       
|Profit after taxation and total recognized gains and losses |  | 24.8                                          |  | 9.6                                       

Purchase
accounting adjustments comprised the following:

|                              |                 | Hekimian |      | Zarak |      | Net-HOPPER |   | Other |   | Total   |     
|----------------------------- | --------------- | -------- | ---- | ----- | ---- | ---------- | - | ----- | - | ------- | ----
|
|Book value of assets acquired |                 | 26.0     |      | 18.7  |      | (1.6       | ) | 6.3   |   | 49.4    |     
|Accounting policy alignments: |                 |          |      |       |      |            |   |       |   |         |     
|                              | Tangible assets |          |     |       | (1.0 | )          |  |       |  |         | (1.0
|                              | Stocks          |          | (0.7 | )     | (0.1 | )          |  |       |  |         | (0.8
|                              | Debtors         |          | (0.4 | )     | (0.7 | )          |  |       |  |         | (1.1
|                              | Creditors       |          |     |       | (0.2 | )          |  |       |  |         | (0.2
|                              |                 |          |      |       |      |            |   |       |   |         |     
|Net assets                    |                 | 24.9     |      | 16.7  |      | (1.6       | ) | 6.3   |   | 46.3    |     
|Goodwill                      |                 | 1,143.4  |      | 262.7 |      | 57.6       |   | 33.9  |   | 1,497.6 |     
|                              |                 |          |      |       |      |            |   |       |   |         |     
|Consideration                 |                 | 1,168.3  |      | 279.4 |      | 56.0       |   | 40.2  |   | 1,543.9 |     
|                              |                 |          |      |       |      |            |   |       |   |         |     

F-96

---

35.   Disposal of operations

Year ended December 31, 2002

On April 1, 2002 the Group completed the sale of its non-core aerospace component businesses from within its Systems group to Curtiss-Wright Corporation
for a cash consideration of $60 million.

On
May 1, 2002 the Group completed the disposal of certain assets of Switching Systems International Inc, a business within its Systems group, for up to $9.1 million in cash.

On
September 30, 2002, the Group completed the disposal of Monitor Labs Incorporated a business within its Systems group, to Teledyne Technologies Incorporated for a cash consideration of
$24 million.

The
businesses sold during the year contributed £0.3 million to the Group's operating cash flows, contributed nil in respect of net returns on investments and servicing of
finance, paid £0.4 million of taxation and utilized £0.4 million for capital expenditure.

Year ended December 31, 2001

On November 9, 2001, the Group completed the disposal of the equity and assets of its Sensing Group of companies in the United Kingdom, United States, Europe, and
Asia to a company formed by GE Industrial Systems, a division of General Electric Company of the United States for a cash consideration of $220 million (approximately
£152 million).

During
the year, the Group completed the disposal of several non-core businesses for cash proceeds, net of expenses of £1.5 million.

The
businesses sold during the year contributed £7.8 million to the Group's operating cash flows, paid £0.7 million in respect of net returns on investments
and servicing of finance, paid £1.4 million of taxation and utilized £3.1 million for capital expenditure.

Year ended December 31, 2000

During the year, the Group completed the disposal of several small non-core businesses for cash proceeds, net of expenses, of £9.9 million.
The businesses disposed of included Holaday Industries Inc and Monitor Products Inc.

The
businesses sold during the year contributed £0.8 million to the Group's operating cash flows, contributed £0.3 million in respect of net returns on
investments and servicing of finance, paid £0.3 million of taxation and utilized £0.5 million for capital expenditure.

F-97

---

Net
assets disposed of were as follows:

|                                                                      |                   | 2002
Total |     | 2001
Total |      | 2000
Total |    
|--------------------------------------------------------------------- | ----------------- | ---------- | --- | ---------- | ---- | ---------- | ---
|Fixed assets                                                          |                   |            |     |            |      |            |    
|                                                                      | Tangible assets   |            | 8.2 |            | 17.9 |            | 1.7
|                                                                      | Intangible assets |            | 6.5 |            | 23.6 |            | 1.0
|Stocks                                                                |                   | 13.0       |     | 16.6       |      | 3.0        |    
|Debtors                                                               |                   | 13.0       |     | 20.1       |      | 4.0        |    
|Creditors                                                             |                   | (7.8       | )   | (11.4      | )    | (2.2       | )  
|Taxation                                                              |                   |           |     | (0.9       | )    | 0.2        |    
|Cash                                                                  |                   |           |     | 0.5        |      | 0.4        |    
|Overdrafts                                                            |                   |           |     | (0.7       | )    |           |    
|Loans                                                                 |                   |           |     |           |      |           |    
|Deferred taxation                                                     |                   | 0.3        |     | 0.4        |      |           |    
|Minority                                                              |                   |           |     | (0.8       | )    |           |    
|                                                                      |                   |            |     |            |      |            |    
|Net assets                                                            |                   | 33.2       |     | 65.3       |      | 8.1        |    
|Goodwill charged to profit and loss account                           |                   | 70.8       |     | 65.1       |      | 19.9       |    
|                                                                      |                   |            |     |            |      |            |    
|                                                                      |                   | 104.0      |     | 130.4      |      | 28.0       |    
|Net (loss)/profit on disposal of operations                           |                   | (48.4      | )   | 14.5       |      | (18.1      | )  
|                                                                      |                   |            |     |            |      |            |    
|                                                                      |                   | 55.6       |     | 144.9      |      | 9.9        |    
|                                                                      |                   |            |     |            |      |            |    
|Satisfied by:                                                         |                   |            |     |            |      |            |    
|Cash (less expenses)                                                  |                   | 55.6       |     | 148.6      |      | 9.9        |    
|Cash accrued                                                          |                   |           |     | (3.7       | )    |           |    
|                                                                      |                   |            |     |            |      |            |    
|                                                                      |                   | 55.6       |     | 144.9      |      | 9.9        |    
|                                                                      |                   |            |     |            |      |            |    
|The cash flows in respect of the sale of subsidiaries are as follows: |                   |            |     |            |      |            |    
|Cash received net of expenses                                         |                   | 55.6       |     | 148.6      |      | 9.9        |    
|Cash less overdrafts included within net assets disposed of           |                   |           |     | 0.2        |      | (0.4       | )  
|Accrued in previous years now received                                |                   |           |     |           |      | 3.6        |    
|                                                                      |                   |            |     |            |      |            |    
|Net cash inflow from disposals                                        |                   | 55.6       |     | 148.8      |      | 13.1       |    
|                                                                      |                   |            |     |            |      |            |    

36.   Post Balance Sheet Events

On March 12, 2003 Spirent announced the divestment of its 51% interests in WAGO, its interconnection joint venture, for net proceeds of
£59.5 million. The divestment was subject to shareholder approval and required the consent of the noteholders and parties to the syndicated bank facility. At the Extraordinary
General Meeting on March 31, 2003, shareholders approved the divestment of WAGO. The divestment was completed on April 4, 2003. At December 31, 2002 the carrying value of
WAGO was £50.1 million. In addition, to provide the Group with an increase in the level of headroom available in relation to certain of its financial covenants, amendments to
the terms of the loan notes and syndicated bank facility have been agreed. On completion of the divestment £47.0 million of the loan notes were prepaid and an associated
contractual make-whole amount of £12.5 million was paid.

F-98

---

Under
the revised terms relating to the syndicated bank facility Spirent will have a committed line of £75 million available, which will reduce to
£60 million by December 31, 2003. The bank facility remains repayable in July 2004. The interest rate will be increased to an initial margin over LIBOR of 1.75%,
which may decrease in certain circumstances.

Following
the application of the net proceeds from the divestment of WAGO $144.2 million of loan notes remain outstanding with unchanged maturities principally in 2009. The applicable
interest rate has been increased to a weighted average of 9.45% which will decrease if certain financial requirements are satisfied. There is a coupon uplift of 1.25% to the original coupons on
the loan notes, which will be reduced to 1% when certain financial ratios are met.

37.   Differences between United Kingdom and United States Generally Accepted Accounting Principles

The accounting policies under which the consolidated financial statements of the Group are prepared conform with accounting principles generally accepted in the United
Kingdom ("UK GAAP"). The Group's revenue recognition policies described in note 1 comply with generally accepted accounting principles in the United States ("US GAAP"), particularly as
regards SEC Staff Accounting Bulletin No. 101 "Revenue Recognition in Financial Statements" ("SAB 101") and AICPA Statement of Position 97-2 "Software Revenue Recognition"
("SOP 97-2"). Accordingly, no differences arise between UK GAAP and US GAAP related to revenue recognition. However, UK GAAP differ from US GAAP as regards the Group in the following
significant respects:

a)    Goodwill and Other Intangible Assets

(i) Capitalization

Under UK GAAP, goodwill arising on acquisitions prior to 1998 was written off to retained earnings on acquisition and at December 31, 2002 amounted to
£43.9 million (2001 £201.7 million). In accordance with FRS 10 "Goodwill and Intangible Assets", goodwill arising on acquisitions subsequent to
January 1, 1998 is capitalized and amortized over its estimated useful economic life.

In
reconciling to US GAAP, amounts written off to retained earnings under UK GAAP have been capitalized and amortized over their estimated useful economic lives of 20 years, until
January 1, 2002. Under US GAAP, with the adoption of Statement of Financial Accounting Standard ("SFAS") 142 "Goodwill and Other Intangible Assets", effective January 1,
2002, goodwill is no longer amortized but is subject to periodic review for impairment.

F-99

---



(ii)    In-process Research and Development ("IPR&D")

IPR&D is defined as expenditure incurred in respect of technology that has not yet demonstrated its technological feasibility and that does not have an alternative future use.
Under UK GAAP, these costs are capitalized as part of goodwill and amortized over 20 years. US GAAP require IPR&D costs identified in respect of acquisitions to be expensed immediately.

(iii)    Contingent Consideration

Under UK GAAP, where the consideration paid for an acquisition includes a contingent payment, the best estimate of the amount likely to be payable in respect of such
consideration is accrued and is included in goodwill at the date of acquisition.

Under
the acquisition agreement for Netcom, the Company was required to make additional payments in the form of cash if the acquired company met certain earnings targets and certain employees and
former shareholders of the acquired company remained in employment through a specified date. Under UK GAAP, the Company accounted for the additional cash payments related to Netcom as contingent
consideration and included these payments as part of its cost of investment because the payments of the additional amounts were considered probable upon acquisition. Under US GAAP, the cash payments
related to Netcom were treated as compensation expense due to the connection between the payment and the continued employment of the employees and former shareholders. The expense for US GAAP was
recognized on a straight-line basis over the required employment term of the former shareholders.

Under
the acquisition agreements for Zarak and Caw, the Company is required to make an additional payment in the form of Ordinary shares if the acquired companies meet certain earnings targets and
certain employees of the acquired companies remain in employment through a specified date. These additional stock payments related to the Zarak and Caw acquisitions have been accounted for as
compensation expense, which is the same accounting treatment required under US GAAP. The compensation expense is estimated based on the Company's share price at the balance sheet date and is
recognized on a straight-line basis over the required employment term of the employees. The contingent shares related to the Zarak and Caw acquisitions will be excluded from the basic
earnings per share calculation under US GAAP until such time that the shares become fully vested. Additionally, the contingent shares are excluded from the diluted earnings per share calculation under
US GAAP, as they are anti-dilutive.

(iv)    Impairment of Goodwill and Long-lived assets

Under UK GAAP, FRS 10 requires goodwill to be reviewed for impairment at the end of the first full financial year following acquisition and in other periods if events or
changes in circumstances indicate the carrying value may not be recoverable.

The
deterioration in trading in the second half of 2002 in the telecommunications market together with the significant fall in the Spirent share price has necessitated a further review of our
business. This review has resulted in impairment losses totalling £923.3 million being recognized under UK GAAP during the period. A similar impairment loss of
£724.6 million was recognized during 2001.

F-100

---

Impairment
losses of £330.7 million relate to the Performance Analysis division, £530.4 million in respect of the Service Assurance division,
£21.7 million for Network Products and £40.5 million for the Systems group.

In
calculating the impairment losses, the directors, in line with best practice, have also reviewed pre-1998 goodwill previously written off to reserves for those businesses in which an
impairment loss had been identified. An amount of £87.0 million has consequently been reinstated and included in the total impairment charge of £923.3 million.

Under
UK GAAP, an impairment loss is recognized when the estimated cash flows on a discounted basis, expected to result from the use of the asset including its disposition, are less than the carrying
value of the asset. On this basis the impairment losses of £923.3 million are the aggregate from the impairment reviews of each individual income generating unit determined in
accordance with FRS 11 "Impairment of Fixed Assets and Goodwill". The impairment loss restates the assets to value in use and has been measured using pre-tax discount rates of
between 15% to 20%. The discount rate is based on the Company's weighted average cost of capital and considers the particular risks associated with each income-generating unit.

Under
US GAAP, regarding goodwill or intangible assets with an indefinite life, SFAS 142 "Goodwill and Other Intangible Assets" became effective January 1, 2002, superseding
SFAS 121 "Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to Be Disposed of". The Group was required to perform a transitional goodwill impairment test based on the
carrying amount of goodwill as at that date. This indicated that the fair values of the Group's reporting units equalled or exceeded their carrying values and therefore the transitional goodwill
impairment test did not result in any impairment being recorded.

Under
SFAS 142 goodwill is no longer amortized but is subject to periodic review for impairment on a reporting unit basis. Having identified its reporting units the Group obtained independent
valuations for SFAS 142 purposes as at November 30, 2002, for Service Assurance, Performance Analysis and Network Products.

SFAS 142
specifies that the test for goodwill impairment is a two-step approach. Step 1 is a comparison of the fair value of a reporting unit to its carrying value. If the
fair value of the reporting unit is less than its carrying amount, the amount of the impairment loss must be measured. Step 2 states that the amount of the impairment loss, if any, is measured
by comparing the implied fair value of goodwill to its carrying amount. Fair values were determined by applying a discounted cash flow method using post-tax discount rates of between 10%
and 15%, depending on the weighted average cost of capital for a comparable set of companies to each respective reporting unit.

Step 1
results indicated impairment of goodwill in Service Assurance and Performance Analysis. After considering the fair values of the other intangible assets the implied fair values of
goodwill were determined under Step 2 and compared to carrying values. On this basis, US GAAP goodwill impairment of £480.5 million in Service Assurance and
£226.4 million in Performance Analysis has been recognized. A further £0.5 million of goodwill impairment arose within Systems. In addition,
£57.4 million of impairment arose on other definite lived intangibles in Service Assurance under SFAS 144 outlined below.

F-101

---

Under
US GAAP, effective for Spirent on January 1, 2002, SFAS 144 "Accounting for the Impairment or Disposal of Long-Lived Assets" supersedes SFAS 121.
SFAS 144 requires long-lived assets to be tested for impairment if events or changes in circumstances indicate the carrying value may not be recoverable. SFAS 144 does not
apply to goodwill or intangible assets with an indefinite life. The Group considered the criteria necessitating an impairment review to have been met and has obtained independent valuations as at
November 30, 2002, for SFAS 144 purposes for other intangible assets within Performance Analysis division and Service Assurance division.

SFAS 144
requires long-lived assets to be written down to their fair value if the long-lived assets carrying amount is greater than the sum of undiscounted cash flows
over the period of the long-lived assets useful life. The impairment amount is the difference between the long-lived assets carrying value and its fair value. Fair values are
determined using the present values of future cash flows expected to be generated by the long-lived assets. Testing takes place at the lowest level for which identifiable cash flows
generated by individual long-lived assets or groups thereof are largely independent of the cash flows of other groups of assets and liabilities.

The
results of the independent valuations indicated that other intangible assets within Service Assurance division were impaired by £57.4 million. Other intangible assets within
Performance Analysis division were not impaired.

The
total impairment loses of £923.3 million under UK GAAP and £764.8 million under US GAAP have the effect of restating the assets to the same fair
values.

During
2001, the rapid deterioration in the telecommunications market led us to recognize impairment losses for Hekimian Laboratories, Net-HOPPER and Zarak Systems, all acquired in the
second half of 2000, under both UK GAAP and US GAAP. Zarak Systems is within Performance Analysis; Hekimian Laboratories and Net-HOPPER comprise Service Assurance.

The
US GAAP impairment losses recognized in 2001 were calculated in accordance with SFAS 121, under which an impairment loss is recognized if the estimated undiscounted cash flows
expected to result from the use of the assets and any related goodwill are less than the carrying value of the asset. In each case the asset would be written down to its fair value measured using a
discounted future cash flow technique with a post-tax discount rate consistent with the UK GAAP impairment calculations. For the purposes of assessing and measuring impairment,
assets are grouped at the lowest level possible for which independent cash flows can be identified. On this basis, US GAAP impairment losses in 2001 totaled £691.1 million,
comprising £682.4 million for goodwill and £8.7 million for identified intangibles.

In
addition, as a result of the trading environment within the aerospace software industry, an impairment charge of £16.5 million for goodwill and other intangible assets in
relation to our investment in WPDS Inc., has been made under US GAAP as at December 31, 2001. As the original business was acquired prior to January 1, 1998, under UK GAAP
the goodwill arising was written off to reserves.

Essentially,
the UK-US GAAP adjustment arises from the use of shorter amortization lives under US GAAP for intangibles, and goodwill until January 1, 2002, which results in a lower
asset carrying value subject to the impairment tests under US GAAP.

F-102

---

Under
UK GAAP, impairment charges on goodwill and other intangible assets are recorded as an increase to accumulated amortization. Under US GAAP, impairment charges are recorded as a reduction of
cost. Classification differences related to this issue have been reflected in the presentation of goodwill and other intangible asset balances within the reconciliation of shareholders' funds.

(v)    Other purchase accounting differences

Other differences between UK GAAP and US GAAP arise with respect to the adoption of SFAS 142 and the determination of the cost of investment, the fair values of assets
acquired, the treatment of identifiable intangible assets and the amortization periods of goodwill as described in more detail below.

Under
US GAAP, acquisitions subsequent to June 30, 2001 are subject to the provisions of SFAS 142 and therefore, goodwill arising on acquisitions subsequent to that date is not
amortized. In the year ended December 31, 2001, amortization arising under UK GAAP on acquisitions subsequent to June 30, 2001, was reversed for the purposes of the reconciliation below
and all goodwill amortization charged under UK GAAP from January 1, 2002 has been reversed in reconciling UK GAAP to US GAAP in the year ended December 31, 2002.

In
addition, under US GAAP, SFAS 141 "Business Combinations", effective January 1, 2002, clarifies the criteria to recognize identified intangible assets separately from goodwill.
Consequently, an unamortized balance of £8.4 million has been transferred from identified intangibles to goodwill on January 1, 2002, representing workforce in place which
does not meet these new criteria.

(vi)    Additional disclosures

SFAS 142 requires disclosure of what reported income before extraordinary items and net income would have been in all periods presented excluding amortization expense
(including any related tax effects) recognized in those periods related to goodwill, intangible assets that are no longer being amortized, any deferred credit related to an excess over cost, equity
method goodwill, and changes

F-103

---

in amortization periods for intangible assets that will continue to be amortized (including any related tax effects).

Year ended 31 December2002

2001

2000(£ millions)Net loss according to US GAAPReported net loss

(774.3
)
(773.7
)
(39.6
)Add back goodwill amortization



168.0

72.5Adjusted net loss

(774.3
)
(605.7
)
32.9(pence)Basic and diluted earnings per shareReported net loss

(83.93
)
(84.55
)
(5.78
)Add back goodwill amortization



18.36

10.58Adjusted basic and diluted earnings per share

(83.93
)
(66.19
)
4.80


The
changes during 2002 in the carrying value of goodwill per segment are presented in the table below:

Performance
Analysis

Service
Assurance

Network
Products

Systems

Total(£ millions)Balance as of January 1, 2002

212.1

506.7

28.2

36.9

783.9Goodwill acquired during year

24.9

14.1

(0.3
)


38.7Transfer from identified intangibles

1.6

6.8





8.4Impairment losses

(226.4
)
(480.5
)


(0.5
)
(707.4
)Goodwill written off related to sale of businesses







(31.3
)
(31.3
)Currency Translation Adjustment

(12.2
)
(33.7
)


(0.9
)
(46.8
)Balance as of December 31, 2002



13.4

27.9

4.2

45.5


F-104

---

Intangible
assets subject to amortization by major class, which constitute more than 5% of total assets, are as follows:

Developed
Technology

Other

Total(£ millions)As at December 31, 2001Gross carrying amount

113.1

41.9

155.0Accumulated amortization

(17.0
)
(14.1
)
(31.1
)Carrying amount

96.1

27.8

123.9As at December 31, 2002Gross carrying amount

67.0

29.8

96.8Accumulated amortization

(32.6
)
(15.3
)
(47.9
)Carrying amount

34.4

14.5

48.9


The
amortization expense for the year ended December 31, 2002 is £19.9 million (2001 £22.4 million). Amortization expense for intangible assets is expected to be
£10.5 million in 2003, £9.6 million in 2004, £9.3 million in 2005, £8.9 million in 2006 and £8.1 million
in 2007.

b)    Stock-based Compensation

UK corporate governance recommends the inclusion of performance criteria in UK stock plans. The Company's UK ESOS plan includes certain performance criteria, which result in
variable accounting under US GAAP. Notwithstanding these performance criteria, under UK GAAP no compensation expense arises under the ESOS.

For
the purposes of the reconciliations below, the Group has elected to use the intrinsic value basis as set forth in Accounting Principles Board Opinion No. 25 "Accounting for Stock Issued to
Employees" ("APB 25") in determining any compensation expense under US GAAP. The compensation expense arising in respect of variable plans under US GAAP is determined by reference to the market price
of the Company's shares at each period end compared with the option price and is charged to income over the vesting period.

Under
US GAAP, the following accounting results for each stock option plan:

(i)    1985 and 1995 Executive Share Option Schemes

The presence of earnings per share performance criteria in the vesting terms results in no measurement date arising until the conditions are resolved. Accordingly, under APB
25, the plan is deemed to be a variable plan.

(ii)    International Executive Share Option Scheme

This plan is accounted for as a fixed plan under APB 25 as a measurement date arises on the date of grant and no performance criteria exist.

F-105

---

(iii)    Savings Related Share Option Schemes

These plans are accounted for as fixed plans; however, following the implementation of Financial Accounting Standards Board Interpretation No. 44 "Accounting for Certain
Transactions Involving Stock CompensationAn Interpretation of APB Opinion No. 25" ("FIN 44") (effective July 1, 2000), a compensation charge arises under the Group's
Save-As-You-Earn schemes as the discount of 20% exceeds the maximum discount permitted of 15%.

(iv)    Netcom Amended and Restated Share Option Plan

This plan is accounted for as a fixed plan under APB 25 as a measurement date arises at the date of grant and no performance criteria exist. As of December 31, 2000, all
options were vested and no further grants have been made under this plan.

(v)    Zarak Amended and Restated Stock Option Plan

This plan qualifies as a fixed plan under APB 25; however, in accordance with FIN 44, a portion of the intrinsic value of the unvested awards at the date of acquisition is
allocated to unearned compensation and recognized by the Company as compensation cost over the remaining future vesting period. The amount allocated to unearned compensation cost is based on the
portion of the intrinsic value at the consummation date related to the future vesting period. This amount is calculated as the intrinsic value of the replacement awards at the consummation date
multiplied by the fraction that is the remaining future vesting period divided by the total vesting period.

(vi)    CAW Amended and Restated Stock Plan

This plan is accounted for in the same way as the Zarak Amended and Restated Stock Option Plan as set out above.

(vii)    Spirent Stock Option Plan

This plan is accounted for as a fixed plan under APB 25 as a measurement date arises on the date of grant and no performance criteria exist.

(viii)    US Employee Stock Purchase Plan

This plan is accounted for as a fixed plan under APB 25. No compensation expense arises under this plan as the discount of 15% is within the permitted range under US GAAP.

(ix)    Global All Employee Share Purchase Plan

This plan operates on similar terms to the US Employee Stock Purchase Plan above and is accounted for in the same way.

(x)    Stock Appreciation Rights Plan

This plan provides stock appreciation rights and, accordingly, is accounted for as a variable plan under APB 25.

F-106

---

(xi)    Long Term Share Purchase Plan

At the date of grant no measurement date arises due to the extensive performance criteria related to each award. Accordingly, the LTSPP is considered a variable plan under APB
25.

The
awards are subject to a six-year performance period comprising two periods of three years each. After the first performance period, the holder of the award has a reinvestment decision
between cash and shares which impacts the matching criteria for the second three-year performance period. The compensation expense recognized for the years ended December 31, 2002
has been estimated by assuming that after the first three year performance period the minimum amount is reinvested in shares. Expense has been recognized based on performance to date.

The
compensation (credit)/expense arising under US GAAP for the above plans is summarized as follows:

|                                            |  | Year ended December 31
|------------------------------------------- |  | ----------------------
|
|
|
|1985 and 1995 Executive Share Option Scheme |  | (0.7                  
|Stock Appreciation Rights Plan              |  |                      
|Other                                       |  | 0.5                   
|                                            |  |                       
|                                            |  | (0.2                  
|                                            |  |                       

c)    Pensions

Under UK GAAP, provision is made for the cost of retirement benefits payable by the Group's significant defined benefit pension schemes as assessed by external professional
actuaries and is charged to the profit and loss account so as to spread the cost over the period during which the employer derives benefit from the employee's services. Under US GAAP, the projected
benefit obligation (pension liability) is matched against the fair value of the pension plan's assets and adjusted to reflect any unrecognized obligations or assets in determining the pension cost or
credit for the year.

Recognition
of an additional minimum liability is required if an unfunded accumulated benefit obligation exists (i.e. the accumulated benefit obligation exceeds the fair value of plan assets), and an
asset has been recognized as prepaid pension cost.

The
excess of any additional liability over any unrecognized prior service cost is reported as a separate component within other comprehensive income, net of tax benefits from timing differences.

For
the purposes of the reconciliations, the Group adopted the provisions of SFAS 87 "Employers Accounting for Pensions" with respect to its UK defined benefit plan from January 1, 1997. The
Company has not implemented SFAS 87 as of its effective date for non-US plans (fiscal years beginning after December 15, 1988) due to the unavailability of actuarial data.
Accordingly, a portion of the transition asset at January 1, 1997 has been allocated to shareholders' equity based on a ratio of 8:15, being the number of years elapsed between the effective
date of SFAS 87 (the

F-107

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Group's fiscal year beginning January 1, 1989) and January 1, 1997, over the 15-year period being used to amortize the transition asset.

In
calculating the 2002 net periodic pension cost under US GAAP, a credit of £4.6 million arises in accordance with SFAS 88, "Employers' Accounting for Settlements and
Curtailments of Defined Benefit Pension Plans and Termination Benefits". Of this credit £2.6 million represents the recognition of prior service credit relating to the future
working life curtailed as a result of the disposals which took place during 2002. No similar credit or charge exists under UK GAAP. The balance of £2.0 million is included as
a component in calculating the US GAAP net periodic pension cost.

d)    Profit on Disposal

The differences between the UK GAAP and US GAAP treatments of goodwill arising on acquisitions prior to January 1, 1998, together with the use of different goodwill
amortization periods and the adoption of SFAS 142, result in adjustments to profit or losses on disposals of businesses as the determination of the profit or loss on disposal takes into account
the unamortized balance of goodwill released. In addition, under US GAAP, the profit or loss on disposal is stated net of any related cumulative currency translation differences and the effect of the
disposal on the Projected Pension Liability (curtailment gain or loss) under SFAS 88.

Under
UK GAAP, the profit or loss on disposal of operations is shown separately on the face of the profit and loss account after operating profit. Under US GAAP, these profits or losses would be
reported as other operating income or expense.

e)    Zarak Change in Control Date

Under UK GAAP, the date of acquisition of a company should be the date on which control of that company passes to its new parent undertaking. The Group began directing the
activities of Zarak effective September 8, 2000. Therefore, under UK GAAP, the Group has consolidated the operations of Zarak from September 8, 2000.

Under
US GAAP, the date of acquisition of a company should ordinarily be the date assets are received and other assets are given or securities are issued. Accordingly, under US GAAP, the operations of
Zarak are consolidated from November 14, 2000, which is the date that the initial consideration was paid to the vendors. For the purposes of the reconciliations below, the operating results of
Zarak and the related goodwill amortization and stock-based compensation expense recognized under UK GAAP for the period from September 8, 2000 to November 14, 2000 have been eliminated.

f)    Vacation Accrual

An accrual is made under UK GAAP in respect of certain subsidiaries for vacation earned but not taken at the year end. Under US GAAP, this accrual must be calculated to include
all subsidiaries within the Group.

F-108

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g)    Derivative Financial Instruments

In June 1998, the Financial Accounting Standards Board issued SFAS 133, ``Accounting for Derivative Instruments and Hedging Activities," the requirements of which
have been adopted by the Group for the purposes of its reconciliations to US GAAP from January 1, 2001.

At
December 31, 2002, the Group has in place an interest rate swap for $163.4 million with a seven-year term which can be canceled at the bank's option at six monthly
intervals, no earlier than May 2003. The fair value of this financial instrument at December 31, 2002 has been determined as £0.4 million asset. In addition, the Group
has forward foreign exchange contracts in place at December 31, 2002, with a fair value of £0.5 million asset.

Under
UK GAAP, net amounts paid and received related to hedging transactions on interest rate swaps are recognized on an accruals basis over the life of the underlying financial instrument and gains
and losses on contracts to hedge future foreign currency exposure are deferred until the transaction occurs. The fair value of these items is required to be disclosed, but not recorded under UK GAAP.

Under
US GAAP, in accordance with SFAS 133, the fair values of derivative instruments are required to be recorded on the balance sheet, and any changes in such fair values which do not meet the
criteria for hedge accounting under SFAS 133 are required to be recorded in the profit and loss account. Therefore, differences between UK GAAP and US GAAP arise which are recorded in net loss
for US GAAP. On adoption of SFAS 133, the one-time cumulative accounting effect did not impact the Group's results of operations or comprehensive income under US GAAP because the
fair value of the Group's derivative financial instruments approximated their carrying value. For the year ended December 31, 2002, the Group has recorded a £2.1 million gain
(2001 £1.2 million loss) related to the changes in the fair value of derivative instruments, which do not meet the requirements of hedge accounting.

h)    Accounting for the Group's Joint Venture and Associates

Under UK GAAP, the Group's interest in its WAGO joint venture is accounted for using the gross equity method. Under this method of accounting, the Group's share of turnover,
operating profit, interest expense, taxation, minority interests, gross assets and gross liabilities of the joint venture is reflected in the Company's consolidated financial statements. Similarly,
the Group's share of its
associates' operating profit, interest and taxation is also reflected in the Company's consolidated financial statements.

In
accordance with US GAAP, as set forth in Accounting Principles Board Opinion No. 18 "The Equity Method of Accounting for Investments in Common Stock," the Company's 51% interest in the WAGO
joint venture is accounted for under the equity method. The equity method is required because the management agreement between Spirent and the joint venture party establishes joint control. Spirent
and the joint venture partner each can appoint two directors. A corporate resolution of the joint venture must be approved by a super-majority of the shareholders; thus, neither joint venture partner
has the ability to unilaterally control the joint venture. Accordingly, the Group's share of the after tax profits of the joint venture and associates would be reflected in the income statement as a
single line item after minority interests and its net investment in the

F-109

---

joint venture would also be included as a single line item in the balance sheet with the investment in the Group's other associated companies.

In
the year ended December 31, 2000, there are no differences between UK GAAP and US GAAP with respect to the Group's share of the after tax profits or the shareholders' equity relating to the
joint venture and the different presentation has no impact on the Group's net income or shareholders' equity. For the years ended December 31, 2002 and 2001, the only differences arising relate
to share based compensation and the adoption of SFAS 133 in the joint venture's US GAAP basis financial statements. These differences together decreased the Group's net loss and increased
shareholders' equity by £0.2 million (2001 £0.3 million) and £0.8 million (2001 £0.5 million), respectively.

i)    Investment in Own Shares

Under UK GAAP, the Group includes investments in Spirent plc shares held by an employee share trust within fixed asset investments and provision is made where the carrying
value of the shares may not be recoverable. Under US GAAP, such investments are treated as treasury stock and recorded on the balance sheet at cost as a deduction from shareholders' equity.

j)    Deferred Taxation

Under UK GAAP, deferred taxation is provided for in accordance with FRS 19 on all timing differences with the exception of gains on revaluations of fixed assets or where
potentially taxable amounts have been rolled over and there is no commitment to dispose of the relevant asset. Deferred tax assets are recognized where it is considered more likely than not that there
will be suitable taxable profits from
which to off-set the timing differences. Under US GAAP, deferred taxation is provided on a full liability basis on all temporary differences between the book and tax bases of the Group's assets and
liabilities.

k)    Unamortized Debt Issue Costs

Under UK GAAP, debt issue costs are shown as a reduction in the associated capital proceeds and amortized over the life of the related debt. Under US GAAP these costs are
disclosed as a separate asset and similarly amortized. Accordingly, a reclassification has been made to show these costs in other debtors for US GAAP disclosure purposes.

l)    Dividends

Under UK GAAP, dividends are recorded in the financial statements in the period to which the dividend relates. Under US GAAP, the liability for dividends is recorded in the
financial statements in the period in which the dividend is declared.

F-110

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Discontinued Operations

Disposals in the year ended December 31, 2002, do not qualify to be treated as discontinued operations under either UK GAAP or US GAAP.

The
Group adopted SFAS 144, which superseded 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" ("APB 30") for purposes of its December 31, 2001 US GAAP reconciliation.

Under
UK GAAP, sales and operating profits of Sensing Solutions, disposed of in 2001, have been reported as arising from discontinued operations.

Under
SFAS 144, reporting of discontinued operations is extended to include disposals qualifying as a "component of an entity". Disposals recorded as discontinued operations for UK GAAP in 2001
meet the definition of a "component" under SFAS 144 and have been treated as discontinued operations for US GAAP. Disposals occurring in 2000 are subject to the provisions of APB 30, which
allows only the disposal of a business segment which has previously been reported as a separate line of business or class of customer to qualify as discontinued operations. Therefore, disposals in the
years ended December 31, 2000, which were treated as discontinued operations for UK GAAP, do not qualify to be so treated under US GAAP.

F-111

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Net Loss under US GAAP

The following is a summary of the adjustments to (loss)/profit attributable to shareholders which would be required if US GAAP were to be applied instead of the UK GAAP:

|                                                                      |                         |                                            |         |                                       |         | Year ended December 31 |       
|--------------------------------------------------------------------- | ----------------------- | ------------------------------------------ | ------- | ------------------------------------- | ------- | ---------------------- | ------
|
|
|(Loss)/profit attributable to shareholders in accordance with UK GAAP |                         | (1,080.4                                   | )       | (763.5                                | )       | 50.7                   |       
|                                                                      |                         |                                            |         |                                       |         |                        |       
|Adjustments:                                                          |                         |                                            |         |                                       |         |                        |       
|a)                                                                    |                         | Goodwill and other intangible assets:      |         |                                       |         |                        |       
|                                                                      |                         | (i)                                        |         | Capitalization                        |         |                       |       
|                                                                      |                         | (ii)                                       |         | In-process research and development   |         |                       |       
|                                                                      |                         | (iii)                                      |         | Contingent consideration              |         | (0.2                   | )     
|                                                                      |                         | (iv)                                       |         | Impairment                            |         | 158.5                  |       
|                                                                      |                         | (v)                                        |         | Other purchase accounting adjustments |         | 39.3                   |       
|                                                                      |                         |                                            |         |                                       |         |                        |       
|                                                                      |                         |                                            |         |                                       |         | 197.6                  |       
|b)                                                                    |                         | Stock-based compensation                   |         | 0.2                                   |         | 18.3                   |       
|c)                                                                    |                         | Pension costs                              |         | (2.6                                  | )       | (0.4                   | )     
|d)                                                                    |                         | Profit on disposal                         |         | 49.4                                  |         | 35.8                   |       
|e)                                                                    |                         | Zarak change in control date               |         |                                      |         |                       |       
|f)                                                                    |                         | Vacation payroll costs                     |         | 0.5                                   |         | 0.4                    |       
|g)                                                                    |                         | Derivative financial instruments           |         | 2.1                                   |         | (1.2                   | )     
|h)                                                                    |                         | Income from interest in joint venture      |         | 0.2                                   |         | 0.3                    |       
|i)                                                                    |                         | Provision against investment in own shares |         | 30.1                                  |         |                       |       
|j)                                                                    |                         | Deferred taxation                          |         |                                       |         |                        |       
|                                                                      |                         | On above adjustments                       |         | 28.6                                  |         | 7.1                    |       
|                                                                      |                         | Methodology                                |         |                                      |         |                       |       
|                                                                      |                         |                                            |         |                                       |         |                        |       
|Total adjustments                                                     |                         | 306.1                                      |         | (10.2                                 | )       | (90.3                  | )     
|                                                                      |                         |                                            |         |                                       |         |                        |       
|Net loss as adjusted to accord with US GAAP                           |                         | (774.3                                     | )       | (773.7                                | )       | (39.6                  | )     
|                                                                      |                         |                                            |         |                                       |         |                        |       
|Arising from                                                          |                         |                                            |         |                                       |         |                        |       
|Continuing operations                                                 |                         | (774.3                                     | )       | (816.0                                | )       | (41.8                  | )     
|Discontinued operations                                               |                         |                                            |         |                                       |         |                        |       
|                                                                      | Result for the period   |                                            |        |                                       | 2.5     |                        | 2.2   
|                                                                      | Surplus on disposal     |                                            |        |                                       | 39.8    |                        |      
|                                                                      |                         |                                            |         |                                       |         |                        |       
|Net loss                                                              |                         | (774.3                                     | )       | (773.7                                | )       | (39.6                  | )     
|                                                                      |                         |                                            |         |                                       |         |                        |       
|Per share:                                                            |                         |                                            |         |                                       |         |                        |       
|Basic and diluted                                                     |                         |                                            |         |                                       |         |                        |       
|                                                                      | Continuing operations   |                                            | (83.93) | p                                     | (89.17) | p                      | (6.10)
|                                                                      | Discontinued operations |                                            |        |                                       | 4.62    | p                      | 0.32  
|                                                                      |                         |                                            |         |                                       |         |                        |       
|Net loss                                                              |                         | (83.93)                                    | p       | (84.55)                               | p       | (5.78)                 | p     
|                                                                      |                         |                                            |         |                                       |         |                        |       

F-112

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Statement of Comprehensive Loss

|                                                                        |  | Year ended December 31 |  
|----------------------------------------------------------------------- |  | ---------------------- | -
|
|
|Net loss as adjusted to accord with US GAAP                             |  | (774.3                 | )
|Other comprehensive income:                                             |  |                        |  
|Minimum pension liability adjustment net of nil tax (2001 £4.8 million) |  | (37.4                  | )
|Currency translation differences                                        |  | (53.0                  | )
|                                                                        |  |                        |  
|Comprehensive loss in accordance with US GAAP                           |  | (864.7                 | )
|                                                                        |  |                        |  

Movements
in other comprehensive loss amounts are as follows:

|                     |  | Currency
translation
differences |   | Minimum pension
liability
adjustment |  
|-------------------- |  | -------------------------------- | - | ------------------------------------ | -
|
|At January 1, 2000   |  | (19.2                            | ) |                                     |  
|Movement in the year |  | (26.6                            | ) |                                     |  
|                     |  |                                  |   |                                      |  
|At December 31, 2000 |  | (45.8                            | ) |                                     |  
|Movement in the year |  | 32.6                             |   | (11.1                                | )
|                     |  |                                  |   |                                      |  
|At December 31, 2001 |  | (13.2                            | ) | (11.1                                | )
|Movement in the year |  | (53.0                            | ) | (37.4                                | )
|                     |  |                                  |   |                                      |  
|At December 31, 2002 |  | (66.2                            | ) | (48.5                                | )
|                     |  |                                  |   |                                      |  

The
amount of cumulative translation adjustment transferred in respect of disposals was a gain of £0.9 million (2001 £4.5 million gain; 2000 nil).

F-113

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Shareholders' Equity under US GAAP

The following is a summary of the adjustments to shareholders' funds, which would be required if US GAAP were to be applied instead of UK GAAP:

|                                               |                                         | As at
December 31 |         
|---------------------------------------------- | --------------------------------------- | ----------------- | --------
|
|
|Shareholders' funds in accordance with UK GAAP |                                         | 139.1             |         
|                                               |                                         |                   |         
|Adjustments:                                   |                                         |                   |         
|Intangible assets                              |                                         |                   |         
|                                               | a)   Goodwill                           |                   |         
|                                               | Cost                                    |                   | (1,797.4
|                                               | Amortization                            |                   | 1,729.3 
|                                               |                                         |                   |         
|                                               |                                         | (68.1             | )       
|                                               |                                         |                   |         
|                                               | a)   Other intangible assets            |                   |         
|                                               | Cost                                    |                   | 96.8    
|                                               | Amortization                            |                   | (47.9   
|                                               |                                         |                   |         
|                                               |                                         | 48.9              |         
|                                               |                                         |                   |         
|Fixed asset investments                        |                                         |                   |         
|                                               | i)    Investment in own shares          |                   | (2.1    
|                                               | h)   Investment in joint venture        |                   | 0.8     
|                                               |                                         |                   |         
|                                               |                                         | (1.3              | )       
|                                               |                                         |                   |         
|Current assets                                 |                                         |                   |         
|                                               | k)   Other debtors                      |                   | 1.1     
|                                               |                                         |                   |         
|                                               |                                         | 1.1               |         
|                                               |                                         |                   |         
|Current liabilities                            |                                         |                   |         
|                                               | l)     Proposed dividend                |                   |        
|                                               | a)    Accrualscontingent consideration |                   | 1.4     
|                                               | f)    Accrualsvacation pay             |                   | (1.0    
|                                               | k)    Borrowings                        |                   |        
|                                               | g)    Derivative financial instruments  |                   | 0.9     
|                                               |                                         |                   |         
|                                               |                                         | 1.3               |         
|                                               |                                         |                   |         
|Long-term liabilities                          |                                         |                   |         
|                                               | c)    Accrued pension liability         |                   | (41.2   
|                                               | k)    Borrowings                        |                   | (1.1    
|                                               |                                         |                   |         
|                                               |                                         | (42.3             | )       
|                                               |                                         |                   |         

F-114

---

|Provision for liabilities and charges                   |                          |                      |   |        |  
|------------------------------------------------------- | ------------------------ | -------------------- | - | ------ | -
|                                                        | j)     Deferred taxation |                      |   |        |  
|                                                        |                          | On above adjustments |   | (15.1  | )
|                                                        |                          | Methodology          |   |       |  
|                                                        |                          |                      |   |        |  
|                                                        |                          | (15.1                | ) | (34.4  | )
|                                                        |                          |                      |   |        |  
|Total adjustments                                       |                          | (75.5                | ) | (129.7 | )
|                                                        |                          |                      |   |        |  
|Shareholders' equity as adjusted to accord with US GAAP |                          | 63.6                 |   | 964.7  |  
|                                                        |                          |                      |   |        |  

Cash Flow Statement under US GAAP

Under US GAAP, cash and cash equivalents include short-term, highly liquid investments that are both readily convertible to known amounts of cash and so near their
maturity that they present insignificant risk of changes in value because of changes in interest rates. However, they do not include bank overdrafts. Generally, investments with original maturities of
three months or less qualify under the definition of cash equivalents. This differs from UK GAAP, which adopt a narrower definition of cash and cash equivalents and excludes such
short-term investments.

In
addition, there are a number of presentational differences for a cash flow statement prepared in accordance with US GAAP. Under UK GAAP, there are separate headings for operating activities,
dividends received from associates, returns on investments and servicing of finance, taxation, capital expenditure and financial investment, acquisitions and disposals, equity dividends paid and
management of liquid resources, whereas under US GAAP there are only three categories: operating, investing and financing. The main differences in classification under US GAAP are as follows:



F-115

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The
categories of cash flow activity under US GAAP are summarized below:

|                                                             |  | Year ended December 31 |  
|------------------------------------------------------------ |  | ---------------------- | -
|
|
|Cash inflow from operating activities                        |  | 60.7                   |  
|Cash (outflow)/inflow on investing activities                |  | (17.9                  | )
|Cash inflow/(outflow) from financing activities              |  | 13.8                   |  
|                                                             |  |                        |  
|Increase/(decrease) in cash and cash equivalents             |  | 56.6                   |  
|Effect of exchange rate changes on cash and cash equivalents |  | (0.9                   | )
|Cash and cash equivalents at beginning of year               |  | 27.9                   |  
|                                                             |  |                        |  
|Cash and cash equivalents at end of year                     |  | 83.6                   |  
|                                                             |  |                        |  

Additional information required by US GAAP in respect of earnings per share

The numerators and denominators used in the computation of basic and diluted earnings per share are as follows:

|                                                                                                 |  | Year ended December 31 |  
|------------------------------------------------------------------------------------------------ |  | ---------------------- | -
|
|
|Earnings                                                                                         |  |                        |  
|Net loss as adjusted to accord with US GAAP used to compute basic and diluted earnings per share |  | (774.3                 | )
|                                                                                                 |  |                        |  
|Weighted average number of shares in issue (millions)                                            |  |                        |  
|Basic                                                                                            |  | 922.5                  |  
|Dilutive potential of employee share options                                                     |  |                       |  
|                                                                                                 |  |                        |  
|Diluted                                                                                          |  | 922.5                  |  
|                                                                                                 |  |                        |  

Additional information required in respect of business combinations

There were three acquisitions in the year ended December 31, 2002 for a total cash cost of £49.2 million.

In
July 2002 we invested £16.4 million in the acquisition of certain assets of the remote special services test product line of Anritsu Company US.

In
August 2002 we acquired the remaining, then, 85% not already owned by the Group, of Caw for an initial consideration including expenses of £26.7 million in cash and the
rollover of outstanding options and shares under the previous Caw employee stock plan. Deferred consideration of up to $60 million in value, expected to be satisfied by way of shares, is
payable dependant on certain performance criteria being achieved by Caw for the year ended December 31, 2003. If the contingent payment occurs it will be treated as a cost of the acquisition.

F-116

---

In
September 2002 we acquired a product line and certain intellectual property rights from UbiNetics for a cash consideration of £6.1 million including expenses.

Total
goodwill of £38.7 million arose as a result of the above acquisitions.

Intangible
assets subject to amortization totaling £17.0 million have been added during the year ended December 31, 2002, in respect of acquisitions. Of this amount
£11.3 million relates to developed technology. The weighted-average amortization period for total intangible assets subject to amortization acquired in the year ended
December 31, 2002 is 5.6 years and for developed technology only it is 5.2 years.

There
were no acquisitions in 2001 except for the acquisition of an initial 16% interest in Caw in October, for cash consideration of £6.4 million including expenses. Caw was
reported as an associate company.

The
following information relates to acquisitions made in the year ended December 31, 2000.

Purchase Consideration

Under UK GAAP, the measurement date for the market price of securities issued in a purchase business combination is the date on which the offer becomes unconditional, usually
as a result of the acceptance being received. Under US GAAP, the securities issued in a purchase business combination
are valued based on the quoted market price for a reasonable period before and after the date the terms of the acquisition are agreed to and announced.

Upon
acquisition of Zarak and Net-HOPPER, the Group rolled-over the share option schemes of the acquired companies into Group share option schemes with substantially similar
terms. Under UK GAAP, the intrinsic value of the rolled-over options (both vested and unvested) is included in the calculation of the purchase price of the acquired company. Under US GAAP,
as set forth in FIN 44, vested stock options issued in exchange for outstanding awards held by employees of the acquiree are required to be included in the purchase price based on their fair value
calculated using the Black Scholes model. For the purposes of the Company's reconciliations to US GAAP, unvested awards granted in exchange for unvested options held by employees of the acquiree have
been considered to be part of the purchase price and the fair value of the new awards included in the purchase price. However, to the extent that service is required subsequent to the acquisition
consummation date in order for the replacement awards to vest, a portion of the intrinsic value of the unvested awards has been allocated to unearned compensation and will be recognized as
compensation expense over the remaining future vesting period. The amount allocated to unearned compensation cost has been based on the portion of the intrinsic value at the consummation date related
to the future vesting period. This amount has been calculated as the intrinsic value of the replacement awards at the consummation date multiplied by the fraction that is the remaining future vesting
period divided by the total vesting period. The intrinsic value of the replacement awards allocated to unearned compensation cost has been deducted from the fair value of the awards for purposes of
the allocation of the purchase price to the other assets acquired.

Purchase
consideration for acquisitions made during the year ended December 31, 2000 under US GAAP totaled £1,517.1 million, which is £26.8 million
less than the purchase consideration as

F-117

---

calculated under UK GAAP. A reconciliation between UK GAAP and US GAAP of the purchase consideration for the acquisitions in the year ended December 31, 2000 is as follows:

|                                           |  | UK GAAP |   | Adjustment |   | US GAAP |  
|------------------------------------------ |  | ------- | - | ---------- | - | ------- | -
|
|Hekimian:                                  |  |         |   |            |   |         |  
|Shares                                     |  | 675.3   |   | (30.9      | ) | 644.4   |  
|Cash (including expenses of £18.3 million) |  | 514.5   |   |           |   | 514.5   |  
|Accrued                                    |  | (21.5   | ) |           |   | (21.5   | )
|                                           |  |         |   |            |   |         |  
|                                           |  | 1,168.3 |   | (30.9      | ) | 1,137.4 |  
|                                           |  |         |   |            |   |         |  
|Zarak:                                     |  |         |   |            |   |         |  
|Shares                                     |  | 261.3   |   | 5.0        |   | 266.3   |  
|Options to acquire shares                  |  | 16.8    |   | (0.7       | ) | 16.1    |  
|Cash                                       |  | 1.3     |   |           |   | 1.3     |  
|                                           |  |         |   |            |   |         |  
|                                           |  | 279.4   |   | 4.3        |   | 283.7   |  
|                                           |  |         |   |            |   |         |  
|Net-HOPPER:                                |  |         |   |            |   |         |  
|Shares                                     |  | 48.1    |   | (0.4       | ) | 47.7    |  
|Options to acquire shares                  |  | 7.0     |   | 0.2        |   | 7.2     |  
|Cash                                       |  | 0.9     |   |           |   | 0.9     |  
|                                           |  |         |   |            |   |         |  
|                                           |  | 56.0    |   | (0.2       | ) | 55.8    |  
|                                           |  |         |   |            |   |         |  
|Other acquisitions                         |  | 40.2    |   |           |   | 40.2    |  
|                                           |  |         |   |            |   |         |  
|Total                                      |  | 1,543.9 |   | (26.8      | ) | 1,517.1 |  
|                                           |  |         |   |            |   |         |  

The
fair value of the options for Zarak and Net-HOPPER were £4.18 and £5.88, respectively. The options were valued at the date of acquisition using the
Black-Scholes option-pricing model with the following assumptions:

|                        |  | Zarak      |  | Net-HOPPER
|----------------------- |  | ---------- |  | ----------
|Dividend yield          |  | 1.3%       |  | 1.3%      
|Expected volatility     |  | 42.4%      |  | 61.1%     
|Risk free interest rate |  | 5.6%       |  | 5.8%      
|Expected life           |  | 2.88 years |  | 0.25 years

Fair Value of Acquired Assets

Acquired Inventories

Under UK GAAP, stocks of finished goods of acquired companies are valued at the lower of replacement cost and net realizable value. Replacement cost is the cost at which the
inventory would have been replaced by the acquired entity, reflecting its normal buying process and the sources of supply and prices available to itthat is, the current cost of bringing
the stocks to their present location and condition. Under US GAAP, such finished goods stocks are valued at their

F-118

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estimated selling prices less the sum of estimated selling costs and a reasonable profit allowance for the selling effort of the acquiring company.

The
different basis for determining the fair value of inventory between UK GAAP and US GAAP for 2000 acquisitions resulted in a US GAAP adjustment to increase inventory values as follows:

|         |  | US GAAP
Adjustment
|-------- |  | ------------------
|
|Hekimian |  | 13.3              
|Zarak    |  | 2.6               
|         |  |                   
|         |  | 15.9              
|         |  |                   

Deferred Taxation

Under US GAAP, a deferred tax liability is recognized for the separately identified intangible assets. The recognition of the deferred tax results in an increase in both
goodwill and deferred tax liabilities under US GAAP for 2000 acquisitions as follows:

|           |  | US GAAP
Adjustment
|---------- |  | ------------------
|
|Hekimian   |  | 43.8              
|Zarak      |  | 9.5               
|Net-HOPPER |  | 2.9               
|           |  |                   
|           |  | 56.2              
|           |  |                   

Useful Economic Lives

Prior to the adoption of SFAS 142 for acquisitions made after June 30, 2001, under which US GAAP goodwill is no longer amortized, an appropriate useful
economic life of goodwill was determined on an acquisition-by-acquisition basis under UK GAAP and US GAAP. Under UK GAAP, the Company re-evaluates the useful lives
of goodwill at each reporting period end.

UK
GAAP define the useful economic life of an intangible asset as the period over which the value of the underlying business acquired is expected to exceed the value of its identifiable net assets.
This definition indicates that the UK GAAP goodwill balance may continue to exist over time, in contrast to US GAAP under which the value of intangible assets at any one date eventually disappears,
and that the recorded costs of intangible assets are amortized by systematic charges to income over the period estimated to benefit therefrom.

Prior
to the adoption of SFAS 142, US GAAP base the amortization period on the estimated useful life of the original purchased goodwill, whereas UK GAAP base it on the estimated period over
which the value of the business will continue to exceed the value of its net assets.

F-119

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Due
to the conceptual differences that exist between UK GAAP and US GAAP related to the nature and composition of goodwill, the Company uses different amortization periods for goodwill under UK GAAP
and US GAAP for the years ended December 31, 2000 and 2001.

As
a result of the contrasting definitions of goodwill between UK GAAP and US GAAP, the Company does not believe the valuations, which are prepared for determining the useful economic lives of
intangibles for US GAAP purposes, are relevant for determining associated useful lives for UK GAAP purposes.

Based
on the Company's evaluation of growth prospects in the telecom test and monitoring industries and the strategic positioning of Hekimian, Zarak, Net-HOPPER and Netcom, the useful
economic life for these businesses has been determined to be in excess of 20 years based on UK GAAP measures. However, under UK GAAP there is a rebuttable presumption that the life of
goodwill is 20 years or less, and since the Company has decided not to rebut the presumption, the useful economic life of goodwill has been limited to 20 years under UK GAAP.

Prior
to the adoption of SFAS 142, the US GAAP definition of the useful economic life requires goodwill to be amortized over the estimated period, which benefits from the original purchased
goodwill. In making this judgement, the results of US GAAP valuation exercises have been followed. Accordingly, for US GAAP purposes, useful economic lives of goodwill for Hekimian, Zarak,
Net-HOPPER and Netcom have been determined to be in the range of 7 to 10 years.

For
business combinations subsequent to June 30, 2001 goodwill and intangible assets deemed to have indefinite lives are no longer amortized but are instead subject to annual impairment tests
in accordance with SFAS 141 and SFAS 142. Other intangible assets continue to be amortized over their useful lives.

Specifically Identified Intangible Assets

Under UK GAAP, identified intangible assets other than goodwill may only be recognized as separate assets when such assets are capable of being disposed of separately from the
underlying business acquired. No such intangible assets were identified related to the Company's acquisitions in any of the years presented. Thus, for the purposes of the reconciliations to US GAAP,
other intangible assets included in goodwill under UK GAAP and amortized over 20 years have been reclassified and amortized over their individually determined estimated useful economic lives.

F-120

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SPIRENT plc

NOTES TO THE FINANCIAL STATEMENTS (Continued)

Fair market appraisals by independent appraisers were used to determine the amount of purchased IPR&D and other intangible assets of Hekimian and Zarak, the results of which
are as set forth below:

|                                    |                       | Hekimian |    | Zarak
|----------------------------------- | --------------------- | -------- | -- | -----
|
|
|In-process research and development |                       |         |    | 10.1 
|Other intangibles                   |                       |          |    |      
|                                    | Workforce             |          | 10 |      
|                                    | Customer list         |          | 10 |      
|                                    | Current technology    |          | 7  |      
|                                    | Non-compete agreement |          |   |      

Due
to the adoption of SFAS 142 on January 1, 2002, the unamortized workforce intangible asset has been subsumed into goodwill and is no longer amortized for US GAAP.

Purchased in-process research and development

The values allocated to purchased IPR&D were expensed subsequent to the acquisition dates. Spirent believes that this treatment is appropriate for US reporting purposes as
these research and development projects had not yet achieved technological feasibility and did not have any alternative use as of the acquisition dates.

The
remaining unallocated excess of consideration over the fair value of net assets acquired has been allocated to goodwill, with management determining that the useful economic life as defined under
US GAAP for the period prior to the adoption of SFAS 142 on January 1, 2002, under which goodwill is no longer amortized, are as follows:

|         |  | Estimated
useful life |  | Valuation
|-------- |  | --------------------- |  | ---------
|
|Hekimian |  | 10                    |  | 1,023.3  
|Zarak    |  | 8                     |  | 218.3    

For
both the Hekimian and Zarak acquisitions, the fair market appraisals were based on the income approach. Under the income approach, the fair value reflects the present value of the projected free
cash flows that will be generated by the IPR&D projects and that is attributable to the acquired technology, if successfully completed. The income approach focuses on the income producing capability
of the acquired technology, and best represents the present value of the future economic benefits expected to be derived and, therefore, the fair value of the acquired technology.

The
value allocated to purchased IPR&D represents the estimated fair value based on risk-adjusted future cash flows generated from the products that would result from each of the
in-process projects. Estimated future after-tax cash flows of each project, on a product by product

F-121

---

basis, were based on management's estimates of revenue less operating expenses, cash flow adjustments, income taxes and charges for the use of contributory assets.

Revenues
were estimated based on relevant market size and growth factors, expected industry trends, individual product sale cycles, the estimated life of each product's underlying technology and
historical pricing. Estimated operating expenses include cost of goods sold, selling, general and administrative expenses and research and development expenses. The estimated research and development
expenses include costs to maintain the products once they have been introduced into the market and are generating revenues and costs to complete the purchased IPR&D. Operating expense estimates were
consistent with historical margins and expense levels for similar products.

The
discount rates used to discount the projected net returns of 25% were based on weighted-average cost of capital relative to Hekimian and Zarak and the telecommunications industry, as well as the
product-specific risk associated with the purchased IPR&D products. Product-specific risk includes the stage of completion of each project, the complexity of the development work completed to date,
the likelihood of achieving technological feasibility and market acceptance. The Company does not anticipate any significant changes in historical pricing, margins or expense levels related to the
following projects under development.

A
brief description of purchased in-process research and development projects for Hekimian and Zarak is set forth below including an estimated percentage of completion of products within
each project at the acquisition date.

a)    HekimianCopperMax

The CopperMax line of products offers DSL services focused towards residential users and small- and medium-sized businesses. The CopperMax family provides access and test
capabilities.

As
a result of the appraisal this project was assigned a fair value of £6.1 million.

At
the acquisition date, management estimated that the Coppermax products development was in aggregate 28% complete.

Management
estimated that the Coppermax projects would start to generate revenues in 2001.

b)    HekimianeDTAU

The Enhanced Digital Test Access Unit (eDTAU) provides access and full time performance monitoring.

As
a result of the appraisal this project was assigned a fair value of £2.7 million.

At
the acquisition date, management estimated that the 3214 19" eDTAU Shelves and Plug-ins product development was approximately 86% complete.

Management
estimated that 3214 19" eDTAU Shelves and Plug-ins would start to generate revenues in 2002.

Other
smaller projects were identified including PVS, Marts, CentreOp Gateway and CentreOp Perform to which a fair value of £1.3 million was assigned.

F-122

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c)    ZarakAbacus 1 Version 4.0

Abacus 1 is a modular and expandable test system that creates telephone traffic (bulk call generator) as well as switches telephone traffic (central office emulator). Both the
functions of a call generator and a call switch can be performed simultaneously in the same system.

Abacus
1 Version 4.0 will include fax/modem capacity and SS7 (Signaling System 7) interface. The new fax/modem capacity will have the ability to mix voice, fax, and modem data calls over a
variety of telecom interfaces on remote access servers, modem pools, switching equipment, and transmission equipment. The SS7 will primarily be used to pass control signals between service points or
local exchanges and defines the procedures for the setup, ongoing management, and clearing of a call between system components that support the end user's connections.

As
a result of the appraisal this project was assigned a fair value of £10.4 million.

At
the acquisition date, management estimated that Abacus 1 Version 4.0 was approximately 50% complete.

Management
estimated that Abacus 1 Version 4.0 would start to generate revenues in 2001.

d)    ZarakAbacus 2

Abacus 2 will incorporate a significant amount of Abacus 1 technology and will be scaled to a capacity of up to 20 Abacus 1 systems. Abacus 2 will contain 20 circuits per card
and will have 16 slots available per system for a maximum of 9600 channels. This presents an increase in its PCM (pulse code
modulation) channel capacity of 95% per card and 90% per system over Abacus 1. Abacus 2 will have a higher analog channel capacity with 50 circuits per card with 16 slots per system, an increase of
90% per card and 75% per system compared to Abacus 1. In addition, Abacus 2 will have higher bandwidth for test results.

As
a result of the appraisal this project was assigned a fair value of £6.9 million.

At
the acquisition date, management estimated that Abacus 1 Version 4.0 was approximately 58% complete. Management estimates that Abacus 2 would start to generate revenues in 2001.

F-123

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Additional information required by US GAAP in respect of pensions

The cost of the Group's defined benefit pension plan computed in accordance with US GAAP is summarized as follows:

|                                      |  | Year ended December 31 |  
|------------------------------------- |  | ---------------------- | -
|
|
|Service cost                          |  | 3.0                    |  
|Interest cost                         |  | 6.8                    |  
|Expected return on plan assets        |  | (5.9                   | )
|Amortization of transition asset      |  | (0.7                   | )
|Amortization of unrecognized net loss |  | 0.2                    |  
|Curtailment gain                      |  | (2.0                   | )
|                                      |  |                        |  
|Net periodic pension cost             |  | 1.4                    |  
|                                      |  |                        |  

The
curtailment gain of £2.0 million recognized as part of the net periodic pension cost is a consequence of the disposal of the Sensing Solutions division which occurred during
2001. On June 30, 2002 the employees of the divested companies ceased to be active members of the Spirent Staff Plan which had the effect of reducing the projected benefit obligation by
£2.0 million.

The
major assumptions used in computing the net periodic pension cost are:

|                                                 |  | Year ended December 31
|------------------------------------------------ |  | ----------------------
|
|
|Assumed discount rate                            |  | 5.50                  
|Rate of compensation increase                    |  | 3.00                  
|Expected long-term rate of return on plan assets |  | 7.00                  

The
funding of the Company's defined benefit pension plan is as follows:

|                                                                        |  | As at
December 31 |  
|----------------------------------------------------------------------- |  | ----------------- | -
|
|Fair value of plan assets                                               |  | 82.2              |  
|Projected benefit obligation                                            |  | (125.4            | )
|                                                                        |  |                   |  
|Projected benefit obligation in excess of plan assets                   |  | (43.2             | )
|Unrecognized transitional asset, net of amortization                    |  | (0.7              | )
|Unrecognized net gain due to past experience different from assumptions |  | 51.2              |  
|Recognition of additional minimum liability                             |  | (48.5             | )
|                                                                        |  |                   |  
|Net amount recognized in the balance sheet                              |  | (41.2             | )
|                                                                        |  |                   |  

The
projected benefit obligation, the accumulated benefit obligation (ABO) and fair value of plan assets for pension plans with ABOs in excess of plan assets for Spirent as at December 31, 2002

F-124

---

were £125.4 million (2001 £115.8 million), £123.4 million (2001 £106.7 million) and £82.2 million (2001
£98.1 million), respectively.

In
2002 the amount recognized in the balance sheet for accrued benefit liability and accumulated other comprehensive income is £48.5 million.

The
disposal of P&G Controls Ltd and P&G Aerospace Ltd in March 2002 reduced the projected benefit obligation by £2.6 million as the employees ceased to be active members of
the Spirent Staff Plan. This curtailment gain has been included in the profit on disposal calculation in accordance with SFAS 88.

The
assets of the Group's UK defined benefit pension plan mostly comprise UK and other listed equities, property investments, bank deposits, UK Government index-linked stocks and insurance policies.

Movements
in the fair value of the plan's assets and projected benefit obligations are as follows:

|                                       |  | Year ended
December 31 |  
|-------------------------------------- |  | ---------------------- | -
|
|
|Movements in Fair Value of Plan Assets |  |                        |  
|At January 1                           |  | 98.1                   |  
|Employer contributions                 |  | 1.4                    |  
|Employee contributions                 |  | 0.6                    |  
|Transfer of benefits into the plan     |  | 0.2                    |  
|Benefit payments                       |  | (4.7                   | )
|Actual return on assets                |  | (13.4                  | )
|                                       |  |                        |  
|At December 31                         |  | 82.2                   |  
|                                       |  |                        |  

|                                           |  | Year ended
December 31 |  
|------------------------------------------ |  | ---------------------- | -
|
|
|Movements in Projected Benefit Obligations |  |                        |  
|At January 1                               |  | 115.8                  |  
|Service cost                               |  | 3.0                    |  
|Employee contributions                     |  | 0.6                    |  
|Transfer of benefits into the plan         |  | 0.2                    |  
|Interest cost                              |  | 6.8                    |  
|Benefit payments                           |  | (4.7                   | )
|Actuarial gain/(loss)                      |  | 3.7                    |  
|                                           |  |                        |  
|At December 31                             |  | 125.4                  |  
|                                           |  |                        |  

F-125

---

Additional pro forma information required by US GAAP in respect of stock-based compensation

If compensation expense had been determined under the fair value methodology of SFAS 123, net loss and the related per Ordinary share amounts adjusted to accord with US
GAAP would have been as follows:

|                                                                                                              |  | Year ended December 31 |   
|------------------------------------------------------------------------------------------------------------- |  | ---------------------- | --
|
|
|Net loss as reported under US GAAP                                                                            |  | (774.3                 | ) 
|Stock-based employee compensation (credit)/expense included in reported net income, net of tax                |  | (0.2                   | ) 
|Stock-based employee compensation expense determined under fair value based method for all awards, net of tax |  | (11.3                  | ) 
|                                                                                                              |  |                        |   
|Pro forma net loss as adjusted to accord with US GAAP                                                         |  | (785.8                 | ) 
|                                                                                                              |  |                        |   
|Per Ordinary share:                                                                                           |  |                        |   
|Basic and diluted                                                                                             |  | (85.18                 | )p
|                                                                                                              |  |                        |   

Additional information required by US GAAP in respect of deferred taxation

The analysis of the US GAAP deferred taxation liability is as follows:

|                              |                                                      | As at
December 31 |      
|----------------------------- | ---------------------------------------------------- | ----------------- | -----
|
|
|Deferred taxation liabilities |                                                      |                   |      
|                              | Liability arising on acquired identified intangibles |                   | 15.7 
|                              | Capital allowances in excess of depreciation         |                   | 1.3  
|                              | Short-term timing differences                        |                   | 1.1  
|                              |                                                      |                   |      
|                              |                                                      | 18.1              |      
|                              |                                                      |                   |      
|Deferred taxation assets      |                                                      |                   |      
|                              | Short-term timing differences                        |                   | (12.3
|                              | Stock compensation expense                           |                   | (1.6 
|                              | Contingent compensation expense                      |                   |     
|                              |                                                      |                   |      
|                              |                                                      | (13.9             | )    
|                              |                                                      |                   |      
|Net deferred tax liability    |                                                      | 4.2               |      
|                              |                                                      |                   |      
|Of which:                     |                                                      |                   |      
|Current                       |                                                      | (8.9              | )    
|Noncurrent                    |                                                      | 13.1              |      
|                              |                                                      |                   |      
|                              |                                                      | 4.2               |      
|                              |                                                      |                   |      

F-126

---

At
December 31, 2002, the Group had US federal net operating loss carryforwards (``NOLs") of approximately $40.4 million (2001 $29.0 million). This arose primarily in one US
subsidiary and resulted from the poor trading performance of that company. Under US income tax laws the company can realize the NOLs over a maximum period of 15 years.

Deferred
tax assets of £23.7 million (2001 nil) have not been recognized.

Spirent
does not provide deferred tax for potential taxes which could become payable on the distribution of retained earnings from its non-UK subsidiaries or joint venture or on the
disposition of such interests where there is no intention to dispose of such interests.

Concentration of credit risk

Potential concentration of credit risk consists of cash, investments, and accounts receivable. The company is exposed to credit-related losses in the event of
non-performance by counterparties to certain financial instruments. The Group does not generally seek collateral or other security from counter-parties. At December 31, 2002, the
Group did not consider there to be any significant concentration of credit risk.

Recently issued accounting pronouncements which have not been adopted

United Kingdom

FRS 17, "Retirement Benefits", issued in November 2000 and subsequently amended in July 2002, is fully effective for accounting periods ending on or after
June 22, 2005. Certain of the disclosure requirements are effective for periods prior to the June 2005 deadline. The standard requires that financial statements reflect at fair value the
assets and liabilities arising from an employer's retirement benefit obligations and related funding. The operating costs of providing retirement benefits are recognized in the period in which they
are earned together with any related finance costs and changes in the value of the related assets and liabilities. The impact of FRS 17 on the Group's financial position is set out in note 10.

United States

Asset Retirement Obligations

In June 2001, the FASB issued SFAS No. 143 "Accounting for Asset Retirement Obligations" which is effective for financial years beginning after June 15, 2002. The
statement requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of the fair value can be made. The
associated asset retirement costs are capitalized as part of the carrying value of the relevant long-lived asset. The impact of adopting the standard cannot be reasonably estimated at this time.

Costs Associated with Exit or Disposal Activities

In July 2002, the FASB issued SFAS No. 146 "Accounting for Costs Associated with Exit or Disposal Activities". This standard will require us to recognize certain costs
associated with disposal activities when they are incurred, rather than at the date of a commitment to a disposal

F-127

---

plan. SFAS 146 is effective for disposal activities initiated after December 31, 2002. Given the nature of disposal plans, it is not possible to determine in advance the impact it might
have on our financial position at a particular date or our results of operations for a particular period in the future.

Stock-Based Compensation

In December 2002, the FASB issued SFAS 148 "Accounting for Stock-Based CompensationTransition and Disclosurean Amendment of SFAS 123".
This standard provides two additional transition methods for companies electing to adopt the fair value accounting provisions of SFAS 123 "Accounting for Stock-Based Compensation", but does not
change the fair value measurement principles of SFAS 123. As permitted by SFAS 123, Spirent has continued to apply the methodologies set out in APB 25 and other US GAAP
literature in calculating its US GAAP adjustments for share option plans and awards of share rights. If the compensation cost for the company's share incentive plan had been determined based on
the fair value at the grant date for awards in 2002, 2001 and 2000 consistent with the provisions of SFAS 123, the group's net income and earnings per share would have been reduced to the pro
forma amounts indicated above.

Derivatives Instruments and Hedging Activities

In May 2003, the FASB issued SFAS 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities". The Statement amends and clarifies
accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under SFAS 133. SFAS 149 clarifies under what
circumstances a contract with an initial net investment meets the characteristic of a derivative as discussed in SFAS 133. In addition, it clarifies when a derivative contains a financing
component that warrants special reporting in the statement of cash flows. SFAS 149 amends certain other existing pronouncements. With certain exceptions, SFAS 149 is effective for
contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003. The impact of adopting the standard cannot be reasonably estimated at
this time.

F-128

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REPORT OF INDEPENDENT AUDITORS

The
Board of Directors WAGO-Kontakttechnik GmbH and
the Board of Directors of WAGO Contact S.A.

We
have audited the accompanying combined balance sheets of WAGO-Kontakttechnik GmbH, WAGO Contact S.A. and their affiliates (the "Company") as of December 31, 2002 and 2001 and the related
combined statements of operations, shareowners' equity, and cash flows for each of the two years in the period ended December 31, 2002. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

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

In
our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of WAGO-Kontakttechnik GmbH, WAGO Contact S.A. and
their affiliates as of December 31, 2002 and 2001, and the combined results of their operations and their cash flows for each of the years then ended in conformity with accounting principles
generally accepted in the United States of America.

Allrevision
Dornhof Kloss und Partner GmbH
Hamburg, Germany
February 14, 2003 except for Note 14, as to which the date is April 4, 2003.

INDEPENDENT AUDITORS' CONSENT

We
consent to the incorporation by reference in the registration statement on Form S-8 No. 333-98607 (Spirent Stock Option Plan, U.S. Stock Purchase Plan, et al) of Spirent plc of our report
dated February 14, 2003, relating to the combined financial statements of WAGO-Kontakttechnik,
GmbH and WAGO Contact S.A. and affiliates as of and for the years ended December 31, 2002 and 2001, which report appears in the December 31, 2002 annual report on
Form 20-F of Spirent plc.

Allrevision
Dornhof Kloss und Partner GmbH
Hamburg, Germany
June 17, 2003

F-129

---

REPORT OF INDEPENDENT AUDITORS

The
Board of Directors
WAGO-Kontakttechnik GmbH
and
The Board of Directors
WAGO Contact, S.A.

We
have audited the accompanying combined statements of operations, shareowners' equity, and cash flows of WAGO-Kontakttechnik GmbH, WAGO Contact S.A. and their affiliates (the "Company") for the year
ended December 31, 2000. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

In
our opinion, the combined financial statements referred to above present fairly, in all material respects, the combined results of the operations and cash flows of WAGO-Kontakttechnik
GmbH and WAGO Contact S.A., and their affiliates for the year ended December 31, 2000 in conformity with accounting principles generally accepted in the United States of America.

Cherry,
Bekaert & Holland, L.L.P.

Charlotte,
North Carolina
February 20, 2001

INDEPENDENT AUDITORS' CONSENT

We
consent to the incorporation by reference in the registration statement on Form S-8 No. 333-98607 (Spirent Stock Option Plan, U.S. Stock Purchase Plan, et al) of Spirent plc of our report
dated February 20, 2001, relating to the combined financial statements of WAGO-Kontakttechnik,
GmbH and WAGO Contact S.A. and affiliates for the year ended December 31, 2000, which report appears in the December 31, 2002 annual report on Form 20-F of Spirent
plc.

Cherry,
Bekaert & Holland, L.L.P.

Charlotte,
North Carolina
June 17, 2003

F-130

---



WAGO-KONTAKTTECHNIK GmbH, WAGO CONTACT S.A. AND AFFILIATES        Combined Balance Sheets

|                                    |                                                | December 31,                                               
|----------------------------------- | ---------------------------------------------- | -----------------------------------------------------------
|
|
|Assets                              |                                                |                                                            
|Current assets                      |                                                |                                                            
|                                    | Cash and cash equivalents                      |                                                            
|                                    | Accounts receivable, net of allowance          |                                                            
|                                    | Accounts receivablerelated parties            |                                                            
|                                    | Inventory                                      |                                                            
|                                    | Prepaid expenses                               |                                                            
|                                    | Other current assets                           |                                                            
|                                    | Deferred income taxes                          |                                                            
|                                    |                                                |                                                            
|                                    |                                                | Total current assets                                       
|                                    |                                                |                                                            
|Property and equipment, net         |                                                | 100,342                                                    
|Other assets                        |                                                |                                                            
|                                    | Goodwill                                       |                                                            
|                                    | Other assets                                   |                                                            
|                                    | Unrealized gains of foreign exchange contracts |                                                            
|                                    |                                                |                                                            
|                                    |                                                | 6,661                                                      
|                                    |                                                |                                                            
|                                    |                                                | 222,669                                                    
|                                    |                                                |                                                            
|Liabilities and Shareowners' Equity |                                                |                                                            
|Current liabilities                 |                                                |                                                            
|                                    | Accounts payable                               |                                                            
|                                    | Accrued expenses and other current liabilities |                                                            
|                                    | Income taxes and other taxes payable           |                                                            
|                                    | Current portion of long-term debt              |                                                            
|                                    |                                                |                                                            
|                                    |                                                | Total current liabilities                                  
|                                    |                                                |                                                            
|Long-term debt                      |                                                | 23,170                                                     
|Deferred income taxes               |                                                | 2,358                                                      
|Other liabilities                   |                                                | 10,344                                                     
|Minority interest                   |                                                | 5,008                                                      
|Commitments and contingencies       |                                                |                                                            
|Shareowners' equity                 |                                                |                                                            
|                                    | Share capital                                  |                                                            
|                                    | Retained earnings                              |                                                            
|                                    | Accumulated other comprehensive income:        |                                                            
|                                    |                                                | Foreign currency translation adjustment                    
|                                    |                                                | Unrealized gains on foreign exchange contracts net of taxes
|                                    |                                                |                                                            
|                                    |                                                |                                                            
|                                    |                                                |                                                            
|                                    |                                                | 222,669                                                    
|                                    |                                                |                                                            

See
notes to combined financial statements.

F-131

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WAGO-KONTAKTTECHNIK GmbH, WAGO CONTACT S.A. AND AFFILIATES        Combined Statements of Operations

|                                                 |                                     | Years ended December 31, |       
|------------------------------------------------ | ----------------------------------- | ------------------------ | ------
|
|
|Net sales                                        |                                     | 238,528                  |       
|Cost of goods sold                               |                                     | (126,657                 | )     
|                                                 |                                     |                          |       
|Gross profit                                     |                                     | 111,871                  |       
|Operating expenses                               |                                     |                          |       
|                                                 | Selling, general and administrative |                          | 78,907
|                                                 | Research and development            |                          | 11,258
|                                                 |                                     |                          |       
|                                                 |                                     | (90,165                  | )     
|                                                 |                                     |                          |       
|Income from operations                           |                                     | 21,706                   |       
|                                                 |                                     |                          |       
|Other income (expense)                           |                                     |                          |       
|                                                 | Interest income                     |                          | 317   
|                                                 | Interest expense                    |                          | (2,511
|                                                 | Other                               |                          | 1,794 
|                                                 |                                     |                          |       
|                                                 |                                     | (400                     | )     
|                                                 |                                     |                          |       
|Income before income taxes and minority interest |                                     | 21,306                   |       
|Provision for income taxes                       |                                     | (8,495                   | )     
|                                                 |                                     |                          |       
|Income before minority interest                  |                                     | 12,811                   |       
|Minority interest                                |                                     | (929                     | )     
|                                                 |                                     |                          |       
|Net income                                       |                                     | 11,882                   |       
|                                                 |                                     |                          |       

See
notes to combined financial statements.

F-132

---



WAGO-KONTAKTTECHNIK GmbH, WAGO CONTACT S.A. AND AFFILIATES

Combined Statements of Shareowners' Equity

(€ in thousands)

|                                                                         |                                                                                                                                 | Share
Capital |   | Retained
Earnings |        | Accumulated
Other
Comprehensive
Income |        | Total
Shareowners'
Equity |       
|------------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------- | ------------- | - | ----------------- | ------ | -------------------------------------- | ------ | ------------------------- | ------
|
|Balance, December 31, 1999                                               |                                                                                                                                 | 10,908        |   | 89,659            |        | 3,094                                  |        | 103,661                   |       
|Comprehensive income:                                                    |                                                                                                                                 |               |   |                   |        |                                        |        |                           |       
|                                                                         | Net income                                                                                                                      |               |  |                   | 23,921 |                                        |       |                           | 23,921
|                                                                         | Foreign currency translation adjustment                                                                                         |               |  |                   |       |                                        | 1,909  |                           | 1,909 
|                                                                         |                                                                                                                                 |               |   |                   |        |                                        |        |                           |       
|Total comprehensive income                                               |                                                                                                                                 |               |   |                   |        |                                        |        | 25,830                    |       
|Effect of share-based compensation                                       |                                                                                                                                 | 952           |   |                  |        |                                       |        | 952                       |       
|Distributions                                                            |                                                                                                                                 |              |   | (3,548            | )      |                                       |        | (3,548                    | )     
|                                                                         |                                                                                                                                 |               |   |                   |        |                                        |        |                           |       
|Balance, December 31, 2000                                               |                                                                                                                                 | 11,860        |   | 110,032           |        | 5,003                                  |        | 126,895                   |       
|                                                                         |                                                                                                                                 |               |   |                   |        |                                        |        |                           |       
|Comprehensive income:                                                    |                                                                                                                                 |               |   |                   |        |                                        |        |                           |       
|                                                                         | Net income                                                                                                                      |               |  |                   | 18,913 |                                        |       |                           | 18,913
|                                                                         | Foreign currency translation adjustment                                                                                         |               |  |                   |       |                                        | 1,760  |                           | 1,760 
|                                                                         | Unrealized gains on foreign exchange contracts arising during the period, net of taxes of €463                                  |               |  |                   |       |                                        | 746    |                           | 746   
|                                                                         | less reclassification and adjustment for gains included in net income, net of taxes of €302                                     |               |  |                   |       |                                        | (486   | )                         | (486  
|                                                                         |                                                                                                                                 |               |   |                   |        |                                        |        |                           |       
|Total comprehensive income before cumulative effect of accounting change |                                                                                                                                 |               |   |                   |        |                                        |        | 20,933                    |       
|                                                                         | Cumulative effect of a change in accounting principles for unrealized gains on foreign exchange contracts, net of taxes of €762 |               |  |                   |       |                                        | 1,223  |                           | 1,223 
|                                                                         |                                                                                                                                 |               |   |                   |        |                                        |        |                           |       
|Total comprehensive income                                               |                                                                                                                                 |               |   |                   |        |                                        |        | 22,156                    |       
|Effect of share-based compensation                                       |                                                                                                                                 | (587          | ) |                  |        |                                       |        | (587                      | )     
|Distributions                                                            |                                                                                                                                 |              |   | (5,069            | )      |                                       |        | (5,069                    | )     
|                                                                         |                                                                                                                                 |               |   |                   |        |                                        |        |                           |       
|Balance, December 31, 2001                                               |                                                                                                                                 | 11,273        |   | 123,876           |        | 8,246                                  |        | 143,395                   |       
|                                                                         |                                                                                                                                 |               |   |                   |        |                                        |        |                           |       
|Comprehensive income:                                                    |                                                                                                                                 |               |   |                   |        |                                        |        |                           |       
|                                                                         | Net income                                                                                                                      |               |  |                   | 11,882 |                                        |       |                           | 11,882
|                                                                         | Foreign currency translation adjustment                                                                                         |               |  |                   |       |                                        | (2,494 | )                         | (2,494
|                                                                         | Unrealized gains on foreign exchange contracts arising during the period, net of taxes of €773                                  |               |  |                   |       |                                        | 1,241  |                           | 1,241 
|                                                                         | less reclassification and adjustment for gains included in net income, net of taxes of €567                                     |               |   |                   |        |                                        | (909   | )                         | (909  
|                                                                         |                                                                                                                                 |               |   |                   |        |                                        |        |                           |       
|Total comprehensive income                                               |                                                                                                                                 |               |   |                   |        |                                        |        | 9,720                     |       
|Effect of share-based compensation                                       |                                                                                                                                 | (221          | ) |                  |        |                                       |        | (221                      | )     
|Distributions                                                            |                                                                                                                                 |              |   | (641              | )      |                                       |        | (641                      | )     
|                                                                         |                                                                                                                                 |               |   |                   |        |                                        |        |                           |       
|Balance, December 31, 2002                                               |                                                                                                                                 | 11,052        |   | 135,117           |        | 6,084                                  |        | 152,253                   |       
|                                                                         |                                                                                                                                 |               |   |                   |        |                                        |        |                           |       

See
notes to combined financial statements.

F-133

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WAGO-KONTAKTTECHNIK GmbH, WAGO CONTACT S.A. AND AFFILIATES        Combined Statements of Cash Flows

|                                                    |                                                                                  | Years ended December 31,                                                        |                                               
|--------------------------------------------------- | -------------------------------------------------------------------------------- | ------------------------------------------------------------------------------- | ----------------------------------------------
|
|
|Cash flow from operating activities                 |                                                                                  |                                                                                 |                                               
|                                                    | Net income                                                                       |                                                                                 | 11,882                                        
|                                                    | Adjustments to reconcile net income to net cash provided by operating activities |                                                                                 |                                               
|                                                    |                                                                                  | Minority interest                                                               |                                               
|                                                    |                                                                                  | Depreciation and amortization                                                   |                                               
|                                                    |                                                                                  | Unrealized gains on foreign exchange contracts net of taxes                     |                                               
|                                                    |                                                                                  | Deferred income tax provision                                                   |                                               
|                                                    |                                                                                  | Share-based compensation                                                        |                                               
|                                                    |                                                                                  | Loss (gain) on disposal of property and equipment                               |                                               
|                                                    |                                                                                  | Change in operating assets and liabilities, net of foreign currency adjustments |                                               
|                                                    |                                                                                  |                                                                                 | Accounts receivabletrade and related parties 
|                                                    |                                                                                  |                                                                                 | Inventory                                     
|                                                    |                                                                                  |                                                                                 | Prepaid expenses                              
|                                                    |                                                                                  |                                                                                 | Other assets, current and noncurrent          
|                                                    |                                                                                  |                                                                                 | Accounts payable                              
|                                                    |                                                                                  |                                                                                 | Accrued expenses and other current liabilities
|                                                    |                                                                                  |                                                                                 | Income taxes and other taxes payable          
|                                                    |                                                                                  |                                                                                 | Other liabilities                             
|                                                    |                                                                                  |                                                                                 |                                               
|Net cash provided by operating activities           |                                                                                  | 43,515                                                                          |                                               
|                                                    |                                                                                  |                                                                                 |                                               
|Cash flows from investing activities                |                                                                                  |                                                                                 |                                               
|                                                    | Purchases of property and equipment                                              |                                                                                 | (17,688                                       
|                                                    | Proceeds from disposal of property and equipment                                 |                                                                                 | 1,242                                         
|                                                    | Acquisition of minority interests in subsidiary                                  |                                                                                 | (2,056                                        
|                                                    |                                                                                  |                                                                                 |                                               
|Net cash used in investing activities               |                                                                                  | (18,502                                                                         | )                                             
|                                                    |                                                                                  |                                                                                 |                                               
|Cash flows from financing activities                |                                                                                  |                                                                                 |                                               
|                                                    |                                                                                  | Proceeds from issuance of long-term debt                                        |                                               
|                                                    |                                                                                  | Payments on long-term debt                                                      |                                               
|                                                    |                                                                                  | Distributions to shareowners                                                    |                                               
|                                                    |                                                                                  | Distributions to minority interests                                             |                                               
|                                                    |                                                                                  |                                                                                 |                                               
|Net cash provided by (used in) financing activities |                                                                                  | (11,543                                                                         | )                                             
|                                                    |                                                                                  |                                                                                 |                                               
|Effect of exchange rate changes on cash             |                                                                                  | (1,929                                                                          | )                                             
|                                                    |                                                                                  |                                                                                 |                                               
|Net increase in cash and cash equivalents           |                                                                                  | 11,541                                                                          |                                               
|Cash and cash equivalents                           |                                                                                  |                                                                                 |                                               
|                                                    | Beginning of year                                                                |                                                                                 | 12,098                                        
|                                                    |                                                                                  |                                                                                 |                                               
|                                                    | End of year                                                                      |                                                                                 | 23,639                                        
|                                                    |                                                                                  |                                                                                 |                                               
|Supplemental cash flow information:                 |                                                                                  |                                                                                 |                                               
|                                                    | Amounts paid for interest                                                        |                                                                                 | 2,296                                         
|                                                    |                                                                                  |                                                                                 |                                               
|                                                    | Amounts paid for income taxes                                                    |                                                                                 | 4,696                                         
|                                                    |                                                                                  |                                                                                 |                                               

See
notes to combined financial statements.

F-134

---



WAGO KONTAKTTECHNIK GmbH, WAGO-CONTACT S.A. AND AFFILIATES

Notes to Combined Financial Statements

December 31, 2002

(€ in thousands)

Note 1Nature of operations

The WAGO Group ("Group") comprises the combination of WAGO Kontakttechnik GmbH and WAGO Contact S.A. These operations are legally independent, but have a common
ownership structure.

WAGO
Kontakttechnik GmbH, ("WAGOGermany"), is a limited liability company, organized under the laws of the Federal Republic of Germany, and was incorporated in 1951.

WAGO
Contact S.A., ("WAGOSwitzerland"), is a joint stock corporation, incorporated in 1977, and organized under the laws of the Federal Republic of Switzerland.

Both
Companies are engaged in the production of an extensive range of wiring products and electric modules for the distributed control of automated processes. The products are marketed
globally under the WAGO brand name. The Companies' world-wide headquarters are located in
Minden, Germany. Principal manufacturing sites are located in Minden, Germany; Sondershausen, Germany; and Domdidier, Switzerland.

Affiliated companies

A summary of significant subsidiaries, owned directly or indirectly, by WAGOGermany or WAGOSwitzerland follows:

|                                        |  | Ownership Percentage
|--------------------------------------- |  | --------------------
|
|
|WAGO Contact S.A., France               |  | 85                  
|WAGO Kontakttechnik Ges. mbH, Austria   |  | 100                 
|WAGO Corporation, USA                   |  | 97                  
|WAGO Limited, Great Britain             |  | 100                 
|WAGO Company of Japan Ltd., Japan       |  | 51                  
|WAGO Elektro spol.s.r.o. Czech Republic |  | 100                 
|WAGO & Controls (India) Ltd., India     |  | 51                  
|WAGO Electronic Pte. Ltd., Singapore    |  | 100                 
|WAGO Elwag Sp. z.o.o., Poland           |  | 98                  
|WAGO Electric (Tianjin) Ltd., China     |  | 100                 
|WAGO Elettronica SRL, Italy             |  | 100                 
|WAGO Elektro spol.s.r.o., Slovakia      |  | 90                  

Major shareowners

Share ownership of WAGO Germany and WAGO Switzerland is as follows:

|Spirent plc                   |  | 51 | %
|----------------------------- |  | -- | -
|Members of the Hohorst family |  | 49 | %

However,
the management contracts between the Hohorst family and Spirent plc have the effect of establishing joint rather than sole control.

F-135

---

Note 2Summary of significant accounting policies

Basis of accounting

The combined financial statements of the Group have been prepared in accordance with accounting principles generally accepted in the United States
(US-GAAP). Effective January 01, 2002, the legal currency of Germany became the EURO. The financial statements reflect the conversion to EURO from Deutsch Marks at the conversion rate that
has been in effect since the inception of the EURO.

Principles of combination

The accompanying financial statements present the financial position of WAGO Kontakttechnik, GmbH and its majority- and wholly-owned subsidiaries, and WAGO
Contact S.A. WAGO Kontakttechnik, GmbH and WAGO Contact S.A. are related through common ownership. Significant intercompany transactions and balances have been eliminated in combination.

Use of estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make certain
estimates and assumptions that affect the reported amounts of assets, liabilities and the disclosure of contingent assets and liabilities in the financial statements. Actual results could differ from
those estimates.

Cash and cash equivalents

The Group considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents.

Accounts receivable

Accounts receivable consist of trade accounts receivable and are stated at cost less an allowance for doubtful accounts. Credit is extended to customers after an
evaluation of the customer's financial condition, and generally collateral is not required. Management's determination of the allowance for doubtful accounts is based on an evaluation of the accounts
receivable, past experience, current economic conditions, and other risks inherent in the accounts receivable portfolio.

Inventory

Inventory is stated at the lower cost or market, with cost determined on the first-in, first-out (FIFO) basis. The Company records a
provision for excess or obsolete inventory as required.

Property and equipment

Property and equipment are stated at cost. Alterations and major overhauls which increase the capacity of assets, are capitalized. Repairs and maintenance are
expensed as incurred.

F-136

---

Depreciation
of owned assets and amortization of assets under capital leases are provided on the straight-line method over the useful lives of the related assets, or the
lease term for assets under capital leases, as follows:

|Buildings               |  | 25 to 40 years
|----------------------- |  | --------------
|Machinery and equipment |  | 3 to 5 years  
|Fixtures and fittings   |  | 3 to 20 years 

Goodwill

In June 2001, the Financial Accounting Standards Board issued two Statements of Financial Accounting Standards, No. 141, Business
Combinations(SFAS No. 141), and No. 142,Goodwill and Other Intangible Assets(SFAS No. 142). SFAS No. 141 addresses financial accounting and reporting for business combinations and supersedes APB Opinion No. 16,Business
Combinations, and FASB Statement No. 38,Accounting for Pre-acquisition Contingencies of Purchased
Enterprises.All business combinations in the scope of SFAS No. 141 are to be accounted for using one method, the purchase method. The provisions of SFAS No. 141
apply to all business combinations initiated after June 30, 2001. Use of the pooling-of-interests method for those business combinations is prohibited. The provisions of
SFAS No. 141 also apply to all business combinations accounted for by the purchase method for which the date of acquisition is July 1, 2001, or later. During 2002 the Company acquired
additional interests from the minority shareholder of WAGO Contact S.A., France; the purchase of those interests were accounted for in accordance with the provisions of SFAS No. 141.

SFAS
No. 142 addresses financial accounting and reporting for acquired goodwill and other intangible assets and supersedes APB Opinion No. 17, Intangible Assets. It addresses how intangible assets
that are acquired individually or with a group of other assets (but not those acquired in a
business combination) should be accounted for in financial statements upon their acquisition. SFAS No. 142 also addresses how goodwill and other intangible assets should be accounted for after
they have been initially recognized in the financial statements. Under SFAS No. 142, goodwill and intangible assets that have indefinite useful lives are not amortized but rather tested at
least annually for impairment. Intangible assets that have finite useful lives will continue to be amortized over their useful lives, but without the constraint of the 40-year maximum life
required by APBO No. 17. The Company adopted the provisions of SFAS No. 142 effective January 1, 2002. See Note 5.

Long-lived assets

Long-lived assets held and used by the Group are reviewed for impairment whenever changes in circumstances indicate that the carrying value of an
asset may not be recoverable.

Revenue recognition

Revenue is recognized when products are shipped, net of estimated allowances for product returns.

F-137

---

Foreign currency translation

The assets and liabilities of WAGO Kontakttechnik GmbH's foreign subsidiaries and affiliates are translated to EURO at exchange rates existing at the
balance-sheet date, and revenues and expenses are translated at average exchange rates for the year. Resulting translation adjustments are reflected as a component of other comprehensive income.

Transaction
gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of
operations as incurred, except those that operate as a hedge of an identifiable foreign currency commitment.

Derivatives and hedging activities

In June 1998 the Financial Accounting Standards Board issued Statement No. 133,Accounting for Derivative Instruments and
Hedging Activities, and its amendment Statements 137 and 138, in June 1999 and June 2000, respectively. The Statement requires the Company to recognize all
derivatives on the balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair value through income. If the derivative is a hedge, depending on the nature of the hedge,
changes in the fair value of derivatives are either set off against the change in fair value of assets, liabilities, or firm commitments
through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings.

The
ineffective portions of a derivative's change in fair value will be immediately recognized in earnings. The adoption of Statement No. 133, as amended, on January 01, 2001,
resulted in the cumulative effect of an accounting change of €1,233 net of taxes of €762, being recognized as other comprehensive income.

Forward
exchange contracts are used to hedge foreign exchange exposures arising from anticipated receipts and payments in foreign countries. Gains and losses on foreign currency
contracts are offset against the foreign exchange gains and losses on the related financial assets and liabilities. Prior to the adoption of SFAS No. 133, where the contract was a hedge against
anticipated transactions, gains and losses were deferred until the transaction occurs. In 2001 such gains and losses are recognized in the balance sheet net of taxes. The cumulative effect of the
change in the accounting principles for Derivatives and Hedging Activities is recognized separately within the Combined Statement of Shareowners' Equity.

Warranty

The Group provides for the estimated cost to fulfill customer warranty claims based upon the recognition of the related revenue. Such reserves are determined
based upon actual warranty cost experience and management's industry experience.

Income taxes

The provision for income taxes is determined in accordance with SFAS No. 109 "Accounting for Income Taxes" ("SFAS No. 109"), which requires the use
of the asset and liability approach. Under this

F-138

---

approach,
deferred taxes represent the expected future tax consequences of temporary differences between the carrying amounts and tax bases of assets and liabilities using the enacted tax rates in
effect in the years in which differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the period that the rate change is
enacted.

Concentration of credit risk

The Group performs ongoing credit evaluations of its customers and generally does not require collateral from its customers. The Group maintains an allowance for
potential losses when identified.

Advertising costs

It is the Company's policy to expense all advertising costs as incurred. Advertising expense incurred during 2002, 2001 and 2000 amounted to
€8,984, €10,797 and €10,086, respectively.

Recently issued accounting pronouncements

In August 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 144,Accounting for the Impairment or
Disposal of Long-Lived Assets. SFAS No. 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets.
This Statement supersedes SFAS No. 121,Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of, and 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 of a business (as previously
defined in that Opinion). SFAS No. 144 also amends ARB No. 51,Consolidated Financial Statements, to eliminate the exception to
consolidation for a subsidiary for which control is likely to be temporary. The adoption of the provisions of SFAS No. 144, effective January 1, 2002, had no effect on the combined
financial statements.

In
June 2001, the FASB issued SFAS 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 the associated asset retirement costs. SFAS No. 143 applies to
legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and the normal operation of a long-lived
asset, except for certain obligations of lessees. SFAS No. 143 amends FASB Statement No. 19,Financial Accounting and Reporting by Oil and Gas Producing
Companies, and is effective for fiscal years beginning after June 15, 2002. The adoption of the provisions of SFAS No. 143 are not expected to have a material
impact on the financial position or results of operations of the Company.

In
June 2002, the FASB issued SFAS No. 146,Accounting for Costs Associated with Exit or Disposal Activities. SFAS
No. 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3,
"Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." The adoption of the provisions of SFAS
No. 146, which is

F-139

---

effective
for exit or disposal activities initiated after December 31, 2002, is not expected to have a material impact on the financial position or results of operations of the Company.

In
2002, the FASB issued Interpretation No. 45,Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others. FIN 45 elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain
guarantees that it has issued. It also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the
guarantee. The initial recognition and initial measurement provisions of this Interpretation are applicable on a prospective basis to guarantees issued or modified after December 31, 2002,
irrespective of the guarantor's fiscal year-end. The disclosure requirements in this Interpretation are effective for financial statements of interim or annual periods ending after
December 15, 2002. The adoption of the provisions of FIN 45 is not expected to have a material impact on the financial position or results of operations of the Company.

In
January 2003, the FASB issued Interpretation No. 46,Consolidation of Variable Interest Entities. FIN 46 applies to
variable interest entities created after January 31, 2003, and must be applied to interests in variable interest entities created on or before January 31, 2003 for the first fiscal
period beginning after June 15, 2003. The adoption of the provisions of FIN 46 are not expected to have a material effect on the financial position or results of operations of the Company.

Research and development costs

The cost of research, development and product improvement costs are charged to expense as they are incurred.

Note 3Inventory

Inventory is comprised of the following:

|                |  | December 31,
|--------------- |  | ------------
|
|
|Raw materials   |  | 14,581      
|Work in process |  | 10,821      
|Finished goods  |  | 23,582      
|                |  |             
|                |  | 48,984      
|                |  |             

F-140

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Note 4Property and equipment

A summary of property and equipment follows:

|                                          |  | December 31, |  
|----------------------------------------- |  | ------------ | -
|
|
|Land and buildings                        |  | 59,726       |  
|Machinery and equipment                   |  | 164,186      |  
|Furniture, fixtures, and office equipment |  | 47,507       |  
|Construction in progress                  |  | 5,440        |  
|                                          |  |              |  
|                                          |  | 276,859      |  
|Less accumulated depreciation             |  | (176,517     | )
|                                          |  |              |  
|                                          |  | 100,342      |  
|                                          |  |              |  

Depreciation
expense amounted to €24,260, €24,123 and €21,849 in 2002, 2001 and 2000, respectively.

Note 5Goodwill

During 2002, the Company acquired an additional 25% interest in WAGO Contact S.A., France from the non-controlling shareholder. In accordance with
SFAS No. 141, the acquisition was accounted for using the purchase method. The purchase price was €2,056, and the excess of purchase price over the proportionate share of the
fair value of net assets acquired of €823 was recorded as goodwill.

The
Company also has goodwill recorded in connection with the acquisition of two of its subsidiaries, WAGO Elektro spol.s.r.o. Czech Republic, and WAGO Elwag Sp. Z.0.0., Poland. Goodwill
is evaluated for impairment for each subsidiary as of the beginning of the fiscal year. For the year ended December 31, 2002, the results of the evaluations indicated no impairment of goodwill.
The increase in the balance of goodwill for the year ended December 31, 2002 of €823 was a result of the acquisition of minority interests described in the preceding paragraph.

The
following table summarizes the effects of the adoption, as of January 1, 2002, of the provisions of SFAS No. 142.

|                               |  | 2002   |  | 2001   |  | 2000  
|------------------------------ |  | ------ |  | ------ |  | ------
|
|Reported net income            |  | 11,882 |  | 18,913 |  | 23,921
|Add back goodwill amortization |  |       |  | 41     |  | 41    
|                               |  |        |  |        |  |       
|Adjusted net income            |  | 11,882 |  | 18,954 |  | 23,962
|                               |  |        |  |        |  |       

F-141

---

Note 6Long-term debt

A summary of the Company's notes and capital lease obligations follow. The obligations are denominated in EURO unless otherwise indicated:

|                                                                                                                                                                                                                                   |  | December 31, |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | -
|
|
|Financial institution installment loans, bearing interest at annual rates from 0.83% to 0,08%, in 2002, denominated in Japanese Yen                                                                                                |  | 1,312        |  
|Financial institution installment loan, bearing interest between 5.4% and 7.79% annually, quarterly payments of €93 plus interest, maturity date March 2004, issued by a subsidiary, of which €426 are guaranteed by WAGO Germany. |  | 429          |  
|Financial institution installment loan, bearing interest between 2.25% and 4.0% annually, maturities 2003 and 2004, collateralized by certain real estate, denominated in Swiss Francs                                             |  | 6,887        |  
|Financial institution installment loan, bearing interest at 5.1% annually, repayable quarterly with €48 plus interest, collateralized by certain real estate, denominated in French Francs                                         |  | 1,517        |  
|Financial institution loans, bearing interest at 14.25% annually, repayable 2000-2004, secured by certain real property, denominated in Indian Rupees.                                                                             |  | 73           |  
|Financial institution installment loans, bearing interest between 4.96% and 5.25% annually, quarterly payment of €141 plus interest, maturity in 2008, collateralized by certain real estate                                       |  | 3,377        |  
|Line of credit agreements, maximum available of €20,217 at December 31, 2002, bearing interest between 6.5% and 8.0% annually.                                                                                                     |  |             |  
|Short-term borrowings from financial institutions, bearing interest between 3.53% and 4.62% annually.                                                                                                                              |  |             |  
|Employee's welfare funds loan, bearing interest of min. 5.5%, unsecured, maturity unlimited                                                                                                                                        |  | 325          |  
|Capital lease obligations, bearing interest between 7.05% to 11.74% annually, maturities 2002 through 2019                                                                                                                         |  | 17,709       |  
|                                                                                                                                                                                                                                   |  |              |  
|                                                                                                                                                                                                                                   |  | 31,629       |  
|Less current portion                                                                                                                                                                                                               |  | (8,459       | )
|                                                                                                                                                                                                                                   |  |              |  
|Long-term portion                                                                                                                                                                                                                  |  | 23,170       |  
|                                                                                                                                                                                                                                   |  |              |  

F-142

---

Future
maturities of long-term debt are as follows:

|2004       |  | 4,046 
|---------- |  | ------
|2005       |  | 1,831 
|2006       |  | 1,873 
|2007       |  | 1,595 
|Thereafter |  | 13,825
|           |  |       
|           |  | 23,170
|           |  |       

Note 7Retirement plan

The Company has a defined benefit pension plan that covers substantially all of its employees. The plan calls for benefits to be paid to eligible employees at
retirement based primarily upon years of service with the Company. The plan is funded on a
pay-as-you-go basis. The Company consults with an actuary for determining any estimates.

The
following sets forth the status of the Plan and amounts recognized in the accompanying combined financial statements.

|                                       |  | 2002   |   | 2001   |  
|-------------------------------------- |  | ------ | - | ------ | -
|
|Change in benefit obligation           |  |        |   |        |  
|Benefit obligation, beginning of year  |  | 4,462  |   | 4,987  |  
|Service cost                           |  | 184    |   | 357    |  
|Interest cost                          |  | 238    |   | 322    |  
|Actuarial (gain) loss                  |  | (379   | ) | (1,130 | )
|Benefits paid                          |  | (62    | ) | (74    | )
|                                       |  |        |   |        |  
|Benefit obligation, end of year        |  | 4,443  |   | 4,462  |  
|                                       |  |        |   |        |  
|Funded status                          |  | (4,443 | ) | (4,462 | )
|Unrecognized net transition obligation |  | 58     |   | 117    |  
|Unrecognized actuarial gains           |  | (58    | ) | (117   | )
|                                       |  |        |   |        |  
|Accrued pension cost                   |  | (4,443 | ) | (4,462 | )
|                                       |  |        |   |        |  

F-143

---

|                              |  | 2002 |   | 2001 |   | 2000 |  
|----------------------------- |  | ---- | - | ---- | - | ---- | -
|
|Assumptions as of December 31 |  |      |   |      |   |      |  
|Discount rate                 |  | 5.5  | % | 5.5  | % | 6.5  | %
|Pension increase rate         |  | 2.5  | % | 2.5  | % | 2.0  | %

|                                        |  | 2002 |   | 2001   |   | 2000 |  
|--------------------------------------- |  | ---- | - | ------ | - | ---- | -
|
|Components of net periodic pension cost |  |      |   |        |   |      |  
|Service cost                            |  | 184  |   | 357    |   | 245  |  
|Interest cost                           |  | 238  |   | 322    |   | 330  |  
|Actuarial gains                         |  | (379 | ) | (1,130 | ) | (145 | )
|                                        |  |      |   |        |   |      |  
|Net periodic pension cost               |  | 43   |   | (451   | ) | 430  |  
|                                        |  |      |   |        |   |      |  

Note 8Share-based compensation

Certain Group executives have been granted options to purchase Spirent plc Ordinary shares by Spirent plc. The Group does not incur any liability to Spirent plc
in connection with the stock option awards.

Historically
under US GAAP, Spirent plc had elected to apply the recognition and measurement principles of APB 25, "Accounting for Stock Issued to Employees" to these stock option
awards. Due to the performance criteria in the plans under which the stock options were granted, these plans were deemed to be variable plans under US GAAP.

Following
the introduction of FASB Interpretation No. 44, "Accounting for Certain Transactions Involving Stock Compensation", which is effective from July 1, 2000, Spirent
plc has accounted for unvested stock option awards granted after December 15, 1998, and any awards subsequent to July 1, 2000 under the fair value method of SFAS 123 "Accounting
for Stock-Based Compensation". The Group follows the same accounting for options as Spirent plc. As the Group does not incur any liability with respect to the options, amounts recognized as expense
are reflected as contributed capital.

Compensation
expense/benefit recognized in the Group's financial statements for the years ended December 31, 2002, 2001 and 2000 for stock option awards to WAGO employees were
€(221), €(587) and €952, respectively.

If
compensation cost for stock options had been determined based on fair value at the date of grant, net income for the years ended December 31, 2002, 2001 and 2000 would have
been €11,873, €18,412 and €24,625, respectively.

The
normal exercise period for stock options is between the third and tenth anniversary of the date of grant, subject to certain performance targets.

The
fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions for grants issued in
2001 and

F-144

---

2000,
respectively no options were granted in 2002; dividend yields of 1.6% and 2.5%, expected volatility of 68% and 49% risk-free interest rates of 4.5% and 5.2%; and expected lives of
3.4 and 5.6 years. The weighted average fair value per share of options granted was (Great Britain pence) 142.0p, and 138.0p.

A
summary of stock option activity follows (as restated to reflect Spirent plc share dividend and rights offering):

|                           |  | 2002    |   | 2001   |   | 2000    |  
|-------------------------- |  | ------- | - | ------ | - | ------- | -
|
|
|Outstanding on January 1   |  | 587,510 |   | 183.34 |   | 482,410 |  
|Granted                    |  |         |   |        |   | 105,100 |  
|Exercised                  |  | (      | ) | (     | ) | (      | )
|Forfeited/Expired          |  | (      | ) | (     | ) |        |  
|                           |  |         |   |        |   |         |  
|Outstanding on December 31 |  | 587,510 |   | 183.34 |   | 587,510 |  
|                           |  |         |   |        |   |         |  

The
following table summarizes information about stock options at December 31, 2002:

|                 |  | Outstanding stock options |  | Exercisable stock options
|---------------- |  | ------------------------- |  | -------------------------
|
|
|104.14 to 152.08 |  | 415,070                   |  | 4.58                     
|305.00 to 334.11 |  | 172,440                   |  | 7.89                     

Note 9Financial instruments

Forward exchange contracts are used to hedge a portion of foreign exchange exposures arising from anticipated receipts and payments in foreign countries occurring
within the following 59 months. At December 31, 2002 and 2001 the Group held foreign exchange forward contracts for Japanese yen equating to €12,550 and
€8,200, respectively.

The
Group also enters into zero-cost option contracts to exchange Yen for EURO as part of its foreign currency exposure risk management activities. Contracts having the same
terms and notional amounts for the purchased call component and the written put component have no net written premium and are accounted for as cash flow hedges. Certain contracts have notional amounts
of the written put option component in excess of the notional amount of the purchased call component, resulting in a beneficial exchange rate, and are accounted for at fair value with changes in fair
value recognized currently in earnings. The Group had open zero-cost options contracts designated as cash flow hedges for €11,100 and €13,300 at
December 31, 2002 and 2001, respectively. The Group had open

F-145

---

option
contracts with the written put option component exceeding the purchased call option component for €8,000 (written put) and €4,000 (purchased call) at both
December 31, 2002 and 2001. Unrealized gains and losses on foreign exchange forward contracts used to hedge anticipated transactions at December 31, 2002 and 2001 were approximately
€4,152 and €2,883, respectively before taxes.

The
Group also has entered into a cross-currency interest rate swap to hedge the currency and interest rate risk of certain of its debt agreements. The notional amount of the swap was
€1,923 at December 31, 2002, respectively €1,985 at December 31, 2001.

The
following methods and assumptions were used by the Group in estimating its fair value disclosures for financial instruments. Fair value approximates carrying value for the following
financial instruments due to their short-term nature: cash and cash equivalents and accounts receivable and payable. The fair value of long-term debt is estimated by
discounting future cash flows using interest rates available to the Group with similar terms and maturities. Foreign currency agreements are valued based on quoted market prices of comparable
instruments.

|                            |  | December 31, 2002 |   | December 31, 2001 |  
|--------------------------- |  | ----------------- | - | ----------------- | -
|
|
|Long-term debt              |  | 31,629            |   | 36,230            |  
|Foreign currency agreements |  | 4,152             |   | 4,152             |  
|Interest rate swap          |  | (272              | ) | (272              | )

Note 10Income taxes

The provision for income taxes follows.

|                  |         | 2002  |       | 2001  |       | 2000  
|----------------- | ------- | ----- | ----- | ----- | ----- | ------
|
|Current provision |         |       |       |       |       |       
|                  | Germany |       | 5,062 |       | 4,705 |       
|                  | Foreign |       | 3,429 |       | 3,964 |       
|                  |         |       |       |       |       |       
|                  |         | 8,491 |       | 8,669 |       | 15,349
|                  |         |       |       |       |       |       

|                   |         | 2002  |      | 2001  |     | 2000   |     
|------------------ | ------- | ----- | ---- | ----- | --- | ------ | ----
|
|Deferred provision |         |       |      |       |     |        |     
|                   | Germany |       | (312 | )     | (68 | )      | (513
|                   | Foreign |       | 316  |       | 159 |        | (280
|                   |         |       |      |       |     |        |     
|                   |         | 4     |      | 91    |     | (793   | )   
|                   |         |       |      |       |     |        |     
|                   |         | 8,495 |      | 8,760 |     | 14,556 |     
|                   |         |       |      |       |     |        |     

F-146

---

Deferred
income taxes were provided for temporary differences in basis of assets and liabilities for financial statement and income tax purposes. These temporary differences consist
principally of the recognition of bad debts, the recognition of obsolete inventory, the calculation of depreciation expense, the deductibility of certain related party expenses, and the recognition of
certain production expenses, and unrealized gains and losses on foreign exchange contracts.

The
tax effects of temporary differences that give rise to deferred tax assets and liabilities include the following:

|                                                 |  | 2002   |   | 2001   |  
|------------------------------------------------ |  | ------ | - | ------ | -
|
|Current deferred tax assets (liabilities)        |  |        |   |        |  
|Elimination of intercompany profits in inventory |  | 1,110  |   | 966    |  
|Other                                            |  | (492   | ) | (303   | )
|                                                 |  |        |   |        |  
|                                                 |  | 618    |   | 663    |  
|                                                 |  |        |   |        |  
|Noncurrent deferred tax assets (liabilities)     |  |        |   |        |  
|Depreciable basis of property and equipment      |  | (1,616 | ) | (1,874 | )
|Pension accruals                                 |  | 187    |   | 233    |  
|Unrealized gains on foreign exchange contracts   |  | (1,488 | ) | (1,050 | )
|Other                                            |  | 559    |   | 559    |  
|                                                 |  |        |   |        |  
|                                                 |  | (2,358 | ) | (2,132 | )
|                                                 |  |        |   |        |  

Gross
deferred tax assets were €1,966 and €2,058 at December 31, 2002 and 2001, respectively.

Gross
deferred tax liabilities were €3,707 and €3,527 at December 31, 2002 and 2001, respectively.

Management
believes that the Company will fully realize deferred tax assets based on future reversal of existing taxable temporary differences and current levels of operating income.

Income
tax returns not barred by the statute of limitations are subject to examination by taxing authorities.

Note 11Other balance sheet information

Valuation and qualifying accounts are deducted from the related balance sheet account, and consisted of the following at each year end.

|                                                |  | December 31
|----------------------------------------------- |  | -----------
|
|
|Allowance for uncollectible accounts receivable |  | 1,622      
|Reserve for obsolete inventory                  |  | 1,681      
|                                                |  |            
|                                                |  | 3,303      
|                                                |  |            

F-147

---

The
components of other liabilities at each year end were as follows:

|                          |  | December 31
|------------------------- |  | -----------
|
|
|Accrued pension liability |  | 4,443      
|Other                     |  | 5,901      
|                          |  |            
|                          |  | 10,344     
|                          |  |            

Note 12Related party transactions

In the customary course of business, the Company leases certain land and buildings from shareowners and related interests. All of these properties are located in
Minden, Germany. These lease agreements will expire on December 31, 2006 at which time certain lease extension provisions may be exercised. These lease agreements contain monthly lease charges
amounting to €20. Lease expense recognized under these related party leases amounted to €239 for 2002, 2001 and 2000, respectively.

Group
sales to Spirent plc were made in the ordinary course of business and amounted to €2,738, €2,717 and €2,576 for 2002, 2001 and 2000,
respectively.

In
the customary course of business, the Company grants credit to Spirent plc and certain of its subsidiaries. Amounts outstanding at December 31, 2002 and 2001 were
€653 and €646, respectively.

Note 13Commitments and contingencies

A summary of the various commitments which the Company has entered into in the ordinary course of business follows:

Operating leases

Total expense under operating leases expense of €5,027, €4,426 and €3,023 was incurred during 2002, 2001 and 2000,
respectively.

F-148

---

Under
the terms of the Group's operating and capital lease agreements, future minimum lease payments for leases with terms greater than one year are as follows:

|Year ended December 31,      |  | Operating |  | Capital |  
|---------------------------- |  | --------- |  | ------- | -
|
|2003                         |  | 2,928     |  | 1,837   |  
|2004                         |  | 2,338     |  | 1,837   |  
|2005                         |  | 1,601     |  | 1,837   |  
|2006                         |  | 1,176     |  | 1,529   |  
|2007                         |  | 759       |  | 1,529   |  
|2008 and thereafter          |  | 959       |  | 19,747  |  
|                             |  |           |  |         |  
|                             |  | 9,761     |  | 28,316  |  
|                             |  |           |  |         |  
|Amount representing interest |  |           |  | (10,607 | )
|                             |  |           |  |         |  
|                             |  |           |  | 17,709  |  
|                             |  |           |  |         |  

The
Company acquired certain operating facilities under the provisions of long-term leases. The economic substance of the leases are to finance the acquisition of the
facilities. Accordingly, these leases have been accounted for as capital leases. During 2002 the company acquired one of the facilities formerly leased. The present value of minimum lease rentals for
properties under capital lease of €19,910 at December 31, 2002 and €22,114 at December 31, 2001 have been capitalized in connection with the leases.
Accumulated depreciation recognized on these facilities amounted to €2,886 and €3,377 at December 31, 2002 and 2001.

Other commitments

The Company has entered into various contracts to construct both buildings and machinery and equipment. At December 31, 2002, expected future payments
under these contracts are not anticipated to exceed €5,967.

For
investments in machinery, tools equipment and buildings to be done in Sondershausen, Germany, the Company has a taxable government grant available of €6,785 which
covers investments of €30,156 from December 12, 2001 until August 31, 2004. As of December 31, 2002 grants available of €5,910 related to future
investments of €26,266 remained.

Note 14Subsequent event

Subsequent to year end, Spirent plc and the members of the Hohorst family reached an agreement whereby Spirent plc would sell its 51% interests in WAGO Germany
and WAGO Switzerland to
entities controlled by the Hohorst family. These share sale and purchase agreements were closed on March 11, the transactions were completed on April 4, 2003.

F-149

---



SCHEDULE II

SPIRENT plc        VALUATION AND QUALIFYING ACCOUNTS

|Description                           |  | Balance at beginning of year |  | Additions
charged to
Profit and Loss |  | Exchange
Differences |  | Deductions |   | Balance at end of year
|------------------------------------- |  | ---------------------------- |  | ------------------------------------ |  | -------------------- |  | ---------- | - | ----------------------
|
|Year ended December 31 2000           |  |                              |  |                                      |  |                      |  |            |   |                       
|Provisions for bad and doubtful debts |  | 2.7                          |  | 2.8                                  |  |                     |  |           |   | 5.5                   
|Year ended December 31 2001           |  |                              |  |                                      |  |                      |  |            |   |                       
|Provisions for bad and doubtful debts |  | 5.5                          |  | 4.7                                  |  |                     |  | (0.9       | ) | 9.3                   
|Year ended December 31 2002           |  |                              |  |                                      |  |                      |  |            |   |                       
|Provision for bad and doubtful debts  |  | 9.3                          |  | 0.4                                  |  | 0.2                  |  | (2.8       | ) | 7.1                   

S-1

---

SIGNATURES

The Registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to
sign this annual report on its behalf.

| |  | SPIRENT PLC  
| |  | -------------
| |  | By:          
| |  | June 17, 2003

---

CERTIFICATIONS

I, Nicholas K Brookes, certify that:

1.     I
have reviewed this annual report on Form 20-F of Spirent plc;

2.     Based
on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made,
in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.     Based
on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4.     The
registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and have:



5.     The
registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent functions):



6.     The
registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other
factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material
weaknesses.

| |  | Date: June 17, 2003
| |  | -------------------
| |  | By:                

---

CERTIFICATIONS

I, Eric G Hutchinson, certify that:

1.     I
have reviewed this annual report on Form 20-F of Spirent plc;

2.     Based
on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made,
in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.     Based
on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4.     The
registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and have:



5.     The
registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent functions):



6.     The
registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other
factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material
weaknesses.

| |  | Date: June 17, 2003
| |  | -------------------
| |  | By:                

---

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