##### Table of Contents

As filed with the Securities and Exchange Commission on June 28, 2004



---

SECURITIES AND EXCHANGE
COMMISSION

Washington, D.C. 20549



---



FORM 20-F



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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES AND EXCHANGE
ACT OF 1934



FOR THE FINANCIAL YEAR ENDED DECEMBER 31,
2003



Commission file number 0- 28952



---



THE RANK GROUP Plc

(Exact name of Registrant as specified in its charter)



---



England

(Jurisdiction of
incorporation or organization)

6 Connaught Place

London

W2 2EZ

(Address of principal executive offices)



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



|                    |  |                                          
|------------------- |  | -----------------------------------------
|Title of each class |  | Name of each exchange on which registered
|None                |  |                                          



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



Ordinary shares of 10p each

(Title of class)



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:



|Ordinary shares | 596,163,721
|--------------- | -----------



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



Indicate by check mark which financial statement item the registrant has elected to follow.    Item 17  x    Item 18 ̈



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##### Table of Contents

TABLE OF CONTENTS



|             |  |                                                                              |  |     
|------------ |  | ---------------------------------------------------------------------------- |  | ----
|             |  |                                                                              |  | Page
|             | 
|Definitions  |  | ii                                                                          
|Introduction |  | iv                                                                          
|             | 
|PART 1       |  |                                                                             
|             |  |                                                                             
|Item 1.      |  | Identity of Directors, Senior Management and Advisers                        |  | 1   
|Item 2.      |  | Offer Statistics and Expected Timetable                                      |  | 1   
|Item 3.      |  | Key Information                                                              |  | 1   
|Item 4.      |  | Information on the Company                                                   |  | 8   
|Item 5.      |  | Operating and Financial Review and Prospects                                 |  | 18  
|Item 6.      |  | Directors, Senior Management and Employees                                   |  | 43  
|Item 7.      |  | Major Shareholders and Related Party Transactions                            |  | 49  
|Item 8.      |  | Financial Information                                                        |  | 50  
|Item 9.      |  | The Offer and Listing                                                        |  | 51  
|Item 10.     |  | Additional Information                                                       |  | 52  
|Item 11.     |  | Quantitative and Qualitative Disclosures About Market Risk                   |  | 60  
|Item 12.     |  | Description of Securities Other than Equity Securities                       |  | 63  
|             | 
|PART II      |  |                                                                             
|             |  |                                                                             
|Item 13.     |  | Defaults, Dividend Arrearages and Delinquencies                              |  | 63  
|Item 14.     |  | Material Modifications to the Rights of Security Holders and Use of Proceeds |  | 63  
|             | 
|PART III     |  |                                                                             
|             |  |                                                                             
|Item 15.     |  | Disclosure Controls and Procedures                                           |  | 63  
|Item 16a     |  | Audit Committee Financial Expert                                             |  | 63  
|Item 16b     |  | Code of Ethics                                                               |  | 64  
|Item 16c     |  | Accountants Fees and Services                                                |  | 64  
|             | 
|PART IV      |  |                                                                             
|             |  |                                                                             
|Item 17.     |  | Financial Statements                                                         |  | 65  
|Item 18.     |  | Financial Statements                                                         |  | F-63
|Item 19.     |  | Exhibits                                                                     |  | F-63



i



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##### Table of Contents

DEFINITIONS



The following definitions are
used in this Form 20-F:



|                                            |  |                                                                                                                                                                                                                                                 
|------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ADR                                       |  | means an American Depositary Receipt evidencing one or more ADRs.                                                                                                                                                                               
|                                            | 
|ADS                                       |  | means American Depositary Shares, each representing two Ordinary shares.                                                                                                                                                                        
|                                            | 
|Atlab                                     |  | means Atlab Holdings Pty Limited.                                                                                                                                                                                                               
|                                            | 
|Company, Group, Rank and Rank Group |  | means The Rank Group Plc, and its subsidiary companies.                                                                                                                                                                                         
|                                            | 
|Convertible preference shares             |  | means the convertible cumulative redeemable preference shares of 20 pence each in Rank.                                                                                                                                                         
|                                            | 
|C$ dollars or Canadian Dollars          |  | refers to Canadian currency.                                                                                                                                                                                                                    
|                                            | 
|DGMS                                      |  | means Deluxe Global Media Services LLC.                                                                                                                                                                                                         
|                                            | 
|Depositary                                |  | means JP Morgan Chase Bank, as the depositary under the deposit agreement governing the ADRs.                                                                                                                                                   
|                                            | 
|Dollar preference shares                  |  | means the Dollar preference shares of US $1,000 each in Rank.                                                                                                                                                                                   
|                                            | 
|EFILM                                     |  | means EFILM LLC.                                                                                                                                                                                                                                
|                                            | 
|ETS                                       |  | means Entertainment Transportation Specialists, Inc.                                                                                                                                                                                            
|                                            | 
|Exceptional items                         |  | means events or transactions that fall within the activities of the Group which need to be disclosed by virtue of their size or incidence. Performance measures, such as operating profit, are
usually given before and after exceptional items.
|                                            | 
|FRS                                       |  | means Financial Reporting Standard.                                                                                                                                                                                                             
|                                            | 
|The Lab                                   |  | means The Lab in Toronto, Inc.                                                                                                                                                                                                                  
|                                            | 
|Like-for-like sales                       |  | means turnover measured on the same basis for more than one year. Only locations which traded on a comparable basis in the prior year are included in like-for-like sales
comparisons                                                           
|                                            | 
|Interest cover                            |  | means the number of times the Group can meet its interest commitments from its earnings calculated by dividing operating profit by the interest charge.                                                                                         
|                                            | 
|non-GAAP measures                         |  | means measures of performance which are not specified by UK or US Accounting Bodies.                                                                                                                                                            
|                                            | 
|noon buying rate                          |  | refers to the noon buying rate in New York for cable transfers in foreign currencies as announced by the Federal Reserve Bank of New York for customs purposes.                                                                                 



ii



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##### Table of Contents

|                                                |  |                                                                                                                                                                                                                                                                                                                                                                                                  
|----------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Ordinary shares                               |  | means Ordinary shares of 10 pence each in Rank.                                                                                                                                                                                                                                                                                                                                                  
|                                                | 
|Pounds sterling, £,
pence, penny or p |  | refers to United Kingdom currency.                                                                                                                                                                                                                                                                                                                                                               
|                                                | 
|Profit on ordinary activities                 |  | means the Groups profit before interest and taxation. Usually given both before and after exceptional items.                                                                                                                                                                                                                                                                                    
|                                                | 
|The Rank Organisation or Rank Organisation  |  | means XRO Limited, formerly The Rank Organisation Limited, formerly The Rank Organisation Plc.                                                                                                                                                                                                                                                                                                   
|                                                | 
|Rank Xerox                                    |  | Xerox Limited, (formerly Rank Xerox Limited), Xerox Holding (Nederland) BV, (formerly Rank Xerox Holding BV), Xerox Investments (Bermuda) Limited, (formerly Rank Xerox Investments Limited)
and Xerox Holdings (Bermuda) Limited (formerly RX Holdings Limited) together with, where the context so requires, their respective subsidiaries and certain joint ventures and associated companies.
|                                                | 
|SFAS                                          |  | means Statement of Financial Accounting Standards                                                                                                                                                                                                                                                                                                                                                
|                                                | 
|Scheme of Arrangement                         |  | means the Scheme of Arrangement of The Rank Organisation dated August 16, 1996 (under section 425 of the UK Companies Act 1985, as amended) which became effective on October 7,
1996                                                                                                                                                                                                            
|                                                | 
|Subsidiary company                            |  | means a subsidiary in which the holding company holds all or a majority of the voting rights.                                                                                                                                                                                                                                                                                                    
|                                                | 
|US dollars, dollars or $                  |  | refer to United States currency.                                                                                                                                                                                                                                                                                                                                                                
|                                                | 
|UK GAAP                                       |  | refers to generally accepted accounting principles in the United Kingdom.                                                                                                                                                                                                                                                                                                                        
|                                                | 
|US GAAP                                       |  | refers to generally accepted accounting principles in the United States.                                                                                                                                                                                                                                                                                                                         
|                                                | 
|Year end rate                                 |  | refers to the closing exchange rate applicable to December 31 as published in the Financial Times in the United Kingdom.                                                                                                                                                                                                                                                                         



iii



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##### Table of Contents

INTRODUCTION



The Consolidated Financial
Statements of the Group are prepared in accordance with UK GAAP, which differ in certain significant respects from US GAAP and, unless otherwise indicated, all financial data is presented in accordance with UK GAAP.



The information within this report contains certain forward-looking statements within the
meaning of Section 27A of the US Securities Act of 1933, as amended, and Section 21E of the US Securities Exchange Act of 1934, as amended, with respect to Ranks development and expansion plans in its existing businesses, including plans
arising as a result of recently proposed UK gambling legislation, and the e-gaming business, and the timing thereof, Ranks capital expenditure plans, the growth of DVD replication and the decline of video duplication, expectations regarding
the profitable extension of the Hard Rock brand, expectations regarding release patterns of block-buster films and Ranks liquidity and capital resources, and information provided pursuant to Item 5E- Off Balance Sheet Arrangements and Item 5F
 Tabular Disclosure of Contractual Obligations. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors
that could cause material differences in the results implied by the forward-looking statements including levels of consumer spending, changes in consumer tastes and preferences, level of marketing and promotional expenditure by Rank and its
competitors, raw materials and employee costs, future exchange and interest rates, changes in tax rates, future business combinations or dispositions, suitable site locations, general economic conditions, amount of leisure time, availability of
popular, well marketed motion pictures, initial release of films to a large number of screens, success of operation initiatives and changes in government regulations.



The Rank Group Plc



Address of principal executive offices:



6 Connaught Place

London

England

W2 2EZ



|           |  |                    
|---------- |  | -------------------
|Telephone: |  | +44 (0)20 7706 1111
|Fax:       |  | +44 (0)20 7262 9886



iv



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##### Table of Contents

PART I



ITEM 1 IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS



NOT APPLICABLE



ITEM 2 OFFER STATISTICS AND EXPECTED TIMETABLE



NOT APPLICABLE



ITEM 3 KEY INFORMATION



3A SELECTED FINANCIAL
DATA



Throughout this report we refer to operating profit before goodwill
amortization and exceptional items. These business performance measures are used internally by management to manage the operations of the business, as management believe the measures provide clearer guidance on underlying business performance. These
measures are non-GAAP measures for both UK and US GAAP reporting and where these business performance measures are discussed in this report, the relevant GAAP measure is also given. The table below reconciles the measures to the relevant statutory
heading under UK GAAP.



|                                                       |  |        |  |        |  |        |  |        |  |       
|------------------------------------------------------ |  | ------ |  | ------ |  | ------ |  | ------ |  | ------
|                                                       |  | 2003£m |  | 2002£m |  | 2001£m |  | 2000£m |  | 1999£m
|Operating profit                                       |  | 166    |  | 213    |  | 172    |  | 219    |  | 209   
|Add back:                                              |  |        |  |        |  |        |  |        |  |       
|Goodwill amortization                                  |  | 6      |  | 1      |  | 1      |  |       |  |      
|Exceptional items                                      |  | 51     |  | 6      |  | 37     |  | 44     |  | 98    
|                                                       |  |        |  |        |  |        |  |        |  |       
|Operating profit before goodwill and exceptional items |  | 223    |  | 220    |  | 210    |  | 263    |  | 307   
|                                                       |  |        |  |        |  |        |  |        |  |       



The table below sets forth selected
consolidated financial data as of December 31, 2002 and 2003 and for each of the years in the three year period ended December 31, 2003, which has been derived from the Groups audited Consolidated Financial Statements included elsewhere in
this Annual Report.



Financial data at December 31, 2001, 2000 and 1999 has
been derived from the Groups previously published audited Consolidated Financial Statements not included in this Annual Report.



The Consolidated Financial Statements have been prepared in accordance with UK GAAP, which differ in certain significant respects from US GAAP. The principal differences
between UK GAAP and US GAAP are summarized in Note 35 to the Consolidated Financial Statements. The following information should be read in conjunction with Item 5 Operating and Financial Review and Prospects and the Consolidated
Financial Statements and the related notes thereto included elsewhere in this Annual Report.



The profit and loss account and balance sheet data below has been extracted from consolidated financial statements, which have been audited by PricewaterhouseCoopers (1999, 2000 and 2001) and by PricewaterhouseCoopers
LLP (2002 and 2003).



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##### Table of Contents

|                                                                           |  |        |   |  |                          |   |  |        |   |  |        |    |  |        |   
|-------------------------------------------------------------------------- |  | ------ | - |  | ------------------------ | - |  | ------ | - |  | ------ | -- |  | ------ | --
|                                                                           |  | 2003£m |   |  | 2002 (as restated) (1)£m |   |  | 2001£m |   |  | 2000£m |    |  | 1999£m |   
|Amounts in accordance with UK                                              |  |        |   |  |                          |   |  |        |   |  |        |    |  |        |   
|GAAP                                                                       |  |        |   |  |                          |   |  |        |   |  |        |    |  |        |   
|Turnover (1)                                                               |  | 1,926  |   |  | 1,509                    |   |  | 1,367  |   |  | 1,793  |    |  | 2,041  |   
|Operating profit before exceptional items                                  |  | 217    |   |  | 220                      |   |  | 210    |   |  | 263    |    |  | 307    |   
|Existing operations before exceptional items                               |  | 212    |   |  | 220                      |   |  | 210    |   |  | 203    |    |  | 196    |   
|Acquisitions                                                               |  | 5      |   |  |                         |   |  |       |   |  |       |    |  |       |   
|Discontinued operations(2)                                                 |  |       |   |  |                         |   |  |       |   |  | 60     |    |  | 111    |   
|Exceptional items (3)                                                      |  | (51    | ) |  | (6                       | ) |  | (38    | ) |  | (44    | )  |  | (98    | ) 
|Income/(loss) from interests in associated undertakings and joint ventures |  |       |   |  | 8                        |   |  | 2      |   |  | (23    | )  |  | (46    | ) 
|Profit (loss) for the financial period                                     |  | 102    |   |  | 137                      |   |  | 91     |   |  | (171   | )  |  | 89     |   
|Earnings (loss) per Ordinary share(4)                                      |  | 14.3   | p |  | 19.6                     | p |  | 11.9   | p |  | (27.6  | )p |  | 5.4p   |   
|Earnings (loss) per ADS(4)                                                 |  | 28.6   | p |  | 39.2                     | p |  | 23.8   | p |  | (55.2  | )p |  | 10.8p  |   
|Total assets                                                               |  | 2,009  |   |  | 1,814                    |   |  | 1,647  |   |  | 1,761  |    |  | 3,139  |   
|Long term debt                                                             |  | 581    |   |  | 468                      |   |  | 364    |   |  | 445    |    |  | 1,142  |   
|Preference shareholders interest                                          |  |       |   |  | 227                      |   |  | 224    |   |  | 222    |    |  | 220    |   
|Shareholders funds(5)(6)                                                  |  | 527    |   |  | 749                      |   |  | 729    |   |  | 731    |    |  | 1,211  |   
|Total number of Ordinary shares(7)                                         |  | 596    | m |  | 594                      | m |  | 592    | m |  | 592    | m  |  | 774    | m 
|Dividends per Ordinary share                                               |  | 13.9   | p |  | 13.2                     | p |  | 12.6   | p |  | 12.0   | p  |  | 12.0   | p 
|Dividends per ADS(4)                                                       |  | 27.8   | p |  | 26.4                     | p |  | 25.2   | p |  | 24.0   | p  |  | 24.0   | p 
|Dividends per Ordinary share ($)(8)                                        |  | 24.9   | c |  | 21.3                     | c |  | 18.3   | c |  | 17.9   | c  |  | 19.3   | c 
|Dividends per ADS ($)(4)(8)                                                |  | 49.8   | c |  | 42.5                     | c |  | 36.7   | c |  | 35.9   | c  |  | 38.7   | c 
|Amounts in accordance with US GAAP                                         |  |        |   |  |                          |   |  |        |   |  |        |    |  |        |   
|Turnover                                                                   |  | 1,575  |   |  | 1,465                    |   |  | 1,367  |   |  | 1,793  |    |  | 2,041  |   
|Net income (loss)                                                          |  | 79     |   |  | 165                      |   |  | 316    |   |  | (353   | )  |  | (200   | ) 
|Net income (loss) applicable to Ordinary shares(6)                         |  | 62     |   |  | 144                      |   |  | 295    |   |  | (374   | )  |  | (221   | ) 
|Basic income (loss) per Ordinary share                                     |  | 13     | p |  | 28                       | p |  | 54     | p |  | (51    | )p |  | (29    | )p
|Diluted income (loss) per Ordinary share                                   |  | 13     | p |  | 28                       | p |  | 54     | p |  | (51    | )p |  | (29    | )p
|Basic income (loss) per ADS(4)                                             |  | 26     | p |  | 56                       | p |  | 108    | p |  | (102   | )p |  | (57    | )p
|Diluted income (loss) per ADS(4)                                           |  | 26     | p |  | 56                       | p |  | 108    | p |  | (102   | )p |  | (57    | )p
|Shareholders equity                                                       |  | 898    |   |  | 867                      |   |  | 957    |   |  | 743    |    |  | 1,515  |   

---

|(1) | Turnover figures for the year to December 31, 2002 have been restated to reflect a revised interactive gaming revenue recognition policy. See F-6 for further details.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | In all years, discontinued operations relate to Nightscene, Odeon Cinemas, Pinewood Studios, Tom Cobleigh and UK Holidays.
|--- | --------------------------------------------------------------------------------------------------------------------------

|(3) | See page 22  Exceptional items for further details.
|--- | ----------------------------------------------------

|(4) | Earnings and dividends per ADS are calculated on the basis of one ADS for every two Ordinary shares.
|--- | ----------------------------------------------------------------------------------------------------

|(5) | Shareholders funds include the amounts shown separately for preference shareholders interest.
|--- | -----------------------------------------------------------------------------------------------

|(6) | Net income applicable to Ordinary shares is the result of deducting preference dividends and provisions for redemption premium from net income.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Total number of Ordinary shares in issue as at December 31, 2003, 2002, 2001, 2000 and 1999.
|--- | --------------------------------------------------------------------------------------------

|(8) | The US dollar amounts are converted at the annual closing exchange rates, as calculated by management.
|--- | ------------------------------------------------------------------------------------------------------



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##### Table of Contents

Exchange rates



The following table sets forth, for the periods and dates indicated, the average, high and low of period Noon Buying Rates for pounds sterling in US dollars per £1,
based on the Federal Reserve Bank of New York Noon Buying Rates.



|                          |  |          |  |      |  |     
|------------------------- |  | -------- |  | ---- |  | ----
|Period                    |  | Average* |  | High |  | Low 
|Year to December 31, 1999 |  | 1.61     |  | 1.68 |  | 1.55
|Year to December 31, 2000 |  | 1.51     |  | 1.65 |  | 1.40
|Year to December 31, 2001 |  | 1.44     |  | 1.50 |  | 1.37
|Year to December 31, 2002 |  | 1.51     |  | 1.61 |  | 1.41
|Year to December 31, 2003 |  | 1.64     |  | 1.78 |  | 1.57
|Month of November 2003    |  |         |  | 1.72 |  | 1.67
|Month of December 2003    |  |         |  | 1.78 |  | 1.72
|Month of January 2004     |  |         |  | 1.85 |  | 1.79
|Month of February 2004    |  |         |  | 1.90 |  | 1.82
|Month of March 2004       |  |         |  | 1.87 |  | 1.79
|Month of April 2004       |  |         |  | 1.86 |  | 1.77
|Month of May 2004         |  |         |  | 1.84 |  | 1.75

---

|* | The average of the Noon Buying Rates on the last day of each full calendar month during the period
|- | --------------------------------------------------------------------------------------------------



On June 24, 2004 the Noon Buying Rate was $1.82 per £1.



Fluctuations in the exchange rate between the pound sterling and the US dollar will affect the US dollar amounts received by holders of the
ADS upon conversion by the Depositary of cash dividends paid in pounds sterling on the Ordinary shares represented by the ADS and may affect the relative market prices of the ADS in the US and the Ordinary shares in the UK.



3B CAPITALIZATION AND INDEBTEDNESS



NOT APPLICABLE



3C REASONS FOR THE OFFER AND USE OF PROCEEDS



NOT APPLICABLE



3D RISK FACTORS



GROUP RISK FACTORS



Rank needs to
recruit and retain key personnel; otherwise, results of operations could be materially, adversely affected.



The Group relies on the continuing service of a number of key personnel for the management of its activities and strategic guidance. The loss of one or more of its top
management could have an adverse effect on the results of operations. The Group introduced a Long Term Incentive Plan in 2000 which provides for selected executives to be given restricted awards over existing Ordinary shares with a market value of
up to one times base salary. In addition, the Board of Directors regularly reviews succession planning requirements across the Group.



3



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##### Table of Contents

Adverse results in litigation cases could have a material adverse effect on the financial condition of the Group.



The Group has a number of outstanding litigation cases including a
dispute with Serena Holdings Limited over the purchase consideration for an acquisition in 1990, which has been referred to an arbitrator for determination. The determination process provided for each party to present four written submissions, the
last of which were presented on March 31, 2003. The dispute concerns the accounts and the profits of the businesses based upon which additional purchase consideration may be payable. In its fourth submission, Serena Holdings Limited has claimed that
additional consideration of £35.9m is payable with interest due thereon. The Board of Directors is strongly resisting the payment of any further sum. At the present time, the outcome to the Group cannot be determined and the potential
liability cannot be quantified.



In addition, certain Rank subsidiary
undertakings are involved in actions, including one class action suit, in the US. These actions are being vigorously contested. At this time, it cannot be determined whether outcomes unfavorable to the Rank defendants are probable.



The risk exists that these cases may be lost or settled at a financial cost to the Group.



Currency exchange rate fluctuations, particularly in respect of the US
dollar, may have a negative impact on Ranks earnings.



A number of
the Groups businesses are based in the US and Canada. Fluctuations in exchange rates will therefore impact earnings and, in particular, a further weakening of the US dollar could reduce the Groups earnings. The net translation effect of
changes in average exchange rates between 2002 and 2003 was to decrease turnover by £26.4m and profit before tax by £2.6m. The average noon buying rates of the US and Canadian dollar per £1 were:



|                |  |      |  |      |  |     
|--------------- |  | ---- |  | ---- |  | ----
|                |  | 2003 |  | 2002 |  | 2001
|US dollar       |  | 1.64 |  | 1.51 |  | 1.44
|Canadian dollar |  | 2.29 |  | 2.36 |  | 2.23



Cash contributions to Ranks
pension fund could be required over time.



Rank operates a defined
benefits pension fund in the UK, which has been closed to new members since 2001. As at December 31, 2003, the fund had a deficit of £64.8 million (£45.4 million net of a deferred tax asset), as calculated under FRS 17, as a result of
the general decline in equity prices around that time. Pension funding requirements depend on various factors, including interest rate levels, taxation, regulatory requirements for funding purposes and changes to pension plan benefits. It is
possible that further adverse changes to such variables could cause Rank to be required to contribute additional cash sums to the pension fund.



Ranks divisions operate in highly competitive industries. The Groups leisure and entertainment businesses compete with many companies providing the same,
or similar, products and services, with a wide variety of leisure and entertainment alternatives. Failure to maintain Ranks competitiveness could reduce market share and profitability.



Gaming



The Gaming division operates in a highly competitive market and any failure to keep up with market developments could reduce the
profitability of this division and adversely impact market share. The successful development and launch of new sites and products is necessary in order to maintain the current market position.



The Groups gaming businesses face competition from other operators and from other forms
of betting and leisure activities. In UK Bingo in 2003, Ranks major competitor was Gala which, as at December 31, 2003, operated 167 clubs in the UK. Rank operated 121 bingo clubs and was the second largest operator in the UK.



4



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##### Table of Contents

In casinos, as at December 31, 2003, Rank had 34 casinos in the UK, making it the second largest operator. Other major UK
casino operators include Stanley Leisure, Gala and London Clubs. The majority of the bingo and casino competitors and betting operators in the UK also have existing on-line operations, which compete with Ranks e-gaming businesses. Proposed
changes in UK gambling legislation may also encourage new entrants in the gaming marketplace and may result in additional obligations for existing operators, which could affect the future profitability of the Group. For more information see
Item 4B Business Overview  Government Regulations.



Hard
Rock



The restaurant and retail merchandising industries are highly
competitive based on the type, quality and selection of the food or merchandise offered, price, service, location and other factors. The risk exists that operating results of existing locations may be negatively affected by changes in consumer
preferences for locations or entertainment hubs. Hard Rock must maintain an awareness of changing styles and tastes in order to retain current market share. The risk exists that competitors may react more quickly to changing circumstances and take
some of the guest traffic away from Hard Rock cafes, reducing the profitability of the Group.



Deluxe



In media services and film
processing, Ranks principal competitor is Technicolor, owned by Thomson Multimedia. Both in North America and Europe, Deluxe and Technicolor together account for a large majority of the contracts awarded by the major Hollywood film studios for
film processing. In North America, Deluxe has a majority of the contracts awarded by the major Hollywood film studios. However in Europe, Technicolor currently has a larger share of the market. In media services, and especially in DVD replication,
Cinram and Sony are also significant competitors in both the US and Europe.



GAMING RISK FACTORS



The loss of any one of the
Groups gaming licenses due to breaches of the Gaming Acts could result in the loss of other gaming licenses held by the Group.



The Groups gaming businesses are subject to regulation in the UK, Alderney, Belgium and Spain. Any breach of the current regulations could adversely impact the
Groups ability to continue trading. In 2001, the Group established a new internet gaming business Rank.com and in 2003 the Group acquired Blue Square Limited. Any compliance breaches arising from any gaming business could
jeopardize the continuation of other gaming licenses currently held by the Group.



Future profitability and growth opportunities for the Groups gaming businesses are uncertain after the publication of the Draft Gambling Bill, the first report of the Joint Committee on the Draft Gambling Bill (JCGB)
and the Governments Response to the report.



On November 19, 2003,
the UK Government published clauses of the Draft Gambling Bill that broadly reflect the proposals made in the White Paper titled A Safe Bet for Success (a UK government report published in response to the Gambling Review Report). The
Draft Gambling Bill provides for further deregulation of the industry and, should it become law, should provide an opportunity for growth in the Groups gaming businesses. On April 7, 2004, the JCGB (which was commissioned to review the draft
Bill) published its first report, supporting the overall structure of the draft Bill and the need to bring the Bill before Parliament as soon as possible. On June 14, 2004, the Government published its response to the first report, accepting 121 of
the 139 recommendations made. However, the Government has also proposed some further amendments to the Draft Bill and the JCBG has reconvened to review a discrete number of these amendments and report back to the Government in July 2004 before the
final version of the Bill is published.



Notwithstanding the publication of the
Draft Gambling Bill, the JCGB report and subsequent Government response, the timing of deregulation is still uncertain and hence capital expenditures in preparation for



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deregulation may not be matched by increased revenues in the short term. Furthermore, the returns expected on any such
investment may also be undermined by increased competition from new entrants to the market or from existing operators. The final legislation may also result in existing operators having to incur additional costs. For more information see Item
4B Business Overview  Government Regulations.



Changes in taxes
levied on gaming businesses can impact profitability.



Operators of bingo
and casino activities in the UK are subject to additional taxes levied by the UK government. Changes to, or increase in, the rates of taxation currently levied could impact the future profitability of the Group.



The impact of large wins or unrecoverable losses by major gaming players over the short
term may adversely impact the profitability of the Group.



The gaming
businesses operated by the Group provide a small recurring statistical advantage in favor of the house over a period of time. However, fluctuations may occur in a finite period or as a consequence of the pattern of wins or losses arising from a
single major player or a small group of such players. The results of the Group may vary significantly over time as a result of such fluctuations. In addition, the ability of the Group to recover amounts due from major players may also impact
profitability.



Ranks telephone betting and on-line gaming businesses
are highly dependent on technology and advanced information systems.



Ranks telephone betting and on-line operations are highly dependent on technology and advanced information systems, and there is a risk that such technology or systems could fail. In the event of such failure, relevant business
continuity procedures would take effect, but there can be no assurance that such procedures would prevent or mitigate any material adverse effect of such failure on Ranks financial condition or operations.



In addition, Rank relies heavily on one software provider for the successful operation of its
interactive betting service. If this provider was no longer able to provide its services (or was no longer able to provide its services on substantially the same terms as they are currently provided), there is a risk that Ranks operations
could be adversely affected.



HARD ROCK RISK FACTORS



The Hard Rock brand value may decline as a result of unsuccessful management decisions or
as a result of unauthorized use of the brand.



In expanding the range of
the Hard Rock brand, management may enter into ventures with inappropriate partners, whose mismanagement of businesses bearing the Hard Rock brand may result in a decline in brand value. Merchandise bearing the Hard Rock brand also has historically
been subject to counterfeit production and the risk exists that the value of the brand could also decline due to over-exposure and poor quality reproduction that are the result of unauthorized use.



Economic downturn, geopolitical instability and terrorist threats may negatively impact
the business, reducing profitability.



The events of September 11, 2001,
the Iraq war in 2003 and the SARS epidemic in 2003 all had an immediate, negative impact on the business of the Group, in particular in the major tourist markets such as Orlando, New York, Washington DC, Las Vegas, Hollywood, Toronto, Paris, London
and Rome. Further challenging general economic conditions and ongoing threats of terrorist activity could continue to have a direct effect on Group profitability.



Profitability may decline as a result of changes in consumer preferences.



Operating results of existing locations may be negatively affected by changes in consumer
preferences, which are beyond Ranks control, for locations or entertainment hubs in which Ranks businesses operate. Ranks inability to anticipate or respond quickly to these shifting preferences may adversely affect the financial
and business performance of the Group.



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Health risks associated with Hard Rock products



The Hard Rock brand may be damaged by any perceived health risks associated with any of the foodstuffs and beverages served in Hard Rock
Cafes. This in turn may affect the profitability of Hard Rock Cafe as well as other Hard Rock branded operations.



Merchandise sales have declined and may continue to decline.



There has been a steady decline in merchandise sales in recent years. This has arisen for a number of reasons, in particular increased competition in the merchandise
market and a reduction in the number of tourists visiting the cafes. Although continued significant decline in merchandise sales will have a negative impact on the profits of Hard Rock, constant attention is paid to the presentation, suitability and
pricing of the merchandise available in the retail shops at the Hard Rock locations.



DELUXE RISK FACTORS



Deluxe has a limited customer base and
the loss of a major contract, or failure to win new contracts, could affect earnings.



The nature of the businesses of both Deluxe Film and Deluxe Media Services is such that significant reliance is placed on a limited number of customers. The loss of any customer, or the failure to win new contracts or
renew existing contracts, presents a risk to the businesses, as demonstrated by the loss of the Fox Home Entertainment contract in the US in 2000 and the Universal Studios film contract in 2003. Any additional contract losses could result in further
charges to the income statement and a decrease in earnings.



In May 2004 the
Group announced that an existing European DVD manufacturing and distribution contract will be transferring to a new supplier. This transfer is taking place on a staged basis over the period to July 2005 and will have a material impact on the
Groups operating profit from 2005. In 2003, this contract accounted for 48% of DVD units supplied and 18% of total packaged media units distributed by Deluxe Media Services. In view of the anticipated timing of transfer of the business, Rank
expects that there will only be a small impact on the Groups operating profit before exceptional items in 2004. The impact on the Groups operating profit in 2005 will depend upon the extent to which replacement business can be found and
what margins can be earned on such business.



Whilst the loss of this contract
is disappointing, active negotiations for additional contract business in both the US and Europe are currently in progress and are expected to reach a conclusion over the next few months. The underlying growth in the DVD market is expected to remain
strong for the next few years, but the ability of Deluxe Media Services to continue to deliver an acceptable return and maintain profitability at the level anticipated in 2004 will be dependent upon gaining new studio contracts. Subject to progress
made on new contract wins during the remainder of the year, an exceptional charge may be incurred in 2004 relating to the impairment of certain manufacturing and distribution assets associated with the lost contract.



The Group tries to renew its major film and media contracts, on commercially favorable terms,
as early as possible with the aim of increasing the average contracted length of time outstanding. As at December 31, 2003, film contracts with studios representing 82% of 2003 contracted volume in Deluxe Film are now secured until 2006 or beyond.
However, there can be no assurance that such extensions will continue, or that extensions will be signed with other studios.



For more information see Item 4B Business Overview  Deluxe.



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Deluxe Film relies on a small number of key suppliers to supply film.



Deluxe Film relies on a small number of key suppliers to supply film. Worldwide, there are
only three principal suppliers for film  Kodak, Agfa and Fuji. The Deluxe Film businesses use all three suppliers. Any prolonged problems with any or all of these suppliers, e.g. stock delivery, could adversely impact Ranks profit margin
or ability to deliver products.



Deluxe may be impacted by changes in
technology, resulting in declining market share.



Changes in technology
are likely to result in declining markets for some of Deluxes products, e.g. video cassettes. There is also a threat from Video on Demand, and although management believes that this technology is not sufficiently advanced to be a
realistic threat in the short term, Video on Demand may pose a threat to DVD sales in the longer term. Additionally, the next generation of DVD technology is already being developed. As it is still in the development phase, the potential
impact that this may have on Deluxes existing DVD business is uncertain.



There is a possibility that digital cinema technology could eventually remove the need for films to be distributed via release prints thereby making Deluxes current film processing and distribution business technically obsolete.
Management believes that any such move would be gradual, as substantial technical and financial obstacles would need to be overcome. Although the Groups view remains that commercially viable digital cinema technology is at least five years
away.



Digital enhancement of the film-based product, which may be incompatible
with Deluxes film facilities, is another technological change affecting the film industry. Greater use of digital processes in the front end and post production phases of film development will improve the quality of film prints and
give greater artistic flexibility. The Groups strategy is to ensure that existing film facilities are compatible with these developments and the Groups investment in EFILM has already provided access to this technology, there can be no
assurance that this strategy will be successful.



Deluxe Media can be
impacted by piracy causing less demand for CDs and DVDs



Physical piracy
(also called counterfeiting), which is the unauthorized production of audio and visual recordings and live performances for commercial sale, exists throughout the world and is a growing problem for the film and music industries.



Piracy has increased globally as a result of the internet. Audio and visual digital
reproductions can be downloaded from the internet using a variety of download methods without payment to the owners of rights. These downloaded files can then be stored and played through computers or recorded onto CDs or DVDs, as the case may be.



Owners of rights continue to develop and implement new measures to protect
their content against piracy. However, if piracy is not controlled, the demand for CDs and DVDs may decrease. It is Ranks view that, at present, piracy is not having a significant impact on Deluxe Medias business.



For more information see Item 4B Business Overview  Deluxe.



ITEM 4 INFORMATION ON THE COMPANY



4A HISTORY
AND DEVELOPMENT OF THE COMPANY



The Rank Group is the successor to a
business established in 1937 through the formation of Odeon Theatres (the forerunner of The Rank Organisation Plc), which was acquired in the early 1940s by J. Arthur Rank. The Rank Organisation Plc was for many years principally a leading UK film
producer and cinema owner. The Rank Organisation Plc was reorganized in 1996 through a Scheme of Arrangement. The Rank Group Plc was established on December 22, 1995 as a public limited company in England and Wales under the Companies Act 1985 and
in October 1996 through the Scheme of Arrangement, became a holding company owning all the outstanding shares of The Rank Organisation. Ranks registered office is at 6 Connaught Place, London W2 2EZ, telephone number + 44 20 7706 1111.
Ranks registered agent in the US is CT Corporation System, 111 Eighth Avenue, New York, New York 10011.



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In 1956, The Rank Organisation Plc entered into a joint venture with Haloid Corporation (subsequently renamed Xerox
Corporation) to form Rank Xerox, which became a manufacturer and distributor of copiers, laser printers, facsimile machines and other business-related products throughout the world, except in North America and subsequently South America. Ranks
profits from those activities were used to diversify into a range of other activities, primarily in the UK, including hotels and roadside service areas and vacation centers. As part of Ranks strategy to redirect resources into the leisure and
entertainment sectors, Rank disposed of its 33% economic interest in Rank Xerox in two tranches in 1995 and 1997.



During the 1980s, the Group focused on leisure and entertainment activities and film and entertainment services through the acquisition of UK bingo businesses, amusement
centers, a caravan (recreational mobile home) vacation park business, a 50% interest in Universal Studios Florida and a 50% interest in a Canadian film laboratory. The Group also divested itself of non-related businesses, including investment
properties, Australian and Asian joint ventures and other industrial interests.



In the early 1990s, the Group acquired the remaining interest in the Canadian film laboratory and acquired Deluxe Film Laboratories and Mecca Leisure Group Plc. Mecca Leisure included vacation hotels and centers, gaming businesses,
nightclubs, business hotels outside of London and Hard Rock Cafes. During this period, Rank also entered into a number of partnership agreements with MCA Inc. (the then owner of Universal Studios) in relation to the development of Universal Studios
Escape (which included Universal City Florida). In addition to the sale of part of its interest in Rank Xerox in 1995, other disposals included roadside service areas, and business hotels.



From 1996 to 1999 the Group grew both organically and by acquisition. In June 1996, the Group
acquired the Hard Rock Cafes and brand rights not already owned by Rank for $410m and in December 1996, Rank acquired Hard Rock Cafe Canada for $61m. In July 1996, Duplico (a European video duplicator) was acquired for £29m and in October 1996
Rank acquired the independent UK pub restaurant chain Tom Cobleigh for £123m. During 1997, Rank acquired the Hard Rock Cafes and brand rights for the Hard Rock Cafe in the Caribbean and Argentina and a logistical distribution business for
video duplication in North America for a total consideration of £43m. In March 1998, Rank acquired Parkdean Holidays, a UK holiday park operator for £38m. Also in March 1998, Rank disposed of freehold property for £161m to a joint
venture with The British Land Company PLC under a sale and leaseback arrangement. In July 1999, the Group invested £10m in Campotel, a campsite business in France.



In the period from 1996 to 1999 the main disposals were the disposal of the Groups remaining interest in Rank Xerox; Rank Precision
Industries for £66m; Shearings for £75m; Kingston Plantation for £30m; certain amusement arcades for £25m and Rank Film Distributors for £65m.



In 1999, Rank began to focus on fewer businesses and embarked on a major cost reduction programme. The Butlins Hotels and Haven Catered
Parks were disposed of for £7m and £8m respectively and in November 1999 the Nightscene business was disposed of for £150m. In February 2000, the Group disposed of Odeon Cinemas and Pinewood Studios for £280m and £62m
respectively. In July 2000, Rank sold its 50% investment in Universal Studios Escape in Florida for £182m and in September 2000 Rank sold Tom Cobleigh for £90m. In October 2000 Rank sold its Holidays Division (excluding Resorts USA) for
a consideration of up to £700m.



Acquisitions in 2000 relating to the
remaining businesses (of Gaming, Hard Rock and Deluxe) included the £12m purchase of a DVD manufacturing facility, Pioneer Video Manufacturing Inc., and the acquisition of the Park Tower Casino in London for £14m.



In June 2001, Deluxe Video completed the sale and leaseback of the plant and machinery at the
video duplication facility in Arkansas for proceeds of £27m. In December 2001, Deluxe Video also completed the sale and leaseback of the real estate in Arkansas for proceeds of £22m. The two transactions taken together realized a profit
on disposal of £12m.



The Groups internet gaming site, Rank.com,
was launched in November 2001, followed by the launch of hardrockcasino.com in July 2002.



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In July 2002, Deluxe Media entered into a venture with Ritek Corporation of Taiwan. The venture combined the DVD assets
of Deluxe and Ritek in North America and Europe. Deluxe will pay a total of £34m to Ritek, spread over three years, for an 80% interest in the new venture.



In November 2002, Deluxe Film acquired Capital FX for £9m. Capital FX is a leading player in the UK laser and sub-titling and digital
effects market.



In December 2002, Deluxe Film acquired the remaining 50%
interest in ETS which it did not already own. The total consideration was £14m.



In January 2003 the Group completed the acquisition of Blue Square Limited, one of the UKs leading internet and telephone betting businesses. The total consideration was £65m in unlisted, unsecured convertible redeemable loan
stock, convertible into Rank Ordinary shares at 282p for every £1 of loan stock held.



In July 2003, the Group acquired Disctronics, one of the largest independent DVD and CD replicators in Europe for a total consideration of £34.3m.



The following table shows, for the years to December 31, 2003, 2002 and 2001 the Groups principal capital expenditures and
divestitures:



|                           |  |        |  |        |   |  |       
|-------------------------- |  | ------ |  | ------ | - |  | ------
|                           |  | 2003£m |  | 2002£m |   |  | 2001£m
|Business Acquisitions      |  |        |  |        |   |  |       
|Blue Square                |  | 65     |  |       |   |  |      
|Disctronics                |  | 34     |  |       |   |  |      
|Ritek Corporation (80%)    |  |       |  | 34     |   |  |      
|Capital FX                 |  |       |  | 9      |   |  |      
|ETS                        |  |       |  | 14     |   |  |      
|                           |  |        | 
|Business Disposals         |  |        |  |        |   |  |       
|British Land Joint Venture |  |       |  | (17    | ) |  |      



In February 2004, Rank sold the
business and assets of Rank Leisure Machine Services Limited and Rank Seasonal Amusements Limited for a total consideration of £30.0m.



4B BUSINESS OVERVIEW



Rank is one of the UKs leading gaming and leisure companies, measured in terms of market capitalization, with a number of international interests and, through its Deluxe division is also a provider of services
to the film industry. Rank has strong market positions in UK Gaming with Mecca Bingo, Grosvenor Casinos and Blue Square, its online and telephone betting business. In 2003, the gaming division also included Rank Leisure Machine Services, an
amusement machine supply business that was sold in February 2004. Ranks leisure businesses include Hard Rock which owns and franchises cafes worldwide and controls the rights to the Hard Rock brand internationally. Ranks film processing,
video duplication and distribution and DVD replication businesses operate under the Deluxe name across North America and in Europe. Rank also owns a vacation business in America - Resorts USA, a 25% interest in Universal Hotels and has a 10%
investment in Universal Studios Japan.



Contributions to turnover and
profit on Ordinary activities



The following table shows, for the
years ended December 31, 2003, 2002, and 2001, turnover and profit on ordinary activities (before taxation and exceptional items) attributable to each business segment and each geographical region. An analysis of Ranks results of operations
including certain exceptional items is contained in Item 5 Operating and Financial Review and Prospects.



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##### Table of Contents

|                                        |  |                      |  |          |                     |  |            |      |          |   |  |            |  |          |  
|--------------------------------------- |  | -------------------- |  | -------- | ------------------- |  | ---------- | ---- | -------- | - |  | ---------- |  | -------- | -
|                                        |  | Years to December 31 | 
|                                        |  | 2003                 |  |          | 2002 (restated) (1) |  |            | 2001 |         
|                                        |  | Turnover£m           |  | Profit£m |                     |  | Turnover£m |      | Profit£m |   |  | Turnover£m |  | Profit£m |  
|By Business Segment                     |  |                      |  |          |                     |  |            |      |          |   |  |            |  |          |  
|Gaming                                  |  | 556.7                |  | 116.2    |                     |  | 518.4      |      | 104.8    |   |  | 437.1      |  | 95.7     |  
|Hard Rock                               |  | 234.0                |  | 23.1     |                     |  | 242.7      |      | 27.6     |   |  | 248.4      |  | 38.0     |  
|Deluxe                                  |  | 746.3                |  | 83.7     |                     |  | 704.2      |      | 89.0     |   |  | 634.6      |  | 74.1     |  
|US Holidays                             |  | 37.7                 |  | 6.0      |                     |  | 43.2       |      | 8.1      |   |  | 46.8       |  | 9.5      |  
|Other                                   |  |                     |  | (17.1    | )                   |  |           |      | (9.9     | ) |  |           |  | (7.6     | )
|                                        |  |                      |  |          |                     |  |            |      |          |   |  |            |  |          |  
|Continuing operations                   |  | 1,574.7              |  | 211.9    |                     |  | 1,508.5    |      | 219.6    |   |  | 1,366.9    |  | 209.7    |  
|Acquisitions                            |  | 351.2                |  | 4.7      |                     |  |           |      |         |   |  |           |  |         |  
|                                        |  |                      |  |          |                     |  |            |      |          |   |  |            |  |          |  
|Total turnover/operating profit         |  | 1,925.9              |  | 216.6    |                     |  | 1,508.5    |      | 219.6    |   |  | 1,366.9    |  | 209.7    |  
|                                        |  |                      |  |          |                     |  |            |      |          |   |  |            |  |          |  
|Associates and joint ventures           |  |                      |  | 0.4      |                     |  |            |      | 3.3      |   |  |            |  | 2.7      |  
|Interest excluding exceptional items    |  |                      |  | (29.7    | )                   |  |            |      | (22.6    | ) |  |            |  | (24.3    | )
|                                        |  |                      |  |          |                     |  |            |      |          |   |  |            |  |          |  
|Profit before tax and exceptional items |  |                      |  | 187.3    |                     |  |            |      | 200.3    |   |  |            |  | 188.1    |  
|Exceptional items                       |  |                      |  | (58.0    | )                   |  |            |      | (2.3     | ) |  |            |  | (27.6    | )
|                                        |  |                      |  |          |                     |  |            |      |          |   |  |            |  |          |  
|Profit (loss) before tax                |  |                      |  | 129.3    |                     |  |            |      | 198.0    |   |  |            |  | 160.5    |  
|                                        |  |                      |  |          |                     |  |            |      |          |   |  |            |  |          |  
|By Geographical Region                  |  |                      |  |          |                     |  |            |      |          |   |  |            |  |          |  
|UK                                      |  | 1,064.3              |  | 98.1     |                     |  | 630.3      |      | 100.5    |   |  | 529.4      |  | 95.0     |  
|North America                           |  | 665.6                |  | 87.7     |                     |  | 707.6      |      | 98.2     |   |  | 710.2      |  | 95.6     |  
|Rest of the World                       |  | 196.0                |  | 30.8     |                     |  | 170.6      |      | 20.9     |   |  | 127.3      |  | 19.1     |  
|                                        |  |                      |  |          |                     |  |            |      |          |   |  |            |  |          |  
|Continuing operations                   |  | 1,925.9              |  | 216.6    |                     |  | 1,508.5    |      | 219.6    |   |  | 1,366.9    |  | 209.7    |  
|                                        |  |                      |  |          |                     |  |            |      |          |   |  |            |  |          |  

---

In preparing its financial statements in accordance
with the Companies Act and UK GAAP, certain financial information is presented that would be viewed as non-GAAP under regulations issued by the United States Securities and Exchange Commission. The Company has described such items and
provided disclosure on the effects and reasons for this presentation in section 3A.



|(1) | Turnover figures for the year to December 31, 2002 have been restated to reflect a revised interactive gaming revenue recognition policy. See F-6 for further details.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



Gaming



Mecca Bingo



Rank is one of the leading bingo operators in the UK, operating under the Mecca brand name. As at December 31, 2003, Rank
operated a total of 121 bingo clubs in the UK with a total of 2.8m square feet of licensed premises and 10 bingo clubs in Spain. As at December 31, 2003, Mecca Bingo had approximately 1.0 million active members in the UK, 45 per cent of whom were
under the age of 45.



In 2003, Mecca Bingo sold one under-performing club in
Cardiff, closed the Glasgow Flamingo and relocated the clubs in York and West Bromwich. Mecca Bingo has plans for a further five relocations over the next 12 months in Burton, Glasgow, Ellesmere Port, Bolton and Edinburgh. Rank also acquired three
bingo clubs in Spain in 2002 and 1 in 2003.



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##### Table of Contents

While membership of Meccas bingo clubs has remained relatively stable over the past three years, admissions during
this period have declined from 25,894,000 in 2000 to 21,066,000 in 2003. Over the same period, spend per head has increased from £8.48 to £11.06 with overall turnover increasing at a rate of 2.4% per annum over the period.



On October 25, 2003 the Group removed admission charges at its bingo clubs in conjunction
with the replacement of UK bingo duty with a gross profit tax. To date, the new gross profit tax appears to have had little impact on trading trends, whilst the removal of the admission charges has been welcomed by customers and is expected to be
positive for the business in the long term.



Grosvenor and Hard Rock
Casinos



Ranks casino business is the second largest operator of
casinos in the UK. As at December 31, 2003, Rank operated 34 casinos in the UK trading under the Grosvenor and Hard Rock brands with a total of approximately 0.5m square feet of licensed premises and approximately 900,000 members.



Rank operates six clubs in London: two upper-end casinos, the Clermont and the Park Tower;
three middle market casinos, the Gloucester, the Connoisseur and the UKs second largest casino, the Victoria, and one of the two Hard Rock casinos. Rank also operated 28 provincial casinos in the UK, including the Hard Rock Casino in
Manchester. In addition, Rank operates two casinos in Belgium, in Middlekerke and Blankenberge. In total, at the end of 2003, Grosvenor and Hard Rock Casinos operated 382 gaming tables and, since 2002, have introduced 547 electronic roulette
terminals, which have proved popular with customers throughout the UK.



Rank
aims to keep its estate up to date by refurbishing and relocating casinos where appropriate with an emphasis on a stylish and modern atmosphere that reflects its commitment to a more contemporary style to attract a wider audience, particularly
younger players. The casinos in Huddersfield, Portsmouth and Plymouth were relocated in 2003, following the relocation of casinos in Newcastle, Southampton, Great Yarmouth, Birmingham, Blackpool and Brighton.



Turnover at Ranks casinos shows some seasonality, with some of its London casinos
benefiting from an influx of overseas visitors in the summer months.



Rank has
plans to open additional casinos in Bolton and Stoke-on-Trent during 2004, bringing the total number of UK operating casinos to 36. It has also applied for a further five new casino licenses.



Blue Square



The Group launched its first internet gaming site, Rank.com in November 2001. In January 2002, the Group was awarded a license by the Isle
of Man Government to operate an on-line casino, which was launched in July 2002. Following the acquisition of Blue Square Limited, one of the UKs leading on-line telephone betting businesses, in January 2003, the Groups on-line
activities have been brought together onto a single operating platform. In June 2003, the on-line casino in the Isle of Man ceased to trade. A new license was awarded by the Alderney Gaming Control Commission and a new on-line casino company started
trading in June 2003.



During 2003, Ranks on-line gaming marketing has
focused on three brands: BlueSq.com, MeccaGames.com and Hardrockcasino.com. The emphasis has been on creating a fully integrated solution across all forms of gambling and betting allowing for maximum cross-fertilization of the databases. There have
also been sponsorship, advertising and affiliate initiatives.



Rank Leisure
Machine Services



On February 10, 2004, Rank sold Rank Leisure Machine
Services, its coin operated machine supply business, to Gamestec Leisure Limited for £30.0 million. Until its disposal, Rank Leisure Machine Services had formed part of the Groups Gaming Division.



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##### Table of Contents

Hard Rock



Restaurant Operations



Rank owns the global rights to the Hard Rock brand name (save for combined Hard Rock casinos and hotels west of the Mississippi River in the United States  see
below for further details). Hard Rock has 65 owned and 48 franchised cafes worldwide. (The 65 owned cafes include the San Juan, Puerto Rico cafe that was closed due to a fire in July 2003. This cafe is expected to reopen in late 2004). The cafes
offer American cuisine with a rock n roll attitude and house the worlds most extensive collection of rock n roll memorabilia. Hard Rock sells branded merchandise including T shirts, baseball caps and other
items of clothing, and collectors items such as Hard Rock pins. Each cafe has a merchandise shop and items can also be purchased from the Hard Rock website.



Hard Rocks revenues tend to be seasonal with increased sales in the summer months as much of its revenues are related to tourism. The music business markets itself
primarily through brand related activities such as Hard Rock Live! and other live performances.



Company owned cafes in Cardiff, Cologne and Lisbon opened in 2003 as part of the development plan to further the Hard Rock presence in the UK and continental Europe. In the US, new cafes opened in Choctaw, Mississippi
and Detroit during 2003. New Company owned cafes have already opened during 2004 in Louisville and Hollywood, Florida. Company cafe sites are currently being developed in Foxwoods, Connecticut and Destin, Florida.



New franchised cafes opened in Moscow, Russia and Nassau, Bahamas in 2003 and five new cafes
are expected to open in 2004, including Catania, Italy; Athens, Greece and Panama.



Hotels/Casinos



Hard Rock is continuing to explore the
use of its brand name within the hospitality sector, in particular in hotels and casinos. This follows the success of the Hard Rock Hotel in Las Vegas (which is owned by Peter Morton, one of the original founders of Hard Rock, who has the rights to
combined Hard Rock Hotels and casinos west of the Mississippi River in the United States.) and the opening of the first Hard Rock international resort in Bali, which opened in 1998. Further hotels include the Hard Rock Hotel in Orlando, which opened
in January 2001, and a resort hotel in Pattaya, Thailand, which opened in November 2001. The first urban hotel opened in Chicago in December 2003. An agreement to license two branded Hard Rock Hotels and casinos to the Seminole Indian tribe of
Florida was signed in 2002 and a similar arrangement for the Mississippi band of the Choctaw Indian Nation was entered into in December 2002, with hotel development to occur prior to 2007. Hard Rock casinos opened in Manchester and London during
2002. In 2003 Hard Rock licensed a branded hotel and casino to a group in Biloxi, Mississippi that is expected to open in 2005.



The financing for the Hard Rock branded Seminole Tribe of Florida casino/hotel development in Florida was completed in May 2002, using the proceeds of the issuance of
$410m in total of Capital Trust Agency Revenue bonds. The Group subscribed for $25m of the bonds in 2002, which have a coupon of 10%, a stated maturity of 30 years and an average life of 17.5 years. The Group subsequently sold these bonds in April
2003, having fulfilled the goal of helping the project to secure initial financing. The resorts will replace the Seminole Tribe of Floridas existing gaming facilities located in Tampa and Hollywood (near Fort Lauderdale, Florida). The facility
in Tampa is already open as is the one in Hollywood which opened in May 2004. The Hard Rock license agreement relating to the casino/hotel developments has an initial term of 15 years from the opening of the facilities. Hard Rock is entitled to an
annual license fee amounting to the total of:



| | the greater of 3% of net gaming revenues or $3m; and
|- | ----------------------------------------------------



| | 3% of hotel room revenues.
|- | --------------------------



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Hard Rock will also receive the net profit from a new cafe at the Hollywood, Florida facility to be developed at a cost
to Rank of approximately $3m.



In June 2003 Hard Rock signed a joint venture
agreement with Sol Meliá to develop jointly Hard Rock hotels, primarily in the Americas and Europe. The Hard Rock Hotel in Chicago is the first Hard Rock Hotel operated by the joint venture. In addition, an agreement was signed in 2003 to
license the Hard Rock hotel rights for San Diego. Further hotel licensing agreements are being sought by the joint venture.



Further opportunities are being pursued reinforcing managements belief that the brand can profitably lend itself to expansion outside of the core restaurant
operations.



Deluxe



Deluxe Film



Deluxe Film is a leading worldwide supplier of film processing and other film services to the major producers and distributors of motion
pictures. These services include the completion and duplication of release prints for cinema exhibition along with other services provided during the production of a film. Deluxes laboratories are based in Hollywood (California), Toronto,
London, Rome and Barcelona. Deluxe laboratories processed over 300 film titles in 2003.



The business has benefited from an increasing trend in the film industry to release films to a larger number of screens to, among other things, maximize the benefits of the films initial marketing. This results in an increased number
of prints being ordered. Deluxe expects this trend to continue as blockbuster films open with increasingly wider release patterns and on similar dates around the world.



The Group tries to renew its major film contracts, on commercially favorable terms, as early as possible with the aim of increasing the
average contracted length of time outstanding. As at December 31, 2003, film contracts with studios representing 82% of 2003 contracted volume are now secured until 2006 or beyond. In addition to the film processing laboratories; the Group also owns
ETS. The principal activity of ETS is the management of film studios inventory of film prints and the physical distribution of release prints and trailers in the United States. Similar to Deluxe, ETS holds long-term contracts with motion
picture studios for the provision of these services. In 2003 Deluxe established a similar service in Canada called Deluxe Film Services (DFS).



Revenues in Deluxe Film follow the release pattern of films, with peaks around the summer period, American Thanksgiving and the Christmas holiday season.



Deluxe Film places significant reliance on a limited number of key suppliers. Worldwide,
there are only three principal suppliers for film  Kodak, Agfa and Fuji. The Deluxe Film businesses use all three suppliers.



Deluxe Media Services



Deluxe Media Services is a major manufacturer and distributor of packaged media, offering complete VHS, CD and DVD supply chain management solutions to major and independent movie studios, music producers, and
corporate rights holders. Services range from large volume, high quality VHS, CD and DVD duplication and packaging, to fulfillment and extensive direct-to-retail distribution and management. Supporting a variety of home entertainment clients, Deluxe
operates manufacturing facilities strategically located in the US and Europe, providing a single-source for the home entertainment industry worldwide. In 2003, Deluxe manufactured 160m VHS cassettes and 162m DVDs.



In 2002, Deluxe entered into a venture with Ritek Corporation of Taiwan, the worlds
largest manufacturer of optical discs, resulting in an 80% ownership interest by the Group in Deluxe Global Media Services LLC. Both companies contributed their DVD related assets to the business in Europe and North America. Deluxe Global Media
Services LLC offers DVD manufacturing and DVD compression, encoding and authoring services.



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In 2003, Deluxe, through its subsidiary Deluxe Global Media Services, acquired Disctronics, one of the largest
independent DVD and CD replicators in Europe. The acquisition of Disctronics follows the formation of the venture with Ritek Corporation in 2002 and consolidates Deluxes position as one of the worlds leading independent DVD
manufacturers. This acquisition also provides Deluxe with a profitable CD business. The acquisition of Distronics resulted in a dilution of Ritek Corporations interest in Deluxe Global Media Services and the Group now has an 88% interest in
the venture.



A further initiative in 2002 was the creation of the Deluxe Media
Asset Management division. This division was established using both internal initiatives and the acquisition of Vision Entertainment, a high-quality provider of specialty fulfillment services for the entertainment industry, including digital and
physical distribution, assembly, convention services, and warehousing. Deluxe Media Asset Management enables the delivery of entertainment content and collateral assets through a variety of distribution channels. Services include physical and
digital asset storage, the development of archiving and cataloguing facilities, and website hosting and management.



Deluxe currently performs storage, pick, pack and ship activities for over three million annual ship orders which contain DVD, VHS, CD and other popular media formats.
Shipments range in size from a single title for multiple truckloads to Blockbuster, to individually customized, direct-to-store replenishments for retailers including Wal-Mart, Kmart, Costco and Sams Club. In 2003, Deluxe distributed a total
of 523m units to retail customers.



In the US home entertainment industry, DVD
continues to be a high growth market. Consumer spending on sales and rentals in 2003 was split 70% for DVD and 30% VHS. Deluxe experienced a 28% drop in VHS units produced during 2003 and this trend is expected to continue as customers switch from
VHS to DVD.



VHS, CD and DVD production is highly seasonal and peaks in
September, October and November, with preparation for increased sales in the run up to Thanksgiving and the Christmas holiday period.



US Holidays



Rank, through its subsidiary Resorts USA, owns and operates 15 Outdoor World private caravan (recreational mobile home) parks on the East Coast of the US. These activities include the sale of memberships and the
operation of sites. Resorts USA also owns a hotel and develops and sells timeshares in the Pocono Mountains, Pennsylvania.



Universal investment



Ranks 25% interest in Universal Hotels is held as a trade investment. Universal Hotels owns three resort hotels in Orlando, the Portofino Bay Hotel, the Hard Rock Hotel, and the Royal Pacific Resort Hotel. All
three hotels are on land adjacent to Universal Studios Escape.



Rank also has a
10% investment in Universal Studios Japan, which opened a theme park in Osaka, Japan in March 2001.



Government Regulations



Many of
Ranks leisure and entertainment businesses are subject to government regulation in the UK and USA, including operating license requirements and regulations relating to land use and the provision of food and beverages. In particular,
Ranks UK gaming businesses are subject to the 1968 Gaming Act, the Lotteries and Amusements Act and the Gaming (Bingo) Act 1985.



In 1999, the UK government commissioned an independent review by the Gambling Review Body, to examine Britains gambling laws. Its report was published in July 2001
and recommended widespread change to existing legislation. Changes proposed included offering all forms of gambling under one roof,



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unlimited prizes for slot machines, substantially greater numbers of machines, a single Gaming Commission to regulate
gaming and betting (including horse racing), together with the removal of many outdated regulations including the present ban on full casino advertising.



The UK Government response to the report of the Gambling Review Body, the White Paper A Safe Bet for Success, (the White Paper), was published in
March 2002 and considered all aspects of gaming regulation. The legislation proposed in the White Paper broadly followed the recommendations made by the Gambling Review Body in July 2001. In November 2003 the UK Government published a draft Gambling
Bill which was subsequently reviewed by a cross-party committee appointed by the Government, the Joint Committee on the draft Gambling Bill (JCBG). On April 7, 2004, the JCBG published its report on the Draft Gaming Bill. The report
broadly supported the principles established in the white paper. On June 14, 2004, the Government published its response to the first report, accepting 121 of the 139 recommendations made. However, the Government has also proposed some further
amendments to the Draft Gaming Bill and the JCBG has reconvened to review a discrete number of these amendments and report back to Government on July 22, 2004, before the final version of the Bill is published. Rank believes that the key elements of
the Draft Gaming Bill, as they affect Ranks UK gaming businesses, are:-



| | a revised system of licensing and regulation for all operators of commercial gambling, overseen by a single statutory regulator, the Gambling Commission.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------



| | abolishment of permitted areas and the requirement to prove that there is an unmet local demand before a casino license is granted. This will mean that, subject to local
planning, operators can build a casino anywhere in the UK rather than only in areas permitted by the current legislation.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | abolishment of the 24 hour rule whereby bingo and casino customers must have been granted membership at least 24 hours before playing.
|- | ----------------------------------------------------------------------------------------------------------------------------------------



| | removal of legal restrictions on advertising. A code of practice for the industry, agreed between the gambling and advertising industries and the advertising regulators, would be
drawn up to ensure advertisements do not target vulnerable sections of society.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | gambling debts are currently unenforceable by law; this would be revised to allow both gambling businesses and their customers to sue for recovery of their debts.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | revision to the rules governing the number of gaming machines allowed in casinos (currently only 10 per casino). Under the proposed legislation there will be an increase in the
number of machines allowed. It is proposed that small casinos of less than 1,500 square meters (16,140 square feet) will be allowed 2 Category B machines per gaming table, with a maximum of 80 machines. Large casinos (between
1,500 and 5,000 square meters) will be granted a greater number of Category B machines, with a ratio of 5 machines per gaming table, up to a maximum of 150 machines. For the very largest premises (over 5,000 square meters), so-called
Regional casinos, there will be a ratio of 25 gaming machines per table, up to a maximum of 1,250 machines. Regional casinos will also be allowed to offer Category A machines (unlimited prizes) as well as Category B machines (prizes up
to £2,000) Machines may be linked within individual premises to provide larger jackpot prizes.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | licensed gaming premises will be able to offer more than one type of gaming activity, for instance a Grosvenor Casino could offer sports betting and, in large casinos, bingo as
well, subject to appropriate planning and licensing.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | customers would be allowed to consume alcohol on the gaming floor.
|- | ------------------------------------------------------------------



| | rollover prizes would be allowed in cash bingo games.
|- | -----------------------------------------------------



| | the provision of the full range of internet gaming services for operators based in the UK would be legalized.
|- | -------------------------------------------------------------------------------------------------------------



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The Group believes that the proposed legislative changes will significantly increase the size of the UK gaming market.
The impact on the Groups UK gaming businesses will depend upon the timing of the changes and the final content of the Gambling Bill, the reaction of competitors and whether the deregulation attracts new entrants to the market.



4C ORGANIZATIONAL STRUCTURE



The registrant, The Rank Group Plc, is the parent company of the Group. The following table
details significant subsidiaries:



|                                                  |  |                         
|------------------------------------------------- |  | ------------------------
|Name                                              |  | Country of Incorporation
|                                                  | 
|Grosvenor Casinos Limited                         |  | England and Wales       
|Mecca Bingo Limited                               |  | England and Wales       
|Blue Square Limited                               |  | England and Wales       
|Rank Group Gaming Division Limited                |  | England and Wales       
|Hard Rock Cafe International (USA) Inc.           |  | US                      
|Hard Rock International Limited                   |  | England and Wales       
|Hard Rock Canada Inc.                             |  | Canada                  
|Deluxe Laboratories Limited                       |  | England and Wales       
|Deluxe Laboratories Inc.                          |  | US                      
|Deluxe Toronto Limited                            |  | Canada                  
|Deluxe Media Services Inc.                        |  | US                      
|Deluxe Global Media Services LLC                  |  | US                      
|(Rank owns 88% of the interest) Rank America Inc. |  | US                      
|Rank Group Finance Plc                            |  | England and Wales       
|Rank Overseas Holdings Limited                    |  | England and Wales       
|Rank Leisure Holdings Plc                         |  | England and Wales       



Except where otherwise stated, Rank
owns directly or indirectly 100% of the above companies and controls 100% of the voting powers in relation to each company.



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4D PROPERTY, PLANTS AND EQUIPMENT



The Groups principal properties include the following:



|         |  |                                   |  |         |  |           |  |                  
|-------- |  | --------------------------------- |  | ------- |  | --------- |  | -----------------
|Division |  | Property                          |  | Country |  | Type      |  | Purpose          
|Gaming   |  | Victoria Casino  35,800 sq. ft.  |  | U.K.    |  | Freehold  |  | Gaming           
|         |  | Clermont Casino  8,700 sq. ft.   |  | U.K.    |  | Leasehold |  | Gaming           
|         |  |                                   |  |        
|Deluxe   |  | Pleasant Prairie 525,000 sq. ft. |  | U.S.A   |  | Leasehold |  | Distribution     
|         |  |                                   |  |        
|         |  | Hollywood  100,000 sq.ft.        |  | U.S.A   |  | Freehold  |  | Film processing  
|         |  |                                   |  |        
|         |  | Little Rock  740,000 sq. ft.     |  | U.S.A   |  | Leasehold |  | VHS duplication  
|         |  |                                   |  |        
|         |  | Brentford  80,900 sq.ft.         |  | U.K.    |  | Freehold  |  | Video duplication
|         |  |                                   |  |        
|         |  | Toronto  102,000 sq.ft.          |  | Canada  |  | Freehold  |  | Film processing  
|         |  |                                   |  |        
|         |  | Denham  197,000 sq.ft.           |  | U.K.    |  | Freehold  |  | Film processing  
|         |  |                                   |  |        
|         |  | Rome  32,500 sq.ft.              |  | Italy   |  | Freehold  |  | Film processing  



In addition to the properties noted
above, the UK Gaming operations utilize another 153 sites, of which 70 are freehold and 83 are leasehold. The value of these properties individually is not significant, however in aggregate they are significant to the Groups operations.



Rank monitors the use of chemicals at its film processing sites to ensure
compliance with all applicable regulations and thus minimize the risk of exposure to chemical hazards.



ITEM 5 OPERATING AND FINANCIAL REVIEW AND PROSPECTS



Please see Introduction, which contains a cautionary statement regarding certain forward-looking statements contained in Item 5 as well as elsewhere in this document.



5A OPERATING RESULTS



Critical Accounting Policies



Ranks main accounting policies are set out on page F-6 to F-8 of the Consolidated Financial Statements and are determined in accordance with UK GAAP. The main
differences between UK and US GAAP are discussed in Note 35 to the consolidated financial statements on page F-47 to F-59. The preparation of these financial statements requires the Group to make estimates and judgements that affect the reported
amounts of assets, liabilities, revenues and expenses. The Group evaluates its estimates and judgements on an ongoing basis. Rank bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under
the circumstances, the results of which form the basis for making judgements about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different
assumptions or conditions.



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Contract advances



Rank believes that the accounting treatment for contract advances is a critical accounting estimate. The Deluxe businesses enter into contracts with major studio
customers that span several years. As part of these contracts, Deluxe provides advance cash payments to the customers. Both Deluxe Media Services and Deluxe Film capitalize the total commitment payable under each contract within debtors at the date
of the agreement and record a corresponding liability on the balance sheet for any outstanding amounts. Within Deluxe Media Services, capitalized contract costs are amortized through the profit and loss account on the basis of the estimated units to
be produced over the life of the contract. Within the Deluxe Film businesses, contract advances receivable are amortized on the basis of estimated total footage over the life of the contract, unless the terms of the contract indicate an alternative
treatment would be more appropriate. Estimates of footage and units are based on amounts produced in the past for that customer, future release schedules and managements knowledge of the customer and industry.



Within Deluxe Film the amortization rate is subject to revision as the contract progresses,
if estimated footage varies significantly compared to actual footage. Within Deluxe Media Services the amortization rate is subject to revision as the contract progresses, if the number units to be produced, estimated at inception, varies
significantly compared to actual units produced. The amortization expense in the profit and loss account will vary depending on the revised amortization rate. Revisions are made in the period in which the facts that give rise to the revision become
known.



Impairment of long lived assets



Rank believes that the accounting treatment for the impairment of assets is a critical
accounting estimate. Under UK GAAP, formal impairment reviews are required if adverse events or changes in circumstances indicate that the carrying values of assets may not be recoverable.



Long lived assets held for use are tested for impairment whenever events or changes in
circumstances indicate that their carrying values may not be recoverable. When impairment is believed to exist, an analysis is performed to compare the discounted cash flows attributable to the asset over its remaining useful life to its carrying
value. If the discounted cash flows are less than the carrying value of the asset, impairment exists. The cash flows attributable to the asset over its remaining useful economic life are based on the estimated cash flows used to prepare the annual
budget and long range plan. The discount rate used is based on the Groups weighted average cost of capital (WACC) adjusted to reflect the individual risks of the asset. The impairment loss is recorded as the difference between the assets
carrying value and its fair value. Fair value is the amount at which an asset could be bought or sold in a current transaction between willing parties, that is, other than in a forced or liquidation sale. Quoted market prices in active markets are
the best evidence of fair value and are used as the basis for measurement, if available. If quoted market prices are not available, the estimate of fair value is based on the best information available in the circumstances. The estimate of fair
value considers prices for similar assets and the results of valuation techniques to the extent available in the circumstances.



The discounted future cash flows or the fair value noted above may be an estimation based on managements best estimate given the relevant circumstances. Variations
in these estimates arising from the use of different management assumptions could lead to differing carrying values of long lived assets on the Group balance sheet and, where recognized, differing impairment charges recorded in the profit and loss
account in a period.



Tangible fixed assets



The Groups accounting policy for tangible fixed assets is detailed in the Consolidated
Financial Statements on page F-7. Tangible fixed assets are depreciated on a straight-line basis to write off the costs, less estimated residual value, over the estimated useful life of the asset. Freehold land is not depreciated. The estimated
useful economic lives of tangible fixed assets are based on managements judgement and experience.



Changes in circumstances such as technological advances, changes to the Groups business model, and or changes to the Groups refurbishment and replacement strategy, could result in the actual useful lives



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differing from the estimates. In those cases where it is determined that the useful life of property or equipment should
be shortened, the net book value in excess of the residual value would be depreciated over the revised remaining useful life. If the property and equipment is not maintained to a reasonable standard, the residual values selected may be affected.



In accordance with UK GAAP the Group evaluates the carrying value of fixed
assets for impairment wherever circumstances indicate, in managements judgement, that the carrying value of such assets may not be recoverable.



Pensions



The determination of Ranks obligations and expenses under the UK defined benefit scheme is dependent on the assumptions used by actuaries in calculating such amounts. These assumptions are described on page F-40
and include among others the rate of return on investments, the valuation method and the rate of increase of pensionable remuneration. Whilst Rank believes its assumptions are appropriate, significant changes in the actual experience or significant
changes in the assumptions may materially affect the amount of the Groups future pension obligations or future pension costs.



Accrued liabilities



Accruals and provisions are by their nature subjective as they are dependent upon estimates and assessments of whether the criteria for recognition have been met, including estimates as to the probable outcome and the
amount of the potential cost of resolution. Accruals and provisions are recognized as a charge to the profit and loss account when, at the end of the period, it is probable that a liability has been incurred and the amount can be reasonably
estimated. This obligation may be legal, regulatory or contractual in nature. If appropriate, long term liabilities may be discounted using an appropriate discount rate. The discount rate will be based on a risk free rate, adjusted to reflect the
specific risks relating to the liability.



Management considers all of the
available information at the end of the period to estimate the expenditure that the Group is likely to bear to settle its obligation. If no reliable estimate of the amount can be made, no provision is recorded and information is presented in the
notes to the accounts.



Due to inherent uncertainties in the evaluation
process, actual losses may differ from the original estimated amount accrued at the end of the period. If the actual outcome is different from the assumptions and estimates, revisions to the estimated provisions would be required, which could impact
the Groups financial position and results of operations.



Goodwill



Ranks accounting policy relating to goodwill is based on numerous
estimates. In accordance with UK GAAP, capitalized goodwill is amortized over its estimated useful economic life, not exceeding 20 years. The estimated useful economic life is determined after taking into account such factors as the nature and age
of the business and the stability of the industry in which the acquired business operates. Rank believes the accounting estimates related to the recoverability of goodwill are critical accounting estimates because:



| | the valuation process is inherently judgmental and highly susceptible to change from period to period because it requires the Company to make assumptions about future supply and
demand related to its individual business units; what future sales prices will be and what cost savings will be achievable;
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | The value of the benefit that Rank expects to realize as a result of the recent acquisitions is inherently subjective;
|- | ----------------------------------------------------------------------------------------------------------------------



If Rank materially fails to meet its forecasted sales levels, or anticipated cost reductions,
or if weak economic conditions prevail in primary markets, the estimated fair values of Ranks reporting units may be adversely affected resulting in impairment charges.



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New UK accounting standards adopted by the Group



In 2003, the Group adopted Application Note G of FRS 5 Reporting the Substance of Transactions. Application Note G considers
revenue recognition under UK GAAP. There were no significant changes required to the Group revenue recognition policy.



In 2003, the Group amended its interactive gaming revenue recognition policy for the year ended December 31, 2002 to show gross turnover (stakes) rather than gross win,
reflecting current industry standards. Further details are given on page F-6.



Operating and Financial Review



The following operating and
financial review describes significant trends and events and their impacts in relation to a true and fair presentation in accordance with UK GAAP. Certain items would be accounted for differently under US GAAP. Although the impacts of the
differences are material to the results of operations and shareholders equity, these differences are non-cash in nature and relate primarily to differences in accounting for goodwill, depreciation methods, impairment of fixed assets, pension
expense recognition and deferred tax. Further details are given on pages F-47 to F-60.



The year ended December 31, 2003 (2003) compared to the year ended December 31, 2002 (2002).



Group results



Group turnover increased 28% to £1,925.9m from £1,508.5m in 2002. £351.2m of the turnover in 2003 related to acquisitions, the most significant of which was the Blue Square transaction within Gaming
which accounted for £308.8m of the increase in turnover. The remaining improvement in turnover reflected growth in Gaming and Deluxe, offset by a weaker performance at Hard Rock and adverse currency movements. The effect of the movement in
exchange rates between 2002 and 2003 was to reduce turnover by £26.4m and is discussed further on page 29.



Operating profit before exceptional items



Group operating profit before exceptional items was down 1%. Gaming had another excellent year with operating profit before exceptional items 9% ahead of 2002, reflecting
both strong turnover growth and further improvement in operating margins in both Mecca Bingo and Grosvenor Casinos. Deluxe Film operating profit was up 13% due to a strong release schedule. Deluxe Media Services operating profit was down 28% as a
result of declining VHS volumes and margins and transitional costs as the business migrates to DVD. As expected, Hard Rock continued to experience difficulties as a result of the continued downturn in international tourism. Operating profit in the
Hard Rock division was down to £23.1m from £27.6m in 2002.



Operating profit after exceptional items



Group operating
profit after exceptional items decreased 22% to £165.5m from £213.4m in 2002. The operating profit in 2003 includes a £35.8m charge relating to the restructuring of Deluxe Media Services, £6.0m relating to the integration of
Blue Square with Rank Interactive Gaming and a £9.3m charge relating to legal settlements for a number of legal actions in the US. The operating profit in 2002 included a charge of £6.2m relating to the impairment of DVD assets in Deluxe
Media. The exceptional items are discussed in more detail later in this section. Gamings operating profit after exceptionals was 4% ahead of 2002 and Deluxe Media Services operating loss after exceptionals was £16.6m compared with
an operating profit after exceptionals of £20.3m in 2002. There were no exceptional charges in Hard Rock or Deluxe Film.



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Profit before tax



Profit on ordinary activities before tax and after exceptional items for 2003 was £129.3m compared to £198.0m in 2002. The decrease is largely attributable to
the larger exceptional items charge in 2003 of £58.0m compared to £2.3m in 2002. Exceptional items are discussed below.



Exceptional Items



In North America, the transition from VHS to DVD involved the relocation of DVD replication capacity from California to replace existing VHS capacity in Arkansas. This relocation programme is virtually complete and,
as a consequence, the DVD plants in Ontario and Carson, California have been closed. This gave rise to an exceptional charge of £15.4m comprising redundancy costs of £3.2m, asset write-offs of £3.9m and property-related costs of
£8.3m.



The decline in VHS volumes and the consequent restructuring of
Arkansas for DVD led to a reassessment of the carrying value of the Groups VHS assets. This resulted in an impairment charge of £20.4m being made against those assets.



In Europe, the decline in VHS has lagged behind US trends but volume was still 20% down in 2003. As a consequence, subsequent to the
year-end, the decision was taken to close the duplication plants in Germany, Italy and Portugal and concentrate duplication into three locations in the UK, Spain and Sweden. These closures, together with further actions that will be taken to
restructure the European VHS business, are expected to give rise to a further exceptional item of around £10m, which, in accordance with FRS 12 Provisions, Contingent Liabilities and Contingent Assets, will be booked in 2004.



Blue Square was acquired for £65.0m in January 2003. The business was
integrated with Rank Interactive Gaming, which the Group expects will generate annualized operating cost savings. The cost of achieving these savings was £6.0m and this has been included as an exceptional charge in these results. The charge
includes redundancy costs of £3.4m and asset write-offs of £2.6m.



As previously described in the contingent liabilities note to the Group accounts, the Group has been subject to a number of legal actions in the US, including class action suits. Since 30 June 2003, one of these actions has been settled and
progress has been made on other actions, such that the Directors are now in a position to make a reasonable estimate of the possible liabilities associated with these actions. Accordingly, a provision of £9.3m has been included as an
exceptional item in the results. Additional information required to be disclosed by FRS 12 is not disclosed on the grounds that it can be expected to prejudice the outcome of the outstanding actions concerned.



During the course of 1999 and 2000, the Group made disposals totalling approximately
£1.4bn. Various provisions which were made at the time of the disposals are now no longer deemed to be necessary, resulting in a write-back of £4.6m.



On December 8, 2003, the Company redeemed all of the Groups £125m 7.25% bonds so as to allow the subsequent redemption of the
Groups outstanding Convertible preference shares. This gave rise to an exceptional premium on redemption of the bonds totalling £11.5m.



Joint ventures



Operating profit from joint ventures was £1.1m in 2003 compared to £5.3m in 2002 as the British Land joint venture was disposed in 2002. At the year-end, joint ventures principally comprise the
Groups interest in Atlab and the Hard Rock Hotels and Resorts joint venture with Sol Meliá which was entered into during the year.



Cost of sales



Total cost of sales increased 37% to £1,495.4m in 2003 from £1,093.0m in 2002. £326.4m of this increase related to businesses acquired during 2003. Excluding acquisitions, cost of sales was similar
to 2002. Total cost of sales expressed as a percentage of turnover was 78% in 2003 compared to 72% in 2002. As a result of the Groups new interactive gaming turnover recognition policy, cost of sales expressed as a percentage of turnover
should increase in future years. Exceptional charges included in cost of sales in 2003 increased to £41.8m from £6.2m in 2002.



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Distribution and administrative expenses



Distribution and administrative expenses were £272.8m in 2003 compared to £212.6m in 2002. Other operating income was
£7.8m in 2003 compared to £10.5m in 2002. The ratio of total operating profit before exceptional items to turnover was 11% in 2003 (2002 15%) and the ratio of total operating profit after exceptional items to turnover was 9% in 2003
(2002 14%). As a result of the Groups new interactive gaming turnover recognition policy, operating profit expressed as a percentage of turnover should decrease in future years.



Interest



Interest payable before exceptional items and excluding associates and joint ventures was £29.7m in 2003 compared to £22.6m in 2002 and after exceptional
items; £41.2m in 2003 compared to £22.6m in 2002. The year-on-year increase in interest payable before exceptional items reflects an increase in net debt to £700.5m at December 31, 2003 compared to £399.1m at December 31,
2002. The increase in net debt was mainly due to additional borrowings attributable to contract advance payments, acquisitions and the redemption of the Convertible preference shares.



Earnings per share



Basic earnings per share after exceptional items was 14.3p in 2003 (2002 19.6p). The decrease reflects the increase in exceptional charges year on year (2003
£29.1m, 2002 £1.7m). A further discussion on the nature of the exceptional items is given later in this section.



Profit for the 2003 financial period was £101.7m compared to £136.7m in 2002.



Divisional results



Gaming



Mecca Bingo



In the UK, the
well-established trends at Mecca Bingo of lower admissions and higher spend per head continued. Turnover increased by 1% in the year and was affected in the fourth quarter by the removal of box office fees following the change to a gross profits tax
regime at the end of October 2003. Operating profit was marginally ahead of 2002 at £72.6m, reflecting a very healthy 31% profit margin.



The growth in revenue at Mecca continues to be driven by the success of interval games and machines with an increase in spend per head of 11% and 9% respectively.



By the end of 2003, the roll out of jackpot machines across the Mecca estate
was virtually complete with a total of 353 jackpot machines installed, compared to 210 at 31 December 2002. A number of new gaming machines are currently being trialled under Section 21 of the Gaming Act in certain Mecca clubs. The early performance
statistics have been encouraging and, if ultimately successful, the plan will be to roll out a number of these machines across the entire UK estate.



The clubs at York and West Bromwich were relocated to new purpose-built facilities during the year. Since the start of 2004, the club at Burton has also been moved to new
premises and others at Bolton, Ellesmere Port, Glasgow and Edinburgh will all be relocated before the year end.



In Spain, Mecca continued to develop with good like-for-like growth in both revenue and operating profit, plus full year contributions from the three clubs acquired
during 2002. A further club at Santiago de Compostela was added in October 2003, taking the total number of clubs in Spain to ten. The Spanish operation contributed £6.8m of operating profit.



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##### Table of Contents

As reported in the trading statement issued on April 27, 2004, from December 31 2003 until April 17 2004 the historic
trend in admissions improved and attendance was down by just 4% since removing admission fees in the UK during the final quarter of 2003. Spend per head continued to rise and the then year-to-date performance was 5% ahead of 2003, resulting in
overall turnover growth of 1%. In Spain, the business continued to deliver steady growth, with increased attendance and spend per head.



Grosvenor and Hard Rock Casinos



Turnover at Grosvenor Casinos was up by 6% and operating profit was up by 7%, despite difficult trading conditions in the London market during the year. The provincial
casinos continued their strong growth trend with profits up a further 16% in the year.



Profits at the Groups two upper end London casinos  the Clermont and the Park Tower  were below 2002 due largely to the impact of the major refurbishment of the Park Tower during the first half of the year and a lower win
percentage at both casinos in the second half of the year. Since reopening in July with 40% additional gaming space, admissions and handle have increased substantially at the Park Tower.



Along with the rest of the market, the Groups three mid-market London casinos  the Victoria, the Connoisseur and the Gloucester
 were affected by lower customer volumes in the run up to and following the war in Iraq. Admissions were down 7% and although handle per head was up 4%, overall handle was down resulting in lower levels of both turnover and operating profit.



The Groups provincial casinos enjoyed another strong year with turnover
up 10% and operating profit up 16%. Since 2000, operating profits in this business have doubled as a result of the continuous investment in relocations, new licences and product development. This combination of initiatives succeeded again in
increasing both admissions and handle per head in 2003. Whilst the relocation programme continues apace, the uplift in performance from the introduction of electronic roulette and the other new products during 2002 has now been realised. This
factor, together with increased competition in certain key locations, resulted in a slowdown in the rate of growth in admissions and handle during the second half of the year.



The two Hard Rock Casinos continued to make good progress in 2003. Both casinos enjoyed strong growth in attendance and handle and the
London casino moved into profit during the second half of 2003 and is now the Groups second highest in terms of attendance. Both casinos are expected to benefit from deregulation and the ability to advertise the Hard Rock Casino concept.



As reported in the trading statement issued on April 27, 2004 from December 31
2003 until April 17 2004 overall turnover within Grosvenor Casinos was down 2%, but excluding the Clermont, overall turnover would have been up by 6%. The London market has generally been more buoyant, with particularly strong performances at the
Park Tower and Hard Rock Casinos. In the provinces, turnover was flat, with the impact of new money laundering rules and general competitive pressures mitigated by a stronger win percentage. The relocated casino in Cardiff has now opened and the
five new casino licence applications announced earlier this year are being progressed.



Rank Leisure Machine Services



Operating profit at Rank
Leisure Machine Services increased during the year to £3.6m compared with £3.1m in 2002. On 10 February 2004, the Group completed the disposal of this business to Gamestec Leisure Limited for £30.0m in cash.



Blue Square



Since its acquisition in January 2003 and subsequent integration with Rank Interactive Gaming, Blue Square has grown at an impressive rate.
Actual Blue Square and interactive gaming turnover reported by the Group was £371.9m in 2003 compared with £46.3m in 2002 and gross win was £23.1m compared with £2.4m in 2002. With the launch of Meccagames.com, the
introduction of a single account for both Blue Square and Meccagames customers, as well as the introduction of new games such as Aces High, the number of active customers increased by 50% compared with 2002.



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##### Table of Contents

The realization of synergy benefits and cost savings from the acquisition resulted in a £1.9m operating profit
before goodwill amortization and exceptional items, compared with a £5.0m reported loss in 2002. Blue Square posted an operating loss of £0.6m after goodwill amortization and £6.6m after goodwill amortization and exceptional items.



As reported in the trading statement issued on April 27, 2004 from December
31, 2003 until April 17, 2004, Blue Square performed well and both the Grand National and Cheltenham Festival helped to deliver a strong result. Further games development is on track, with a new Blue Square casino and poker room to be launched later
in 2004.



Hard Rock



Despite an encouraging performance in food and beverage revenues in the owned cafes and
increased income from hotel franchises, the absence of any significant recovery in international travel and tourism continued to undermine merchandise sales and, together with negative currency movements, resulted in a reduction in operating profit
to £23.1m compared with £27.6m in 2002.



Like-for-like sales for
the year were down 3.1%. Whilst food and beverage sales were up 2.4%, merchandise sales were down 11.2%. The shortfall in merchandise sales remains concentrated in the major tourist locations such as Paris, Rome, London, New York and Orlando. The
like-for-like sales trends have been relatively steady since June 2003 with a marginal improvement towards the end of the year.



Profit from cafe franchise and other income was down 6% to £5.8m and was impacted by the outbreak of the SARS virus which particularly affected the cafes in the Far
East. Hotel franchise and other income contributed £5.2m in 2003, reflecting a good performance by the Orlando hotel and dividends from the Groups interest in the Universal Rank Hotel partnership in Orlando. Territory fees included up
front fees from the Biloxi casino and from the Hard Rock Cafe planned at Foxwoods. Central overheads increased due to one-off redundancy costs of £1.1m associated with the restructuring announced at the beginning of 2003.



The strategy of continuing to extend the Hard Rock brand into hotels and casinos took a major
step forward during 2003 with the formation in June of a joint venture with Sol Meliá to develop Hard Rock Hotels in the Americas and Europe. The Hard Rock Hotel in Chicago was the first hotel to open as part of the joint venture and is
already attracting large amounts of media and customer interest. The joint venture has announced the development of a second hotel in San Diego, which is scheduled to open in 2006 and further potential projects are in the pipeline.



The first of two Seminole Tribe of Florida developments, both branded Hard Rock, opened in
Tampa in March 2004 with 90,000 square feet of gaming, 1,500 slot machines, 55 poker tables, an 800-seater bingo facility and a 250 room hotel. The second development, in Hollywood, Florida, with 115,000 square feet of gaming, 2,000 slots, 65 poker
tables, an 800-seater bingo facility and a 500 room hotel, opened in May 2004. Elsewhere, the first phase of financing for a $235m Hard Rock casino and hotel in Biloxi, Mississippi was completed at the beginning of 2004 and this is expected to open
during the third quarter of 2005.



As reported in the trading statement issued
on April 27, 2004 from December 31 2003 until April 17 2004 Hard Rocks performance in the period was encouraging. The cafe business performed well with like-for-like sales up 3%. Food and beverage was up 6% and merchandise down 4%.



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##### Table of Contents

Deluxe



Deluxe produced another strong result in 2003 in difficult circumstances with turnover up 12% and operating profit up 4% before exceptional items and goodwill
amortization. Operating profit after exceptional items and goodwill amortization was down 39% compared with 2002. The overall result was achieved despite adverse currency movements which reduced operating profit by £3.5m, and reflected a very
strong performance at Film, offset by the anticipated reduction in profit at Media, which was impacted by the continued transition from VHS to DVD.



Film Processing



Film Services had an outstanding year in 2003 with operating profit up 13%. Film footage was up 3% despite the loss of the Universal film contract in March and the smaller Fox International contract in October 2003.
Excluding these two contracts, contracted footage was up 10%. The growth in volume was due to the continued trend of the increasing number of prints per title, as studios move to ever wider release patterns, together with the addition of a number of
contracts from independent film producers. Major titles produced during the year included Lord of the Rings  The Return of the King, X-Men United, Charlies Angels 2, and Master and Commander.



Other services include the results of ETS and Capital FX and benefited in 2003 from a full
years contribution from both businesses. ETS, the physical film distribution business, became a wholly-owned subsidiary at the end of 2002. Additional contract wins resulted in strong growth in operating profit. Capital FX has continued to
build on its position in the UK laser sub-titling and digital effects market. Deluxes involvement in the digital arena is supplemented by its 20% interest in EFILM, one of Hollywoods leading providers of digital intermediates, which is
accounted for as an associate.



All of Deluxes film contracts as at 31
December 2003 are secure until at least 2005, with 82% of 2003 contracted volume secure until at least 2006, with a weighted average contract life of 49 months.



As reported in the trading statement issued on April 27, 2004 from December 31, 2003 until April 17, 2004, Film continued to perform well and total volume was ahead of
last year. Titles produced during the first quarter of 2004 included The Passion of The Christ, Starsky and Hutch, and Hellboy. The outlook remains good with a number of major titles expected in the balance of the year including Spider-man 2, Day
after Tomorrow, Stepford Wives and The Brothers Grimm.



Media Services



The Group made significant progress towards completing the transition of
the Media business in 2003. The transformation of the business from a pure VHS duplicator and distributor to a fully integrated DVD compression and authoring, replication and distribution business is now all but complete.



Key events during the year included the acquisition of Disctronics in July 2003, providing
important European manufacturing capacity and making the Group one of the worlds largest DVD manufacturers; the integration and rationalisation of the Ritek acquisition, which involved the relocation of plant, equipment and employees to a
single production facility in Arkansas; and the commencement of a restructuring of the VHS business in Europe including the announcement to close the operations in Italy, Germany and Portugal.



The rate of decline of VHS continued to accelerate during the year with 160m units compared
with 224m in 2002 being produced, leading to a decline in turnover of 38% and an operating loss before exceptional items and goodwill amortization of £8.9m. In contrast, the DVD/CD side of the business continued to make excellent progress.
Total volume increased to 162m discs compared with 69m in 2002, revenue grew by 270% and operating profit increased before exceptional items and goodwill amortization with major titles produced in 2003, including the Indiana Jones box set and
Seabiscuit. While technological advances have meant that the manufacturing costs are typically lower for DVD than VHS, the relative pricing and costs associated with the transition from VHS to DVD led to lower combined profits in VHS and DVD
manufacturing. The global market for DVD grew by 46% in 2003 and is expected to continue to grow strongly. As a result of the exceptional costs incurred in the transition from VHS to DVD, VHS reported an operating loss after exceptional items and
goodwill amortisation of £29.3m and the DVD business reported an operating loss after exceptional items and goodwill amortisation of £4.0m.



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##### Table of Contents

The growth in demand for DVD was the major factor behind the growth in the distribution business where total volumes
increased by 18% to 523m units compared with 443m in 2002. Revenues increased by 18% to £106.8m, compared with £90.8m in 2002, and operating profit more than doubled to £11.5m, compared with £5.3m in 2002.



Digital Services doubled its revenues and grew profit to £5.2m, with particularly
strong performance in the compression, encoding and authoring business.



As
reported in the trading statement issued on April 27, 2004 from December 31, 2003, until April 17, 2004, manufacturing and distribution volumes were higher than 2003, albeit during the seasonally unimportant time of year. Although Disctronics, which
was acquired in 2003, has been integrated and is performing to expectations, its trading pattern mirrors the seasonality of the industry. Digital Services continued to perform well.



During May 2004 the Group announced that an existing European DVD manufacturing and distribution contract will be transferring to a new
supplier. This transfer is taking place on a staged basis over the period to July 2005 and will have a material impact on the Groups operating profit from 2005. In 2003, this contract accounted for 48% of DVD units supplied and 18% of total packaged
media units distributed by DMS. In view of the anticipated timing of transfer of the business, Rank expects that there will only be a small impact on the Groups operating profit before exceptional items in 2004.



Whilst the loss of this contract is disappointing, active negotiations for additional
contract business in both the US and Europe are currently in progress and are expected to reach a conclusion over the next few months. The underlying growth in the DVD market is expected to remain strong for the next few years, but the ability of
Deluxe Media Services to continue to deliver an acceptable return and maintain profitability at the level anticipated in 2004 will be dependent upon gaining new studio contracts. Subject to progress made on new contract wins during the remainder of
the year, an exceptional charge may be incurred in 2004 relating to the impairment of certain manufacturing and distribution assets associated with the lost contract.



Deluxe associates and joint ventures



Deluxe associates and joint ventures comprises the 20% interest in EFILM and the joint venture investment in Atlab. The acquisition of the remaining 50% of ETS on 31
December 2002 resulted in that business being consolidated within Deluxe.



US Holidays



The US Holidays business generated operating
profit of £6.0m and net cash of £7.8m, compared with £8.1m and £13.0m, respectively in 2002.



Central costs and other



The increase in central costs is largely as a result of increased insurance costs and a net £1.2m expense in Other compared with a £4.4m profit in 2002. Exceptional charges included within central costs
relate to £9.3m for legal provisions relating to legal actions in the US. Total central costs and other after exceptional charges was £21.8m in 2003.



Discontinued operations



There were no material discontinued operations in 2003.



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##### Table of Contents

Acquisitions



During 2003, the Group made a number of acquisitions. Summary details are as follows:



In January 2003, the Group completed its acquisition of Blue Square for a total consideration of £65.0m in unlisted, unsecured
convertible loan stock. The loan stock, which became redeemable from the end of July 2003, is convertible into Rank Ordinary shares at a price of 282p per £1 of loan stock held. Full conversion of the loan stock would result in the issue of 23
million new Rank Ordinary shares. Blue Square contributed £1.0m to operating profit in 2003 before goodwill amortization of £2.5m and exceptional items of £6.0m.



On May 16, 2003, Deluxe Media Services acquired certain assets and liabilities of Sonic Foundry, Inc., Sonic Foundry Media Services, Inc.
and International Image Services, Inc for £3.5m. Sonic is a digital media asset management company. Sonic contributed £nil to operating profit in 2003.



On July 1, 2003, Deluxe Film acquired the remaining 67.7% interest in The Lab for total consideration of £1.4m, of which £0.6m
is deferred.



In July 2003, Deluxe Media Services acquired Disctronics for
£34.5m, of which £6.7m is deferred. Disctronics is one of the largest independent DVD and CD replicators in Europe. Disctronics contributed £6.2m to operating profit in 2003.



In October 2003, the Gaming division acquired a Spanish bingo club for a total consideration
of £2.3m. The club contributed £nil to operating profit in 2003.



In December 2003, Blue Square Limited acquired A Heathorn (Course) Limited, an on-course bookmaker with pitches at major racecourses for total consideration of £1.2m. Heathorn contributed £nil to operating profit in 2003.



In addition to the acquisition of subsidiary undertakings detailed above, in
June 2003, the Group entered into a joint venture with Sol Meliá to develop the Hard Rock Hotel concept throughout the Americas and Europe. The joint venture contributed £nil to profit in 2003.



Geographical contributions



UK operations contributed 55% of turnover on continuing operations in 2003 and 45% of
operating profit before exceptional items compared with 42% and 46% respectively in 2002. North America contributed 35% of turnover on continuing operations before acquisitions and 40% of operating profit before exceptional items in 2003 compared
with 47% and 45% in 2002, respectively. The rest of the world made up the balance.



Associates and joint ventures



Deluxe associates and
joint ventures



These comprise the Groups interests in EFILM, Atlab
and The Lab (which became a 100% subsidiary on July 1, 2003). These businesses contributed £0.4m net profit before tax in 2003 compared with £1.3m in 2002.



Interest expense



Interest on managed businesses before exceptional items was £7.1m higher in 2003, reflecting an increase in the levels of net debt. The Group incurred an
exceptional interest charge of £11.5m on the redemption of the £125m Eurobond. After exceptional charges interest on managed businesses was £18.6m higher in 2003 compared to 2002. Interest cover, expressed as the ratio of Group
operating profit before exceptional items to managed businesses interest before exceptional items, was 7.3 times in 2003, compared with 9.7 times in 2002. Interest cover, expressed as the ratio of Group operating profit after exceptional items
to managed businesses interest, was 4.0 times in 2003, compared with 9.4 times in 2002.



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##### Table of Contents

Profit before tax and exceptional items



Profit before tax and exceptional items was £187.3m in 2003 compared to £200.3m in 2002.



Exceptional items



The net exceptional charge of £29.1m in 2003 comprises:



|                                                                 |  |       |  
|---------------------------------------------------------------- |  | ----- | -
|                                                                 |  | £m    |  
|Exceptional items within operating profit                        |  |       |  
|- Deluxe Media Services restructuring                            |  | (35.8 | )
|- Blue Square restructuring                                      |  | (6.0  | )
|- Legal provision                                                |  | (9.3  | )
|                                                                 | 
|Non-operating exceptional items                                  |  |       |  
|- Release of disposal provisions                                 |  | 4.6   |  
|                                                                 | 
|Exceptional item within net interest payable and similar charges |  |       |  
|- Premium on redemption of £125m Eurobond                        |  | (11.5 | )
|                                                                 |  |       |  
|                                                                 |  | (58.0 | )
|                                                                 | 
|Tax                                                              |  |       |  
|- Credit on exceptional items above                              |  | 13.4  |  
|- Release of disposal provisions                                 |  | 12.7  |  
|                                                                 |  |       |  
|                                                                 |  | (31.9 | )
|Minority Interest share of Deluxe Media Services restructuring   |  | 2.8   |  
|                                                                 |  |       |  
|Total                                                            |  | (29.1 | )
|                                                                 |  |       |  



In preparing its financial statements
in accordance with the Companies Act and UK GAAP, certain financial information is presented that would be viewed as non-GAAP under regulations issued by the United States Securities and Exchange Commission. The Company has described
such items and provided disclosure on the effects and reasons for this presentation in section 3A.



Further details of the exceptional charge can be found on pages 22.



Exchange rates



The average
exchange rates used and the net translation effect of changes in average exchange rates between 2002 and 2003 are summarized in the table below.



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##### Table of Contents

|                                |  |                       |  |                |  |             |   |  |                     |  
|------------------------------- |  | --------------------- |  | -------------- |  | ----------- | - |  | ------------------- | -
|                                |  | Average exchange rate |  | Impact on 2003 | 
|                                |  | 2003                  |  | 2002           |  | Turnover £m |   |  | Operating profit £m |  
|                                |  |                       |  |               
|US dollar                       |  | 1.63                  |  | 1.51           |  | (45.8       | ) |  | (7.0                | )
|Canadian dollar                 |  | 2.32                  |  | 2.40           |  | 2.4         |   |  | 0.1                 |  
|Euro & Other                    |  | 1.45                  |  | 1.59           |  | 17.0        |   |  | 2.3                 |  
|                                |  |                       |  |                |  |             |   |  |                     |  
|                                |  |                       |  |                |  | (26.4       | ) |  | (4.6                | )
|                                |  |                       |  |               
|Gaming                          |  |                       |  |                |  | 2.9         |   |  | 0.6                 |  
|Hard Rock                       |  |                       |  |                |  | (11.1       | ) |  | (1.2                | )
|Deluxe                          |  |                       |  |                |  | (15.1       | ) |  | (3.5                | )
|US Holidays                     |  |                       |  |                |  | (3.1        | ) |  | (0.5                | )
|                                |  |                       |  |                |  |             |   |  |                     |  
|                                |  |                       |  |                |  | (26.4       | ) |  | (4.6                | )
|Interest                        |  |                       |  |                |  |             |   |  | 2.0                 |  
|                                |  |                       |  |                |  |             |   |  |                     |  
|Net impact on profit before tax |  |                       |  |                |  |             |   |  | (2.6                | )
|                                |  |                       |  |                |  |             |   |  |                     |  



Taxation



The effective tax rate, before exceptional items, is 28.9% and the pre-exceptional current
tax rate is 7.2% compared with 29.9% and 15.6% in 2002 respectively. Cash tax liabilities relating to 2003 profits benefited from tax losses in the US.



The Group recognized an exceptional tax credit in 2003 of £26.1m of which £13.4m relates to the exceptional charges discussed on page 22 and £12.7m
relates to tax liabilities provided on the disposal of the Holidays business which are no longer required.



The effective tax rate after exceptional items is 21.7% compared with 29.9% in 2002.



The year ended December 31, 2002 (2002) compared to the year ended December 31, 2001 (2001)



Group results



After restating to reflect the Groups new revenue recognition turnover for interactive gaming, Group turnover increased 10% to
£1,508.5m from £1,366.9m in 2001. £61.7m of the turnover in 2002 related to acquisitions, the most significant of which was the Ritek transaction within Deluxe Media Services which accounted for £50.5m of the increase in
turnover. The remaining improvement in turnover reflected strong growth in Gaming and Deluxe Film, offset by a weaker performance at Hard Rock and adverse currency movements. The effect of the movement in exchange rates between 2001 and 2002 was to
reduce turnover by £37.8m.



Group operating profit before exceptional
items was up 5%. Gaming had another excellent year with profit 10% ahead of 2001, reflecting both strong turnover growth and further improvement in operating margins in both Mecca Bingo and Grosvenor Casinos, offset by a £5m loss at Rank
Interactive Gaming, comprising Rank.com and hardrockcasino.com. Deluxe Film profit was up 16% due to an exceptional release schedule and a first full year of contribution from the new laboratory in Rome. Deluxe Media Services profit before
exceptional items was up 31%, helped by a first time contribution of £4.3m from the venture with Ritek and an improved result from distribution, which more than compensated for the decline in VHS volumes and margins. Deluxe Media Services
operating profit after exceptional items was £20.3m compared with a loss of £17.3m in 2001. As expected, Hard Rock experienced a difficult year in the aftermath of the events of September 11, 2001. Operating profit in the Hard Rock
division was down to £27.6m from £38.0m in 2001 with low levels of travel and tourism having a direct impact on the cafe estate, particularly on merchandise sales.



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##### Table of Contents

Group operating profit after exceptional items increased 24% to £213.4m from £172.2m in 2001. The results in
2001 included exceptional items of £37.5m relating to restructuring costs and the impairment of assets at Deluxe Media. The operating profit in 2002 includes a charge of £6.2m relating to the impairment of DVD assets in Deluxe Media. The
exceptional items are discussed in more detail later in this section. 2002 operating profit included £4.3m relating to the venture with Ritek Corporation in July 2002.



Profit on ordinary activities before tax and after exceptional items for 2002 was £198.0m compared to £160.5m in 2001. The
increase is largely attributable to the smaller exceptional items charge in 2002 of £2.3m compared to £27.6m in 2001. £8.9m of the 2001 exceptional items related to the restructuring of the European video business involving the
closure of duplication plants in France and Holland and reorganization in the UK and Germany.



A further exceptional charge of £28.6m was recognized in 2001 following the decision to combine the Deluxe Video businesses in the US and Europe. Offsetting these charges was a non operating exceptional profit
of £12.3m arising on the disposal of Arkansas real estate, plant and equipment.



Profit before tax from joint ventures was £8.5m in 2002 compared to £2.7m in 2001. The profit for 2002 from joint ventures includes a non-operating profit of £6.7m resulting from the disposal of properties owned by the
joint venture with British Land. An exceptional interest charge of £2.0m arose in the joint venture associated with the unwinding of a number of interest rate swaps. At the year end, joint ventures principally comprised the Groups
interest in ETS and Atlab. A 50% equity interest in Atlab was acquired on September 10, 2002.



Total cost of sales increased 6% to £1,049.1m in 2002 from £991.0m in 2001. £52.6m of this increase related to businesses acquired during 2002. Excluding acquisitions, cost of sales were similar to
2001. Total cost of sales expressed as a percentage of turnover remained comparable between years (2002 72%, 2001 72%).



Distribution and administrative expenses were £212.6m in 2002 compared to £212.5m in 2001. Other operating income was £10.5m in 2002 compared to
£8.8m in 2001. The ratio of total operating profit before exceptional items to turnover was 15% in 2002 (2001 15%) and the ratio of total operating profit after exceptional items to turnover was 14% in 2002 (2001 13%). Interest payable
(excluding associates and joint ventures) was £22.6m in 2002 compared to £24.3m in 2001. The year on year reduction reflects a substantial reduction in average interest rates to 5.5%. Net debt was £399.1m at December 31, 2002
compared to £248.1m at December 31, 2001. The increase in net debt was mainly attributable to a number of advance payments made to film studios in relation to the extension or renewal of existing Deluxe contracts. These advance payments are in
line with industry practice and are recoverable over the life of the contract.



Basic earnings per share before exceptional items, based on average Ordinary shares of 589.2m compared to year end Ordinary shares of 594.1m was 19.9p compared to 16.5p in 2001 (restated for FRS 19). The main reason for the increase is an
improvement in operating profit resulting from acquisitions during the year and a reduction in interest reflecting lower effective interest rates.



Profit for the 2002 financial period was £136.7m (2001 £91.1m).



Basic earnings per share after exceptional items was 19.6p in 2002 (2001 11.9p). The increases reflect the reduction in exceptional charges year on year (2002
£1.7m, 2001 £27.6m). A further discussion on the nature of the exceptional items is given later in this section.



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##### Table of Contents

Divisional results



Gaming



Mecca Bingo



Turnover (including the results from acquisitions of £4.2m) increased to £474.5m in 2002 from £437.1m in 2001 and operating profit increased from £95.7m in 2001 to £104.8m (including
profit on 2002 acquisitions of £1.5m) in 2002. The Divisions momentum for revenue growth was maintained during the year and, accompanied by a keen focus on cost control, resulted in increased operating margins at Mecca Bingo, Grosvenor
Casinos and Rank Leisure Machine Services.



In the UK, Mecca Bingo increased
turnover by 3% and operating profit by 7% in 2002. The number of registered members increased by 4% to nearly 1.1 million and although admissions fell by 5%, this was more than compensated for by an 8% increase in spend per head, continuing the
pattern experienced over the last few years. Mecca has been successful in attracting younger, higher yielding customers, with 45% of the membership now aged below 44. These players tend to visit less frequently but spend more per visit, especially
on interval games, such as cashline bingo and machines, both of which attract high margins.



The roll-out of the recently permitted jackpot machines is continuing and is expected to further enhance machine revenue and profitability in the future. At December 31, 2002, 210 jackpot machines had been installed
with plans for a total of 350 by the middle of 2003.



Meccas operating
profit margin increased by a further 1% to 31% in 2002 despite an additional £3.5m in promotional costs, reflecting the growth in interval games and machines and underlining the strength of cost controls within the business.



In Spain, Meccas bingo operations produced a strong year-on-year performance reflecting
the inclusion for the first time of the three additional clubs which were acquired during the first half for a net cash consideration of £15.0m, of which £9.2m was paid in 2002. The clubs contributed £1.5m of operating profit in
the year and have benefited from the introduction of Meccas UK expertise.



Grosvenor and Hard Rock Casinos



Grosvenor Casinos continues
to benefit from the investment made over the last few years in relocating and refurbishing its casinos and from the enhancement of its product offering. Turnover was up 16% and operating profit increased 28%. This was despite a reduction in win
percentage that for the estate as a whole fell from 17.8% in 2001 to 17.2% in 2002.



In London, the Groups two upper end casinos  the Clermont and the Park Tower  increased revenue by 23%, due largely to a much higher win percentage, and doubled operating profit to £6.0m. The Park Tower is currently
undergoing a major refurbishment that will extend its gaming space by 40%. At the other London casinos  the Victoria, Gloucester and Connoisseur  while admissions were up 3%, handle per head up 15% and turnover up 7%, operating profit
was flat, partly reflecting increased costs associated with the introduction of later opening hours.



The provincial casinos delivered improved results in 2002. Admissions were up 6%, handle per head increased by 18% and turnover was up by 19%, despite a lower win percentage of 16.6%. Operating profits increased by
38% to £22.7m. The Brighton casino was relocated and opened in August 2002.



The two new Hard Rock Casinos opened during the second half of 2002 and incurred an operating loss of £2.1m, including pre-opening costs of £1.4m. The first Hard Rock Casino opened in central Manchester in July, followed by the
second casino which opened in November, near Leicester Square in the West End of London. Both casinos have enjoyed a strong start with impressive growth in both membership, now over 15,000 each, and also admissions, which for both casinos combined
has reached over 6,000 per week.



The continued roll-out of electronic roulette
is proving successful and there are now a total of 420 machines across the Grosvenor estate. Progressive Stud Poker, which links across Grosvenor casinos and was the first of its type in the UK, was introduced in the fourth quarter of 2002 and has
proved popular to-date.



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Rank Leisure Machine Services



Operating profit at Rank Leisure Machine Services increased during the year to £3.1m (2001 £2.3m).



Rank Interactive Gaming



Rank Interactive Gaming continued to build its customer base in 2002. As at December 2002, the business had over 75,000 registered
customers. The investment in building market share, together with start-up costs associated with hardrockcasino.com, which was launched in July 2002, resulted in an operating loss of £5.0m for the year.



On January 27, 2003, the Group completed the acquisition of Blue Square Limited, one of the
UKs leading internet and telephone betting businesses. The integration of Blue Square and Rank Interactive Gaming will create a substantial business with annualized stakes currently running at approximately £400m. Cost savings of
approximately £5m per annum have already been identified as well as a number of opportunities to cross-sell a variety of the games and betting products now available.



Hard Rock



Uncertainty and decline in the international travel market during 2002 continued to impact the performance of Hard Rock and operating profit fell 27% to £27.6m. The
impact was particularly severe at some of the company-owned cafes where reduced levels of tourism contributed to a substantial reduction in higher margin merchandise sales. In addition, pre-opening expenses were £1.9m higher than last year,
reflecting the opening of a further six cafes (Munich, Austin, Pittsburgh, Nottingham, Minneapolis, and Leeds). During 2003, new cafes are expected to open in Lisbon, Cologne and Cardiff.



Like for like sales for the year as a whole were down 2.4% with food and beverage sales up 2.1%, a creditable result in the circumstances.
Merchandise sales were down 8.2%.



Like for like trends improved considerably
during the fourth quarter, albeit against relatively weak comparatives in 2001. Total sales were up 5.2% with food and beverage up 8.1%. Since the year-end, after a good performance in January 2003, up 5.1% compared with the same period in 2002,
like for like sales during February 2003 were negatively impacted by terrorist alerts in both the UK and the US, and by severe weather conditions in the northern states of the US. Overall, for the eight weeks to February 21, 2003 like for like sales
were down 0.5%.



Hotel franchise and other income contributed £3.8m in
2002, including a dividend of £1.4m from the Groups 25% interest in the partnership which owns three hotels in Orlando, including the Hard Rock Hotel. The development of new revenue streams from licensing the Hard Rock brand to other
leisure-related activities has made good progress. Following the completion of its financing arrangements in May 2002, the Seminole Tribe of Florida development in Florida, comprising two new hotel and casino resorts, is now in-build and expected to
open, at least partially, by the end of 2003. An arrangement with the Choctaw Indians for a beach club in Mississippi is now in place and is expected to open later this year. In the longer term, there is also a plan for a Hard Rock Hotel development
on the same site. The new Hard Rock hotel in Chicago is scheduled to open in early 2004. These transactions demonstrate the value of the brand and Rank will continue to search for other attractive opportunities.



Despite the receipt of a one-off site fee of £1.0m relating to the Choctaw development,
territory fees fell by £1.9m during the year.



Deluxe



Turnover increased 11% to £704.2m (including £57.5m turnover from 2002
acquisitions) in 2002 from £634.6m in 2001. Operating profit before exceptional items increased 20% to £89.0m (including £4.5m relating to acquisitions) in 2002 (2001 £74.1m). Operating profit after exceptional items of
£6.2m (2001 £37.5m) increased 102% to £82.8m (2001 £36.6m).



33



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##### Table of Contents

Film Processing



Film processing had an exceptional year in 2002. A number of major blockbuster films were processed including Spider-Man, Star Wars Episode II  Attack of the
Clones, Lord of the Rings  The Two Towers, and James Bond  Die Another Day, contributing to a record year for the business. Film footage was up 16%, turnover 8% and operating profit 16%, helped by a full years contribution from the
Rome laboratory and the relocation of the Toronto laboratory which became fully operational in April 2002. The program for 2003 looks strong and includes Daredevil and Lord of the Rings  The Return of the King.



During 2002 Deluxe Film expanded its geographic coverage with the purchase of a new
laboratory in Barcelona, acquired for £5.5m in November 2002, and in Australia through a technical and marketing joint venture with Atlab, the largest film processing business in Australasia. These developments have further enhanced the
position of the film business in Europe and also provided an entry point into the attractive Asian market.



Deluxe also extended its range of services to studios through the acquisition of Capital FX and a 20% shareholding in EFILM. Capital FX was acquired in November 2002 for £9.0m (of which £6.0m is deferred)
and is a leading player in the UK laser sub-titling and digital effects market. The 20% interest in EFILM, which is engaged in the digital production of film elements necessary for bulk film processing, was acquired in July 2002. The results of
Atlab and EFILM are recorded within Deluxe associates and joint ventures.



On
December 31, 2002, the Group acquired the remaining 50% equity of ETS that it did not already own. ETS is a distributor of release prints and trailers based in Los Angeles. The total consideration payable is up to £14.2m, of which £7.4m
was paid in January 2003 and £6.8m is deferred until later years. Of the deferred consideration, up to £1.6m is contingent upon the future performance of ETS. This brings the total investment in ETS to £17.5m for 100% ownership.



The decision during the first half to renew the majority of Deluxes
major film contracts has lengthened the average life of existing contracts such that some 79% of 2002 actual volumes are now secure until 2005 or beyond. The loss of the contract with Universal Studios will have an adverse impact on Films
profits in the current year. However, Deluxe expects that underlying growth in film footage, the effect of new acquisitions, and a continuing drive to reduce costs, will mitigate the impact of the contract loss on the results for 2003.



Media Services



After a number of years of declining turnover and profit, Deluxe Media Services recorded a 31% growth in operating profit before exceptional
items in 2002 and after exceptional items profit was £20.3m in 2002 compared with an operating loss of £17.3m in 2001. The Group has made excellent progress in repositioning this business for the future, in particular through the
formation of a new DVD replication venture with Ritek Corporation of Taiwan. This venture combines the DVD assets of Deluxe and Ritek in North America and Europe and creates a major force in the DVD market. Deluxe will pay a total of £33.8m to
Ritek, spread over three years, for an 80% interest in the new venture which contributed £4.3m to Deluxe operating profit in 2002. The move into DVD, together with the continuing importance of distribution services and the entry into digital
services, means that, over time, Deluxe will become much less dependent upon the declining video duplication market.



The worldwide replication market for DVD was estimated at approximately 1.74 billion units at the end of 2002, an increase of over 60% compared with the previous year.
The timing of the Ritek transaction meant that Deluxe was able to benefit from the inclusion of its share of the profits during the busiest time of the year in the run up to Christmas. Deluxe replicated 69 million DVDs in 2002 (2001  6
million), including Star Wars Episode II  Attack of the Clones and Spider-Man. DVD revenues increased to £55.7m and the combined business produced an operating profit of £2.3m.



The market for VHS continues to be difficult as consumers switch to using DVD as their
primary home entertainment platform. Total volumes were down by 10% while revenues were down by 16%, reflecting the continued price erosion being suffered as demand declines. During 2002, Deluxe duplicated



34



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##### Table of Contents

approximately 224 million VHS cassettes (2001  250 million). While this performance was better than the market as a
whole, it was not sufficient to prevent a fall in operating margin to 10.1% (2001  11.1%). The steady decline in VHS is expected to continue during 2003 and whilst Rank expect DVD volumes to grow strongly, the relative margins are such that
overall profit for Deluxe Media Services is expected to decline in 2003.



With
a capability to distribute both DVD and VHS, Deluxe has seen substantial volume growth within its distribution services business with the number of DVDs distributed having increased by 90% to 171m (2001  90m). While the volume of VHS
distributed declined in 2002 by 20% to 272m, both revenue and profit from distribution activities increased substantially.



Digital Services was formed in February 2002 following the acquisition of Vision Entertainment and the establishment of Deluxe Media Asset Management. Having invested in
some of the most sophisticated technologies in the industry, as well as the development of bespoke software, the business has already secured a number of sizeable contracts to manage both physical as well as digital studio assets which are being
securely delivered to entertainment industry customers around the world.



Deluxe associates and joint ventures



These comprise the
Groups interests in EFILM, Atlab, The Lab, a front-end laboratory based in Toronto, and ETS (which became a 100% subsidiary on December 31, 2002). Deluxes investments contributed £1.8m in 2002 (2001 £1.1m).



US Holidays



Resorts USA suffered from the reduced level of tourism but still managed a satisfactory result in the circumstances with operating profit of
£8.1m (2001 - £9.5m). The business generated net cash of £13.0m (2001 £13.3m).



Central Costs and other



|              |  |         |   |  |         |  
|------------- |  | ------- | - |  | ------- | -
|              |  | 2002 £m |   |  | 2001 £m |  
|Central costs |  | (14.3   | ) |  | (10.2   | )
|Other         |  | 4.4     |   |  | 2.6     |  
|              |  |         |   |  |         |  
|              |  | (9.9    | ) |  | (7.6    | )
|              |  |         |   |  |         |  



The increase in central costs is
largely as a result of a £6.5m provision (2001 - £2.1m) in respect of the Groups long term incentive plan for key employees.



Discontinued operations



There were no discontinued operations in 2002.



Acquisitions



During 2002, the Group made a number of acquisitions. Summary details are as follows:



The Gaming division acquired three Spanish bingo clubs during 2002. Total consideration was £15.0m of which £5.8m was deferred. The clubs contributed
£1.5m to operating profit in 2002.



In July 2002 Deluxe entered into a
venture with Ritek Corporation of Taiwan. The venture combined the DVD assets of Deluxe and Ritek in North America and Europe. Deluxe will pay a total of £33.8m to Ritek, spread over three years, for an 80% interest in the new venture which
contributed £4.3m to Deluxe operating profit in 2002.



35



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##### Table of Contents

In November 2002, Deluxe Film acquired Capital FX for £9.0m (of which £6.0m is deferred). Capital FX is a
leading player in the UK laser sub-titling and digital effects market.



In
November 2002, Deluxe Film also acquired a laboratory in Barcelona for £5.5m.



In December 2002, Deluxe Film acquired the remaining 50% interest in ETS which it did not already own. The total consideration was £14.2m, of which £7.4m was paid in January 2003.



In January 2003, the Group completed its acquisition of Blue Square for a total consideration
of £65m in unlisted, unsecured convertible loan stock. The loan stock, which is redeemable from the end of July 2003, is convertible into Rank Ordinary shares at a price of 282p per £1 of loan stock held. Full conversion of the loan
stock would result in the issue of 23 million new Rank Ordinary shares.



In
addition to the acquisition of subsidiary undertakings detailed above, the Group also acquired the following interests in joint ventures and associates during 2002.



In September 2002 the Group acquired 50% of the Ordinary share capital of Atlab for a cash consideration of £4.8m. Atlab is a film
processing business in Australasia. The acquisition is accounted for as a joint venture.



In July 2002, the Group acquired a 20% interest in EFILM for a cash consideration of £3.7m. EFILMs principal activity is the digital production of film elements necessary for bulk film processing.



36



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##### Table of Contents

Geographical contributions



UK operations contributed 41% of turnover on existing operations in 2002 (2001 - 39%), and 47% of operating profit before exceptional items
(2001-45%). North America contributed 48% of turnover on existing operations before acquisitions (2001-52%) and 44% (2001-46%) of operating profit before exceptional items in 2002. The rest of the world made up the balance.



Associates and joint ventures



British Land



The British Land joint venture made a contribution after interest and before exceptional items of £1.5m in 2002 (2001-£1.6m).
The joint venture ended with the disposal of all its remaining properties in August 2002 for cash proceeds of £109m and net cash proceeds, after repayment of financing, for the Group of £16.6m. The disposal of properties on ending the
joint venture with British Land generated an exceptional net profit before interest of £6.7m and an exceptional £2.0m charge associated with the unwinding of a number of interest rate swaps.



Deluxe associates and joint ventures



These comprise the Groups interests in EFILM, Atlab, The Lab and ETS (which became a
100% subsidiary on December 31, 2002). These businesses contributed £1.8m net profit in 2002 (2001- £1.1m).



Interest expense



Interest on managed businesses was £1.7m lower in 2002, reflecting a substantial reduction in the average rate of interest to 5.5% which more than offset the impact of higher levels of debt. Interest cover,
expressed as the ratio of Group operating profit before exceptional items to managed businesses interest, was 9.7 times in 2002 (2001-8.6 times) and interest cover expressed as a ratio of Group operating profit after exceptional items to
managed businesses interest, was 9.4 times in 2002 (2001  7.1 times).



Profit before tax and exceptional Items



Profit before
tax and exceptional items was £200.3m in 2002 compared to £188.1m in 2001.



Exceptional items



The net exceptional charge of £2.3m
in 2002 comprises:



|                                                                        |  |      |  
|----------------------------------------------------------------------- |  | ---- | -
|                                                                        |  | £m   |  
|Exceptional items within operating profit                               |  |      |  
|- impairment of DVD assets within Deluxe                                |  | (6.2 | )
|Non-operating exceptional items                                         |  |      |  
|- loss on disposal of continuing operations                             |  | (0.8 | )
|- net loss on disposal of fixed assets in joint ventures  discontinued |  | (1.0 | )
|- profit on disposal of interest in joint venture                       |  | 7.7  |  
|Exceptional item within joint venture interest                          |  | (2.0 | )
|                                                                        |  |      |  
|Exceptional items after tax                                             |  | (2.3 | )
|                                                                        |  |      |  



The exceptional charge in 2002
reflects an impairment of the value of Deluxes investment in the Pioneer DVD facility which crystallized as a result of the venture with Ritek Corporation. The disposal of properties on ending the joint venture with British Land generated an
exceptional net profit before interest of £6.7m and an exceptional £2.0m charge associated with the unwinding of a number of interest rate swaps.



37



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##### Table of Contents

Exchange rates



The average exchange rates used and the net translation effect of changes in average exchange rates between 2001 and 2002 are summarized in the table below.



|                                |  |                       |  |                |  |             |   |  |                     |  
|------------------------------- |  | --------------------- |  | -------------- |  | ----------- | - |  | ------------------- | -
|                                |  | Average exchange rate |  | Impact on 2002 | 
|                                |  | 2002                  |  | 2001           |  | Turnover £m |   |  | Operating profit £m |  
|US dollar                       |  | 1.51                  |  | 1.43           |  | (31.5       | ) |  | (4.1                | )
|Canadian dollar                 |  | 2.40                  |  | 2.23           |  | (8.3        | ) |  | (1.3                | )
|Euro                            |  | 1.59                  |  | 1.61           |  | 2.0         |   |  | 0.2                 |  
|                                |  |                       |  |                |  |             |   |  |                     |  
|                                |  |                       |  |                |  | (37.8       | ) |  | (5.2                | )
|Gaming                          |  |                       |  |                |  | 0.4         |   |  | 0.1                 |  
|Hard Rock                       |  |                       |  |                |  | (9.4        | ) |  | (0.9                | )
|Deluxe                          |  |                       |  |                |  | (26.6       | ) |  | (4.0                | )
|US Holidays                     |  |                       |  |                |  | (2.2        | ) |  | (0.4                | )
|                                |  |                       |  |                |  |             |   |  |                     |  
|                                |  |                       |  |                |  | (37.8       | ) |  | (5.2                | )
|Interest                        |  |                       |  |                |  |             |   |  | 0.8                 |  
|                                |  |                       |  |                |  |             |   |  |                     |  
|Net impact on profit before tax |  |                       |  |                |  |             |   |  | (4.4                | )
|                                |  |                       |  |                |  |             |   |  |                     |  



Taxation



The Group has implemented FRS 19 Deferred Tax in the year ended December 31,
2002. This has resulted in an effective tax rate before exceptional items of 30.3% (2001 36.4%) and after exceptional items of 29.9% (2001 42.1%). The current tax rate is 15.6% (2002 17.0%).



|5B | LIQUIDITY AND CAPITAL RESOURCES
|-- | -------------------------------



Liquidity



The Groups primary sources of liquidity are cash flows from operations and borrowings under various credit facilities. The Group generated a net cash inflow of
£70.8m in 2003 (2002 net outflow of £29.0m). Cash flow from operating activities was an inflow of £291.9m in 2003 (2002 net inflow of £107.3m). Cash flows are dependent on the cash generation/consumption of the Groups
component businesses. The cash flows from component businesses are dependent on the general economic conditions prevailing in the markets in which the Group competes and a decline in the conditions in those markets, such as that experienced by Hard
Rock immediately after the events of September 11, 2001, will have a negative impact on those cash flows. See Item 3D Risk Factors for a more complete discussion of the risks and uncertainties that could lead to fluctuations in the level
of future cash flows.



At December 31, 2003, the Group had undrawn committed
facilities available amounting to £200.0m compared with £113.2m in 2002.



The debt facilities available to the Group are, in the opinion of the Rank Group, adequate to satisfy the current and expected levels of working capital required in the operating businesses. Debt levels at the Group have risen in 2003 due
to the acquisition of Blue Square in January 2003, for a total consideration of £65.0m, the redemption of the Groups £226.1m convertible preference shares in December 2003 and payments of contract advances made to major customers
in the Deluxe businesses to extend present contract agreements.



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##### Table of Contents

Borrowings



At December 31, 2003, net debt (defined as gross debt less cash and deposits) was £700.5m compared with £399.1m at December 31, 2002. The increase in net debt
was mainly due to additional borrowings attributable to the redemption of the Convertible preference shares, contract advance payments and acquisitions.



Debt levels are generally higher following payment of the interim and final dividends in May and October each year. The level of debt will also fluctuate according to the
timing of capital expenditure during the year.



Net debt as a percentage of
shareholders funds was 132.9% at December 31, 2003 compared with 53% at December 31, 2002. The Companys Articles of Association state that borrowings shall not exceed two and a half times the adjusted share capital and consolidated
reserves of the Group.



The Groups borrowings as at the year end had not
breached any covenants or other restrictions that could trigger the early repayment of the debts. The Groups committed facility of £400.0m is subject to covenants regarding the level of debt and interest in comparison to earnings before
interest, tax and depreciation, however the Group continues to operate within the ranges prescribed. The Groups ability to finance its operations through debt is not sensitive to movements in the credit ratings published by external third
parties.



The maturity profile of Groups borrowings and interest rate
structure is set out in the table below as well as discussed in Note 18 of the notes to the Consolidated Financial Statements included in Item 17 to this Annual Report.



|                                 |  |                      |  |              |  |              |  |                    |  |         
|-------------------------------- |  | -------------------- |  | ------------ |  | ------------ |  | ------------------ |  | --------
|Group debt repayment obligations |  | Less thanone year £m |  | 1-2 years £m |  | 2-5 years £m |  | After fiveyears £m |  | Total £m
|                                 |  |                      |  |              | 
|Short-term borrowings            |  | 284.3                |  |             |  |             |  |                   |  | 284.3   
|Long-term borrowings             |  | 1.6                  |  | 0.5          |  | 315.7        |  | 260.3              |  | 578.1   
|Capital lease obligations        |  | 6.2                  |  | 2.9          |  | 0.7          |  | 0.4                |  | 10.2    
|Convertible preference shares    |  |                     |  |             |  |             |  |                   |  |        
|                                 |  |                      |  |              |  |              |  |                    |  |         
|Total                            |  | 292.1                |  | 3.4          |  | 316.4        |  | 260.7              |  | 872.6   
|                                 |  |                      |  |              |  |              |  |                    |  |         



At December 31, 2003, commitments to
make payments under operating leases in the following 12 months were:



|                                        |  |                      |  |                       |  |         
|--------------------------------------- |  | -------------------- |  | --------------------- |  | --------
|Group operating lease commitments       |  | Land andbuildings £m |  | Plant andmachinery £m |  | Total £m
|                                        |  |                      | 
|Leases expiring in one year             |  | 3.3                  |  | 0.5                   |  | 3.8     
|Leases expiring in two to five years    |  | 8.2                  |  | 14.3                  |  | 22.5    
|Leases expiring in more than five years |  | 49.3                 |  |                      |  | 49.3    
|                                        |  |                      |  |                       |  |         
|Total                                   |  | 60.8                 |  | 14.8                  |  | 75.6    
|                                        |  |                      |  |                       |  |         



At December 31, 2003, the Group had
made commitments for capital expenditure of £35.6m and guarantees of £27.3m in 2003 compared with £24.1m and £38.9m respectively in 2002.



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##### Table of Contents

Treasury policy



Rank seeks to achieve certainty of value on its foreign currency purchases and sales by buying or selling forward a portion of its estimated net currency requirements up
to a year ahead, or longer where an external currency exposure exists or is forecast to exist. At December 31, 2003, at least 80% of anticipated core currency transaction exposures for the following 12 months had been hedged. Balance sheet currency
exposure in respect of investments in overseas subsidiaries is minimized by hedging the underlying asset position with currency borrowings or through the use of currency swaps.



Rank seeks to protect itself against material adverse movements in interest rates by undertaking controlled management of the interest rate
structure on Group investments and borrowings. This exposure is managed by fixing interest rates on a portion of the Groups borrowings dependent on the level of gearing.



The Directors review and agree the broad policies and guidelines for all significant areas of treasury activity, including key ratios,
funding and risk management. Implementation of these policies is carried out by the Group treasury department, under close management direction. The treasury function is not operated as a profit center.



Under UK GAAP Rank uses off-balance sheet financial instruments, including foreign exchange
forward contracts and interest rate swaps, in its management of exchange rate and interest rate exposures. Off-balance sheet financial instruments are only used to hedge underlying commercial exposures. Therefore, while these instruments are subject
to the risk of loss from changes in exchange rates and interest rates, such losses would be offset by gains in the related exposures. Rank does not speculate in derivative financial instruments. Realized and unrealized gains and losses on foreign
exchange forward contracts that hedge firm third party commitments are recognized in income in the same period as the underlying transaction. Net interest paid or received on interest rate swap contracts is included in net interest expense.



Fair values



The estimated fair values of the Groups financial assets and financial liabilities at
December 31, 2003 and 2002 are set out below. The fair value of quoted borrowings are based on year end mid-market quoted prices. The fair values of other borrowings and the derivative financial instruments are estimated by discounting the future
cash flows to net present values using appropriate market rates prevailing at the year end. The fair value of the Convertible preference shares is calculated by reference to the open market value at year end.



40



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##### Table of Contents

Primary financial instruments held or issued to finance the Groups operations:



|                                                                             |  |                    |   |  |            |   |  |                    |   |  |            |  
|---------------------------------------------------------------------------- |  | ------------------ | - |  | ---------- | - |  | ------------------ | - |  | ---------- | -
|                                                                             |  | 2003               |   |  | 2002       |  
|                                                                             |  | Net carryingamount |   |  | Fair value |   |  | Net carryingamount |   |  | Fair value |  
|                                                                             |  | £m                 |   |  | £m         |   |  | £m                 |   |  | £m         |  
|Short term financial liabilities and current portion of long term borrowings |  | (292.1             | ) |  | (301.0     | ) |  | (175.6             | ) |  | (175.6     | )
|Long term borrowings                                                         |  | (580.5             | ) |  | (577.6     | ) |  | (330.7             | ) |  | (338.1     | )
|Cash at bank and liquid investments                                          |  | 172.1              |   |  | 172.1      |   |  | 107.2              |   |  | 107.6      |  
|Other financial assets                                                       |  | 20.0               |   |  | 20.0       |   |  | 27.7               |   |  | 27.7       |  
|Convertible preference shares                                                |  |                   |   |  |           |   |  | (226.9             | ) |  | (237.7     | )
|Other financial liabilities                                                  |  | (79.6              | ) |  | (79.6      | ) |  | (73.9              | ) |  | (73.9      | )



The difference between net carrying
amount and estimated fair value reflects unrealized gains or losses inherent in the instruments based on valuations at December 31, 2003. The volatile nature of the markets means that values at any subsequent date could be significantly different
from the values reported above.



Financial derivative instruments



The estimated current value of the foreign exchange forward contracts and
interest rate swaps entered into to hedge future transaction flows and on-balance sheet exposures are set out below based on quoted market prices.



|                                        |  |            |  |               |   |  |            |  |              
|--------------------------------------- |  | ---------- |  | ------------- | - |  | ---------- |  | -------------
|                                        |  | Book value |  | Current value |   |  | Book value |  | Current value
|                                        |  | 2003       |  | 2003          |   |  | 2002       |  | 2002         
|                                        |  | £m         |  | £m            |   |  | £m         |  | £m           
|Interest rate swaps                     |  |           |  | (0.4          | ) |  |           |  | 10.5         
|Foreign exchange forward rate contracts |  |           |  | 2.3           |   |  |           |  | 4.4          
|Foreign currency swaps                  |  | 2.0        |  | 2.0           |   |  | 3.0        |  | 3.0          
|Commodity forward contracts             |  |           |  | (0.6          | ) |  |           |  |             



Shareholders equity



Shareholders equity, exclusive of minority interests, was
£527.0m at the end of 2003 compared with £748.6m at the end of 2002.



Net assets, exclusive of minority interests, per Ordinary share at December 31, 2003 were 88p, compared with 88p at the end of 2002.



If shareholders equity had been determined in accordance with US GAAP, shareholders equity attributable to the holders of Ordinary shares would have been
£897.7m at December 31, 2003, compared with £867.2m at December 31, 2002. See Note 35 of the notes to the Consolidated Financial Statements included in Item 17 to this Annual Report.



Related party transactions



For information on the Groups related party transactions see Item 7B Related
Party Transactions.



41



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##### Table of Contents

5C RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES



The Group has not undertaken any significant research and development during the past three years.



5D TREND INFORMATION



The following trends, uncertainties and events could have a material impact on the Groups net revenues, income from continuing
operations, net income, liquidity and capital resources in the current financial year.



|(i) | Changes in consumer tastes and preferences/changes in discretionary spending priorities away from the Groups products and services;
|--- | ------------------------------------------------------------------------------------------------------------------------------------



|(ii) | Increased raw material and employee costs;
|---- | ------------------------------------------



|(iii) | Future exchange rate movements, in particular the US dollar;
|----- | ------------------------------------------------------------



|(iv) | A decline in general economic conditions in the Groups principal markets of the UK and the US;
|---- | -----------------------------------------------------------------------------------------------



|(v) | Changes in government regulations and the timing of implementation thereof.
|--- | ---------------------------------------------------------------------------



5E OFF-BALANCE SHEET ARRANGEMENTS



Other than certain instruments used to manage exchange rate and interest rate exposures and to hedge underlying commercial exposures, Rank does not have any off-balance
sheet financing. While these financial instruments are subject to the risk of loss from changes in exchange rates and interest rates, such losses would be offset by gains in the related exposures. Rank does not speculate in derivative financial
instruments. Realized and unrealized gains and losses on foreign exchange forward contracts that hedge firm third party commitments are recognized in income in the same period as the underlying transaction. Net interest paid or received on interest
rate swap contracts is included in net interest rate expense. Rank has no majority-owned subsidiaries that are not included in its consolidated financial statements, nor does Rank have any interest in or relationships with any special purpose
entities that are not reflected in its consolidated financial statements.



5F TABULAR DISCLOSURES OF CONTRACTUAL OBLIGATIONS



The known
contractual obligations of the Group as at 31 December 2003 were:



|                                                                                                                       |  |                       |  |                     |  |               |  |                      
|---------------------------------------------------------------------------------------------------------------------- |  | --------------------- |  | ------------------- |  | ------------- |  | ---------------------
|                                                                                                                       |  | Payment due by Period
|Contractual Obligations                                                                                                |  | Total £m             |  | Less than1 year £m |  | 1-5 years £m |  | More than 5 years £m
|Long-Term Debt Obligations                                                                                             |  | 836.8                 |  | 260.3               |  | 316.2         |  | 260.3                
|Capital (Finance) Lease Obligations                                                                                    |  | 10.2                  |  | 6.2                 |  | 3.6           |  | 0.4                  
|Operating Lease Obligations                                                                                            |  | 75.6                  |  | 3.8                 |  | 22.5          |  | 49.3                 
|Purchase Obligations                                                                                                   |  | 15.0                  |  | 8.6                 |  | 6.4           |  |                     
|Other Long-Term Liabilities Reflected on the Companys Balance Sheet under the GAAP of the primary financial statement |  | 62.1                  |  | 15.0                |  | 46.4          |  | 0.7                  
|Total                                                                                                                  |  | 999.7                 |  | 293.9               |  | 395.1         |  | 310.7                



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##### Table of Contents

ITEM 6 DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES



6A DIRECTORS AND SENIOR MANAGEMENT



Directors



Alun Cathcart joined Rank as Chairman on May 1, 2001. Age 60. He is
Deputy Chairman of Avis Europe Plc, Deputy Chairman of Belron International Limited and a Director of TIKKUN U.K. Ltd.



Mike Smith joined Rank as Chief Executive on April 1, 1999. Age 57. He is a member of the Executive Committee. He is also a non executive Chairman of communisis plc.



Ian Dyson joined Rank as Finance Director on September 13, 1999. Age 42. He is
a member of the Executive Committee. He is also a non executive Director of Misys Plc.



Peter Jarvis joined Rank as an independent non-executive Director in 1995. Age 62.



Oliver Stocken joined Rank as an independent non-executive Director in 1998. Age 62. He is Deputy Chairman of 3i Group Plc, non-executive Chairman of Rutland Trust Plc, and a non-executive Director of GUS Plc, Novar
plc, Pilkington plc and Stanhope Plc.



John Sunderland joined Rank as an
independent non-executive Director in 1998. Age 58. He is Executive Chairman of Cadbury Schweppes Plc.



All the executive Directors are eligible for annual performance-related bonus payments under a scheme established by the Remuneration Committee of Rank.



Senior Management



David Boden was appointed Managing Director of Gaming in January 1998. Age 47.



Charles Cormick joined Rank as Company Secretary in 1995. Age 53.



Hamish Dodds was appointed Director and CEO of Hard Rock Cafe in March 2004. Age 47.



Cyril Drabinsky was appointed President, Deluxe Film Worldwide in September 2001. Age 46.



Peter Pacitti was appointed President, Deluxe Media Services Worldwide in September 2001. Age
46.



Christine Ray was appointed Group Human Resources Director in February
2001. Age 56.



There are no family relationships between the Directors and
senior management. There are no arrangements or understandings with major shareholders, customers, suppliers or others pursuant to which any person referred to above was selected as a Director or member of senior management.



43



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##### Table of Contents

6B COMPENSATION



Compensation of Directors



In 2003 the compensation paid or accrued to Directors was as follows:



|                        |  |                           |  |                 |  |                    |  |                    
|----------------------- |  | ------------------------- |  | --------------- |  | ------------------ |  | -------------------
|                        |  | Year to December 31, 2003
|                        |  | Basesalary/fees£000       |  | Annualbonus£000 |  | Other*benefits£000 |  | Totalemoluments£000
|Directors               |  |                           |  |                 |  |                    |  |                    
|Chairman:               |  |                           |  |                 |  |                    |  |                    
|Alun Cathcart           |  | 167                       |  |                |  | 10                 |  | 177                
|Executive Directors     |  |                           |  |                 |  |                    |  |                    
|Mike Smith              |  | 570                       |  | 145             |  | 288                |  | 1,003              
|Ian Dyson               |  | 320                       |  | 82              |  | 86                 |  | 488                
|Non Executive-Directors |  |                           |  |                 |  |                    |  |                    
|Peter Jarvis            |  | 40                        |  |                |  |                   |  | 40                 
|Oliver Stocken          |  | 40                        |  |                |  |                   |  | 40                 
|John Sunderland         |  | 33                        |  |                |  |                   |  | 33                 



---

|* | Other benefits include a car or cash allowance paid in lieu, life disability and health insurance and relocation expenses and in the case of Mike Smith, additional pension
contributions of £257,000 and in the case of Ian Dyson, a salary supplement of £64,000 in lieu of additional pension contributions.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Payments under the annual bonus scheme for 2003 were based on the achievement of operating profit targets and clearly defined personal objectives.



Compensation of Senior Management



The aggregate compensation received by Senior Management during 2003 was as follows:



|                 |  |                   |  |                     |  |                      
|---------------- |  | ----------------- |  | ------------------- |  | ---------------------
|Base salary £000 |  | Annual bonus £000 |  | Other benefits £000 |  | Total emoluments £000
|1,329            |  | 472               |  | 166                 |  | 1,967                



Payments under the annual bonus scheme
for 2003 were based on the achievement of operating profit targets and clearly defined personal objectives.



The total amounts set aside or accrued by the Company or its subsidiaries to provide pension, retirement or similar benefits to Directors and senior management was £520,263.



44



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##### Table of Contents

6C BOARD PRACTICES



The Companys policy is that the Chairman and executive Directors have service contracts with notice periods not exceeding one year. However, the Company recognizes
that in the case of any future appointments from outside the Company, a longer initial notice period may be necessary, reducing to one year or less after an initial period. There are no predetermined compensation provisions for early termination,
and any compensation payable will be determined on an individual basis taking into account length of service, the circumstances surrounding termination, and an individuals duty to mitigate losses.



Non-executive Directors do not have service contracts and in future will be appointed for an
initial period of three years, subject to review annually thereafter. The existing non-executive Directors do not have service contracts but serve the Company under letters of appointment. These appointments may be terminated without liability for
compensation.



The Company recognizes that its Directors may be invited to
become non-executive Directors of other companies, or become involved in charitable or public service organizations. The appointments can broaden the knowledge and experience of the Directors to the benefit of the Company. Providing there is no
conflict of interest and the commitment is not excessive, the executive Directors are permitted to accept one external appointment and to retain any fees received. During the year, Mike Smith served as non-executive Chairman of communisis plc and
retained fees of £75,000 and Ian Dyson served as non-executive Director of Misys Plc and retained fees of £7,500.



In addition, Ranks Articles of Association provide that each of the Directors is subject to re-election by shareholders at the annual general meeting at intervals
of not more than three years. If at any annual general meeting the place of a retiring Director is not filled, the retiring Director, if willing to act, is deemed to have been re-elected, unless at such meeting it is expressly resolved not to fill
the vacated office or unless a resolution for the re-appointment of that Director has been put to the meeting and failed to achieve the requisite number of votes. Members of Senior Management who are not Directors are also appointed without terms.



The following current Directors have entered into service agreements with
Rank:



|(a) | an agreement dated April 10, 2001 between Rank and Alun Cathcart pursuant to which Alun Cathcart was appointed Chairman. The agreement may be terminated by either party on one
years notice;
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(b) | an agreement dated February 25, 1999 between Rank and Mike Smith pursuant to which Mike Smith is employed as Chief Executive. The agreement may be terminated by either party on one
years notice. Termination will be automatic on Mr Smiths 62nd birthday; and
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(c) | an agreement dated August 17, 1999 between Rank and Ian Dyson pursuant to which Ian Dyson is employed as Finance Director. The agreement may be terminated by either party on one
years notice. Termination will be automatic on Mr Dysons 60th birthday.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



During 2003, no Directors service agreement provided for benefits upon termination of employment.



The Companys corporate governance rules comply with NASDAQ requirements.



The Audit Committee



The Audit Committees terms of reference are designed to enable the Committee to assist the Board in reviewing the effectiveness of internal control systems. The
Committee also reviews financial statements to be published externally before their submission to the Board to ensure they present a fair assessment of the Groups position and prospects. It also authorizes any change in accounting policies.



The complete terms of reference for the Audit Committee are as follows:



|(i) | to keep under review the effectiveness of internal control systems so as to safeguard Ranks assets and provide timely and meaningful management information. Such a review will
include:
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | consideration of the external auditors management letter and Ranks response to such letter;
| | - | ---------------------------------------------------------------------------------------------



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##### Table of Contents

| |  | consideration of the half yearly report from the internal Auditors setting out the principal findings from their work and progress in completing the Annual Audit Plan;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | review of the consistency of management information with statutory accounts and published information.
| | - | ------------------------------------------------------------------------------------------------------



|(ii) | to consider the appointment of the external Auditor and any questions of resignations or dismissal and make recommendations to the Board;
|---- | -----------------------------------------------------------------------------------------------------------------------------------------



|(iii) | to discuss with the external auditors the nature and scope of the audit. Such discussions shall be after discussions between the external Auditors and the Finance Director but
before the audit commences;
|----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(iv) | to agree on behalf of the Board the external audit fee proposals following discussions between the external Auditors and the Finance Director;
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------



|(v) | to review the half year and annual announcement of results to the Stock Exchange and the financial statements before submission to the Rank Board, with particular emphasis on:-
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | any changes in reporting requirements or accounting practices;
| | - | --------------------------------------------------------------



| |  | the applicability of accounting policies and any changes from those adopted in previous periods;
| | - | ------------------------------------------------------------------------------------------------



| |  | major judgmental areas;
| | - | -----------------------



| |  | significant adjustments resulting from the audit;
| | - | -------------------------------------------------



| |  | the going concern assumption;
| | - | -----------------------------



| |  | compliance with accounting and reporting requirements; and
| | - | ----------------------------------------------------------



| |  | any other issue considered significant by either the Finance Director of Rank or the external Auditors.
| | - | -------------------------------------------------------------------------------------------------------



|(vi) | to review the scope of the internal audit;
|---- | ------------------------------------------



|(vii) | to ensure there is proper co-ordination between internal and external Auditors;
|----- | -------------------------------------------------------------------------------



|(viii) | to review any shareholders circulars and Listing Particulars or similar public offering documents particularly with regard to any statements regarding profit forecasts or
working capital requirements;
|------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(ix) | to review the adequacy of the corporate governance aspects of Ranks pension schemes; and
|---- | -----------------------------------------------------------------------------------------



|(x) | to consider such other topics as may be specified by the Board.
|--- | ---------------------------------------------------------------



In December 2003 the Audit Committee adopted a new policy regarding auditor independence and the provision of non-audit services by the external Auditors. All non-audit
services above £50,000 to be performed by the external auditors are required to be approved by the Audit Committee and the Groups policy remains that, where appropriate, non-audit work is put out to competitive tender.



The Audit Committee meets not less than twice a year. Normally, the Chief Executive, Finance
Director and Director of Risk Management attend. It also meets at least annually with the Auditors without executive management being present.



46



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##### Table of Contents

The members of the Audit Committee in 2003 were Oliver Stocken (Chairman), Peter Jarvis and John Sunderland. The Board is
satisfied that all members of the Committee have recent and relevant financial experience. Alun Cathcart was also a member of the Committee until December 2003 when he resigned from the Committee and in future the Committee will be comprised solely
of independent non-executive directors.



The Remuneration Committee



The Remuneration Committee is responsible for determining the
remuneration packages of the Chairman, the executive Directors and other members of the Executive Committee. The Committee meets not less than twice a year.



The complete terms of reference for the Remuneration Committee are as follows:



|(i) | to consider and approve the terms of service and rewards, including bonus awards, profit sharing and other benefits, whether in cash or in kind, and pension and termination
arrangements for all Directors of the Company and also for such other senior executives as may be referred to the Committee by the Chairman of the Company;
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(ii) | to authorize the grant of share options to executive Directors and other senior executives under the Companys executive share option schemes in accordance with the rules of
the schemes and agreed guidelines; and
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(iii) | to regularly review the Companys remuneration policies and practices to facilitate the employment and motivation of personnel, with a view to providing the packages needed to
attract, retain and motivate Directors of the quality required but avoiding paying more than is necessary for this purpose.
|----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The members of the Remuneration Committee throughout 2003, and who remain current members, were Oliver Stocken and John Sunderland. The Chairman of the Committee was
Peter Jarvis until 27 April 2004, and John Sunderland from 28 April 2004.



6D EMPLOYEES



The following tables disclose the average number
of employees:



|                            |  |        |  |        |  |       
|--------------------------- |  | ------ |  | ------ |  | ------
|By Business Segment         |  | 2003   |  | 2002   |  | 2001  
|Gaming                      |  | 10,241 |  | 10,250 |  | 10,115
|Hard Rock                   |  | 6,544  |  | 5,862  |  | 5,206 
|Deluxe                      |  | 6,307  |  | 4,770  |  | 4,604 
|US Holidays                 |  | 865    |  | 933    |  | 984   
|                            |  |        | 
|Corporate                   |  | 46     |  | 47     |  | 46    
|                            |  |        |  |        |  |       
|Average number of employees |  | 24,003 |  | 21,862 |  | 20,955
|                            |  |        |  |        |  |       
|By Geographical Region      |  |        |  |        |  |       
|UK                          |  | 11,453 |  | 10,628 |  | 10,560
|North America               |  | 8,971  |  | 8,772  |  | 8,190 
|Rest of World               |  | 3,579  |  | 2,462  |  | 2,205 
|                            |  |        |  |        |  |       
|Average number of employees |  | 24,003 |  | 21,862 |  | 20,955
|                            |  |        |  |        |  |       



Labor relations throughout the Group
have generally been good during 2003. Currently, there are no union issues at any represented location which will threaten continuing relationships for the foreseeable future.



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##### Table of Contents

6E SHARE OWNERSHIP



The Directors interests in the securities of Rank, including options to purchase Ordinary shares under the terms of Ranks Executive Share Option Schemes
(ESOS), Long Term Incentive Plan and Share Savings Schemes (SAYE) were, as of May 31, 2004 as follows:



|                |  |                |  |                              |  |      |  |                          |  |                                         
|--------------- |  | -------------- |  | ---------------------------- |  | ---- |  | ------------------------ |  | ----------------------------------------
|                |  |                |  | Share Options               
|                |  | Ordinaryshares |  | ESOS                         |  | SAYE |  | ExercisePrice (p)        |  | Expiry Date                             
|Alun Cathcart   |  | 100,000        |  |                             |  |     |  |                         |  |                                        
|Ian Dyson       |  | 119,675        |  | 278,225138,376100,03363,684  |  |   |  | 248.00271.00239.92320.33 |  | 09.12.200905.23.201203.26.201303.10.2014
|Mike Smith      |  | 400,000        |  | 600,000244,464178,184112,383 |  |  |  | 226.25271.00239.92320.33 |  | 03.31.200905.23.201203.26.201303.10.2014
|Peter Jarvis    |  | 26,093         |  |                             |  |     |  |                         |  |                                        
|Oliver Stocken  |  | 41,835         |  |                             |  |     |  |                         |  |                                        
|John Sunderland |  | 1,625          |  |                             |  |     |  |                         |  |                                        



None of the Directors beneficially own
more than 0.04% of a relevant class of share.



Ian Dyson and Mike Smith have
been granted the following conditional awards of Ordinary shares pursuant to the Companys 2000 Long Term Incentive Plan approved by shareholders at the annual general meeting in April 2000.



|           |  |                          |  |                           |  |             
|---------- |  | ------------------------ |  | ------------------------- |  | ------------
|Director   |  | Award of Ordinary shares |  | Year of Conditional Award |  | Release Year
|Ian Dyson  |  | 54,545100,62863,060      |  | 200220032004              |  | 200520062007
|Mike Smith |  | 96,363179,245111,282     |  | 200220032004              |  | 200520062007



Under the 2000 Long Term Incentive
Plan, the release of awards is dependent upon the achievement of total shareholder return and earnings per share targets over three consecutive years; the total shareholder return performance is measured against a comparative group of companies. The
maximum number of shares will only be released if the Company exceeds the total shareholder return of at least 75 per cent of the comparator group and produces real average annual growth of two per cent in earnings per share over the performance
period.



In addition to the above interests, pursuant to the provisions of the
Companies Act 1985, each executive Director is deemed to be interested in the Ordinary shares held by The Rank Group Plc Employee Benefit Trust. As at May 31 , 2004, such interest totaled 824,895 Ordinary shares.



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##### Table of Contents

None of the members of Senior Management beneficially own more than 0.19 per cent of a relevant class of shares. Their
aggregate shareholding as at May 31, 2004 totaled 1,153,635 Ordinary shares. The aggregate number of shares over which Senior Management hold options are as follows:



|          |  |       
|--------- |  | ------
|ESOS      |  | SAYE  
|3,524,770 |  | 18,093



The exercise prices attaching to ESOS
options range from 170.00p to 475.76p per Ordinary share and the expiry dates of such options range from August 14, 2004 to March 10, 2014. The exercise prices attaching to SAYE options range from 141p to 268p per Ordinary share and the expiry dates
of such options range from October 31, 2004 to November 30, 2009.



The total
number of Ordinary shares in respect of which members of Senior Management have been granted conditional awards under the terms of the Rank Group 2000 Long Term Incentive Plan is 1,915,337.



Rank has three principal arrangements for involving employees in the capital of the Company.
First, it operates a long term incentive plan for selected members of top management pursuant to which conditional awards of Ordinary shares are granted, the vesting of which is dependant upon the achievement of two performance criteria, as detailed
above.



Secondly, it operates an executive share option plan for employees of
senior executive grade and above under which options over Ordinary shares become exercisable, subject to the achievement of performance criteria. The current criteria is that there must be real annualized growth of at least 3% in normalized earnings
per share over a three year period.



Thirdly, the Company operates a Share
Savings Scheme under which participants agree to save a fixed monthly amount of up to £250 for three or five years, and then may use these savings together with any interest or bonus to acquire Ordinary shares by exercising the option granted
to them under the scheme. The price at which the Ordinary shares may be acquired is set when the option is granted, usually at a discount of not more than 20% to the then prevailing market price. Although in the past, participation in share saving
schemes has been extended to both UK and overseas employees, the schemes launched in 2001, 2002 and 2003 were limited to UK employees only.



ITEM 7 MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS



7A MAJOR SHAREHOLDERS



As far as the Company is aware, no
person is the beneficial owner of more than 5% of Ranks Ordinary share capital. As at May 31, 2004 the only beneficial owners of more than 5% of Ranks Ordinary share capital were Fidelity which owned 54,775,878 Ordinary shares
representing 9.15% of Ranks Ordinary share capital and Schroder IM which owned 32,928,637 Ordinary shares representing 5.51% of Ranks Ordinary share capital.



As far as the Company is aware, Rank is not directly or indirectly owned or controlled by another corporation, by any government or by any
other natural or legal person.



As of May 31, 2004, 4,645,325 Ordinary shares
(including 4,108,130 Ordinary shares represented by 2,054,065 ADSs) were held by approximately 2,552 registered holders (including nominees) in the US. At such date their holdings represented 0.77% of the total number of Ordinary shares outstanding.



49



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##### Table of Contents

7B RELATED PARTY TRANSACTIONS



During the year the Group traded with its associate undertakings, The Lab and EFILM. Group sales to these associated undertakings totaled
£1.0m, purchases totaled £0.3m, marketing fees totaled £0.3m and as at December 31, 2003 EFILM owed the Group £0.7m. On July 1, 2003 the Group purchased the remaining 672/3% of the common stock of the Lab. During the year the Group forgave EFILM trade debt of £0.7m. In the period to May 29, 2004 EFILM has made purchases
from the group of £0.5m, marketing fees totaled £0.1m and as at May 29, 2004 EFILM owed the group £1.0m.



During the year the Group traded with its joint venture Atlab. Group sales to Atlab totaled £2.4m, purchases totaled £10.6m, marketing fees totaled
£0.2m and at December 31, 2003 Atlab owed the Group £0.3m. The Group also provides Atlab with a bank guarantee for £3.2m. In the period to May 29, 2004, Group sales to Atlab were £0.2m and purchases from Atlab were
£1.6m, marketing fees totaled £0.1m and as at May 29, 2004 EFILM owed the group £0.4m. The Group continues to provide a £3.2m bank guarantee.



The Group recharges the Rank Group UK Pension schemes with the costs of administration and independent pension advisers borne by the Group.
The total amount recharged in the year ended December 31, 2003 was £1.9m, compared with £1.6m in 2002. In the period to May 29, 2004 the administrative expenses recharged were £0.7m.



7C INTERESTS OF EXPERTS AND COUNSEL



NOT APPLICABLE



ITEM 8 FINANCIAL INFORMATION



8A CONSOLIDATED
STATEMENTS AND OTHER FINANCIAL INFORMATION



See Item 17 for a list of
financial statements and schedules filed as part of this Annual Report.



Legal proceedings



Rank is involved in a dispute with
Serena Holdings Limited over the purchase consideration for an acquisition in 1990 which has been referred to an expert for determination. The determination process provided for each party to present four written submissions; the fourth submissions
were presented on March 31, 2003. The dispute concerns the accounts and the profits of the businesses upon which an additional purchase consideration may be payable. In its fourth submission, Serena Holdings Limited claimed that additional
consideration of £35.9m is payable with interest due thereon. The Board of Directors are strongly resisting the payment of any further sum. At the present time, the outcome cannot be determined and the potential liability to the Group cannot
be quantified. However, it is the opinion of the Board of Directors that it is unlikely that the outcome of this dispute will have a material effect on the Groups financial position.



Subsidiary undertakings are involved in actions, including one class action suit, in the US.
The actions are being vigorously contested. At this time it cannot be determined that the likelihood of outcomes unfavorable to the Rank defendants are probable. The Board of Directors believe that none of these actions will result in a material
adverse effect on the financial condition of the Group.



Dividend
distributions



The total dividend on Ordinary shares was 13.9p in
2003, 13.2p in 2002 and 12.6p in 2001.



Any determination to pay dividends in
the future will be at the discretion of the Board of Directors and will be dependent upon the Groups results of operations, financial condition, capital expenditures, working capital requirements and other factors deemed relevant by the Board
of Directors.



50



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##### Table of Contents

8B SIGNIFICANT CHANGES



In December 2003, the Group redeemed the remaining 226,086,041 Convertible preference shares at 100p per share.



ITEM 9 THE OFFER AND LISTING



9A OFFER AND
LISTING DETAILS



The following table shows the annual high and low market
prices for both the ADS traded in the US and Ranks Ordinary shares traded in the UK.



|     |  |                      |  |        |  |       |  |     
|---- |  | -------------------- |  | ------ |  | ----- |  | ----
|     |  | Rank Ordinary shares |  | ADS   
|     |  | High                 |  | Low    |  | High  |  | Low 
|     |  | (pence)              |  | (US $)
|1999 |  | 303.00               |  | 182.00 |  | 9.63  |  | 5.50
|2000 |  | 207.00               |  | 133.00 |  | 6.88  |  | 4.00
|2001 |  | 248.00               |  | 163.00 |  | 7.50  |  | 4.55
|2002 |  | 309.00               |  | 218.25 |  | 9.48  |  | 6.65
|2003 |  | 307.00               |  | 212.50 |  | 10.35 |  | 6.70



For the last two years the high and
low market prices are given for each quarter.



|               |  |                      |  |        |  |      |  |       |  |     
|-------------- |  | -------------------- |  | ------ |  | ---- |  | ----- |  | ----
|               |  | Rank Ordinary shares |  | ADS   
|               |  | High                 |  | Low    |  | High |  | Low  
|               |  | (pence)              |  | (US $)
|2002           |  |                      |  |        |  |      |  |      
|First quarter  |  | 308.75               |  | 218.25 |  | 8.50 |  | 6.65 
|Second quarter |  | 309.00               |  | 246.83 |  | 8.80 |  | 7.55 
|Third quarter  |  | 293.00               |  | 218.40 |  | 8.68 |  | 6.70 
|Fourth quarter |  | 299.55               |  | 231.50 |  | 9.48 |  | 7.50 
|               |  |                      |  |       
|2003           |  |                      |  |        |  |      |  |      
|First quarter  |  | 266.50               |  | 212.50 |  | 8.40 |  | 6.70 
|Second quarter |  | 265.00               |  | 235.50 |  | 8.97 |  | 7.30 
|Third quarter  |  | 295.00               |  | 250.50 |  | 9.47 |  | 8.29 
|Fourth quarter |  | 307.00               |  | 264.25 |  |      |  | 10.35 |  | 8.83



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##### Table of Contents

Share price information for the most recent eight months is as follows:



|              |  |                      |  |        |  |       |  |      
|------------- |  | -------------------- |  | ------ |  | ----- |  | -----
|              |  | Rank Ordinary shares |  | ADS   
|              |  | High                 |  | Low    |  | High  |  | Low  
|              |  | (pence)              |  | (US $)
|October 2003  |  | 291.75               |  | 264.25 |  | 9.75  |  | 8.83 
|November 2003 |  | 307.00               |  | 282.00 |  | 10.35 |  | 9.42 
|December 2003 |  | 292.75               |  | 276.25 |  | 10.23 |  | 9.61 
|January 2004  |  | 315.00               |  | 279.25 |  | 11.52 |  | 10.00
|February 2004 |  | 333.00               |  | 306.00 |  | 12.72 |  | 11.14
|March 2004    |  | 335.00               |  | 310.00 |  | 12.31 |  | 11.15
|April 2004    |  | 339.00               |  | 317.50 |  | 12.75 |  | 11.75
|May 2004      |  | 319.50               |  | 293.00 |  | 12.04 |  | 10.67



9B PLAN OF DISTRIBUTION



NOT APPLICABLE



9C MARKETS



The principal trading market for the Ordinary shares is the London Stock Exchange. American Depository Shares representing Ordinary shares,
for which JP Morgan Chase Bank is the Depositary, are quoted on the NASDAQ SmallCap Market. Each ADS represents two Ordinary shares.



9D SELLING SHAREHOLDERS



NOT APPLICABLE



9E DILUTION



NOT APPLICABLE



ITEM 10 ADDITIONAL INFORMATION



10A SHARE
CAPITAL



NOT APPLICABLE



10B MEMORANDUM AND ARTICLES OF ASSOCIATION



Rank was incorporated on December 22, 1995 under the Companies Act of England and Wales 1985
as a public company limited by shares, and registered under company number 3140769. The objects for which Rank were established can be found in Section 4 of the Memorandum of Association, and include, among other things, the carrying on of business
as a holding company, and the carrying on, directly or indirectly, of any business of providing leisure or entertainment activity, and the production of any and all kinds of production, performance or entertainment.



Directors



Directors interests



A Director may vote in respect of certain proposed contracts, arrangements or transactions in which he is interested and be counted in the quorum for such meeting,
provided that such Director declares the nature of his interest to the Directors.



52



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##### Table of Contents

Directors remuneration



The aggregate of all fees payable to Directors (excluding amounts payable to any Director by reason of his holding a salaried employment in
the Company) is £200,000 per annum, or such amount as determined by an Ordinary resolution of the Company. Any Director may be paid additional remuneration for his services, such remuneration to be determined by the Directors. The Directors
may pay, or agree to pay, gratuities, pensions or other retirement, superannuation, insurance, death or disability benefits to any past or present Director.



Directors powers



The Directors may exercise all their powers to raise or borrow money in such manner as they may think fit, and may receive deposits, enter into guarantees and indemnities and mortgage or charge Ranks
undertakings, property, assets (present and future) and uncalled capital, and issue debentures or other securities outright or as security for any of the Companys debts, liabilities or obligations, or those of any third party. The Directors
shall, however, restrict the Companys borrowings (and those of its subsidiaries, through voting or other powers of control) to ensure that the aggregate principal amount of all borrowed moneys outstanding by the Company and its subsidiaries
(the Group) shall not, without the sanction of an Ordinary resolution, exceed two and a half times the aggregate from time to time of:



| | (1) | the amount paid up or credited as paid up on the Companys issued share capital; and
| | --- | ------------------------------------------------------------------------------------



| | (2) | the amount standing to the credit of the consolidated reserves of the Group, and the Groups interest in the reserves of associated or related companies,
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------



calculated and adjusted as set out in Article 102(A) of the
Companys Articles of Association.



Directors term of office and
shareholding requirements



There are no shareholding requirements for a
Director to qualify for office. At every annual general meeting, one-third of the Directors who are subject to retirement by rotation are retired from office (or if their number is not three or a multiple of three, the nearest to one-third thereof),
provided that if any Director has at the start of the annual general meeting been in office for more than three years since his last appointment or re-appointment, he shall retire. A retiring Director is eligible for re-appointment. However, no
person may be appointed as a Director if at the time of his appointment he has attained the age of 70. A Director must retire at the next annual general meeting held after he turns 70.



Share rights



Rank may issue sterling denominated Ordinary shares (the Ordinary shares), and US dollar denominated preference shares (the dollar preference
shares and, together with the Convertible preference shares, the preference shares). The Ordinary shares have a nominal value of 10p each, and the dollar preference shares have a nominal value of US$1,000 each.



The Ordinary shares rank pari passu among themselves, while the preference
shareholders have certain income, capital and redemption rights in priority to the holders of Ordinary shares, as set out below.



Dividends



The dollar preference shareholders have the right to a cumulative preferential dividend payable in US dollars in priority to any dividend payable to the Ordinary shareholders and the convertible preference
shareholders, on such date and on such terms as determined by the Directors. While any arrears of dividends payable on the dollar preference shares are outstanding, no dividends or other distributions may be declared, made or paid. The dollar
preference shareholders have no further rights to participate in profits or assets.



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The Ordinary shareholders are entitled to dividends only as and when declared by the Company, but the Directors have the
right to offer Ordinary shareholders the right to elect to receive new Ordinary shares, credited as fully paid, in whole or in part, in lieu of any dividend paid or declared by the Company.



The Directors may deduct from any dividend or other moneys payable in respect of any shares
any sums of money presently payable by the shareholder on account of calls or otherwise in relation to the shares. Any dividend unclaimed for a period of twelve years from the date on which it first became payable shall be forfeited and reverts to
the Company.



Capital



The dollar preference shareholders have the right on winding up or on any other return of
capital (other than the purchase of shares by Rank) to receive in priority to the Ordinary shareholders and the convertible preference shareholders, payment (in US dollars) of any arrears and accruals of dividends due in respect of them and the paid
up or credited value of such shares, together with any premium paid on their issue.



Redemption



In December 2003, the Company redeemed all
226,086,041 remaining Convertible preference shares.



The dollar preference
shares are redeemable at the Companys option on any date to be determined by the Directors for the payment of dividends, at par together with any premium paid on their issue and any arrears or accruals of dividends thereon.



Reserves and calls on capital



The Directors may carry to reserves out of the Groups profits such sums as they think
proper which, at their discretion, shall be applicable for any purpose to which Ranks profits may be properly applied. Pending such use, these sums may either be employed in Group businesses or invested. The Directors may also, without placing
the same to reserve, carry forward any of Ranks profits.



The
Directors may from time to time make calls upon the shareholders in respect of any moneys unpaid on their shares, whether in respect of the nominal amount or on account of premiums thereon.



Variation of rights



The rights attached to each class of shares may only be varied if the holders of three-quarters of the issued shares of that class consent
in writing to such variation, or with the sanction of an extraordinary resolution passed at a separate meeting of the holders of that class.



Voting



Subject to the restrictions below, every holder of shares who is present in person at any general meeting shall have one vote, and on a poll every holder who is present in person or by proxy shall have one vote for
each share which they hold or represent.



The Convertible preference shares do
not carry any rights to attend and vote at general meetings, unless at the date of the notice convening such meeting, any dividends payable in respect of such shares have been in arrears for more than six months. In addition, the Convertible
preference shareholders are entitled to receive notice of, and vote at, a general meeting where a resolution is proposed varying or abrogating any of the rights attached to the Convertible preference shares and/or a resolution is proposed for the
winding up of the Company.



Annual and Extraordinary General Meetings



An annual general meeting and an extraordinary general meeting for
the passing of a special resolution may be called by at least twenty-one clear days notice. All other extraordinary general meetings may be convened by fourteen days clear notice. All notices given must specify the place, day and time of
the



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meeting and, in the case of special business, the general nature of the business to be transacted. The notice of such
general meeting should also specify a time, which is not more than 48 hours prior to the meeting, by which a person must be entered on the register of members in order to have the right to attend or vote at the meeting.



Three members present by person or by proxy and entitled to vote at the meeting shall be a
quorum. However, for a meeting at which the rights of any class of shareholders may be varied or abrogated, the quorum shall be two persons holding or representing by proxy at least one-third in nominal value of the issued shares of that class.



Ownership Rights



There are no restrictions on ownership of Ranks shares, but the Directors may refuse
to register a transfer of shares to an entity which is not a natural or legal person, a minor or if the shares are to be held jointly by more than four persons.



Disclosure Requirements



The Companies Act 1985 applies in relation to the disclosure of share ownership in Rank. A person with a material interest of 3% or more in aggregate of Ranks
shares is required to notify the Company of his shareholding. After the 3% threshold is exceeded, Rank must be notified of increases or decreases of 1% or more. A person holding an interest, whether material or otherwise, in 10% or more of
Ranks shares is also required to notify us of such holding. The requirements of the City Code of Takeovers and Mergers will apply to any shareholder seeking to increase his shareholding in Rank.



In addition, Rank may, by notice in writing, require a person whom Rank knows or has
reasonable cause to believe to be, or at any time during the three years immediately preceding the date on which the notice is issued, interested in shares comprised in Ranks relevant share capital to confirm that fact or to indicate whether
or not that is the case, and to give such further information as may be required relating to his interest in shares consisting of the Companys relevant share capital.



A person failing to fulfil the obligations imposed by the Companies Act 1985 in relation to disclosure requirements may be subject to
criminal penalties.



10C MATERIAL CONTRACTS



No contracts (other than contracts entered into in the ordinary course of business) have
been entered into by members of the Rank Group during the last two years, other than as disclosed below:



|(a) | an agreement dated May 8, 2003, whereby Rank Group Finance Plc entered into a Note and Guarantee Agreement guaranteed by The Rank Group Plc to raise £336 million through a
private placement of senior notes to a number of large US and UK investors, predominately comprised of insurance companies. The Company used the proceeds from the placement to refinance existing obligations of the Group. The Note and Guarantee
Agreement, among other things, places certain limitations on the Groups ability and the ability of certain of the Groups subsidiaries to borrow money, create liens on assets to secure debt, substantially change the general nature of the
Groups business, sell certain assets, merge with or into other companies, or enter into transactions with affiliates. The senior notes have maturities ranging from 2007 to 2018, with an average coupon of 5.5%.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



10D EXCHANGE CONTROLS



There are currently no UK foreign exchange control restrictions on the payment of dividends
on Ordinary shares or on Convertible preference shares or on the conduct of the Groups operations.



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There are currently no limitations on grounds of nationality imposed by English law or by Ranks Memorandum and
Articles of Association on the rights of non-UK holders of Ordinary sharers to hold, own or vote such securities.



10E TAXATION



The following discussion summarizes certain US federal income tax consequences and certain UK tax consequences of the ownership and disposition of Ordinary shares and Ordinary shares represented by ADSs evidenced by
ADRs by US Holders. A US Holder is a beneficial owner of Ordinary shares or ADSs that is (i) a citizen or individual resident of the US for US federal income tax purposes, (ii) a corporation (or other entity taxable as a corporation for
US federal income tax purposes) created or organized in or under the laws of the US or any state thereof (including the District of Columbia), (iii) an estate the income of which is subject to US federal income taxation regardless of its source, or
(iv) a trust if a court within the US is able to exercise primary supervision over its administration and one or more US persons have the authority to control all of the substantial decisions of the trust. If a partnership holds Ordinary shares or
ADSs, the tax treatment of a partner generally will depend upon the status of the partner and the activities of the partnership. If a US Holder is a partner in a partnership that holds Ordinary shares or ADSs, such Holder is urged to consult its own
tax advisor regarding the specific tax consequences of owning and disposing of the Ordinary shares or ADSs. This summary applies only to US Holders who hold Ordinary shares or ADSs as capital assets. This summary is based (i) upon current UK tax law
and UK Inland Revenue practice and US law and US Internal Revenue practice, including the Internal Revenue Code of 1986, as amended (the Code), Treasury regulations, rulings, judicial decisions and administrative practice, all as
currently in effect, and all of which are subject to change or changes in interpretation, possibly with retroactive effect, (ii) upon the United Kingdom - United States Income Tax Convention that entered into force on April 25, 1980 as in effect on
January 1, 2003 (the 1980 Convention), and the United KingdomUnited States Convention relating to estate and gift taxes as in effect on the date of this Annual Report (the Estate Tax Convention), and (iii) in part upon
representations of the Depositary and assumes that each obligation provided for in or otherwise contemplated by the Deposit Agreement and any related agreement will be performed in accordance with their respective terms.



US Holders should be aware that a new United Kingdom - United States Income Tax Convention
entered into force on March 31, 2003 (the New Convention) and generally will have effect in respect of dividends paid on or after May 1, 2003. However, a US Holder entitled to benefits under the 1980 Convention may elect to have the
provisions of the 1980 Convention continue for an additional twelve months if the election to apply the 1980 Convention would result in greater benefits to the Holder. If a US Holder were to make an effective election, the discussion below with
respect to dividend payments made pursuant to the 1980 Convention would continue to apply to dividends paid by Rank prior to May 1, 2004. The discussion below notes instances where the relevant provisions of the New Convention will produce a
materially different result for a US Holder. US Holders should note that certain articles in the New Convention limit or restrict the ability of a US Holder to claim benefits under the New Convention and that similar provisions were not contained in
the 1980 Convention. US Holders should consult their own tax advisors concerning the applicability of both Conventions.



The following summary of certain US federal income tax considerations does not address all of the tax consequences to certain categories of US Holders who may be subject
to special rules (such as US expatriates, insurance companies, regulated investment companies, tax-exempt organizations, financial institutions, persons subject to the alternative minimum tax, securities brokers-dealers, traders who elect to apply a
mark-to-market method of accounting, persons who own, directly, indirectly or by attribution 10% or more of the share capital or voting stock of Rank, persons who acquired the Ordinary shares of ADSs pursuant to the exercise of employee stock option
or otherwise as compensation, persons who hold Ordinary shares or ADSs as part of a straddle, hedging or conversion transaction) and persons whose functional currency is not the US dollar, and the following summary of certain UK tax considerations
does not address the tax consequences to a US Holder (i) that is resident (or, in the case of an individual, ordinarily resident) in the United Kingdom for UK tax purposes, (ii) whose holding of Ordinary shares or ADSs is effectively connected with
a permanent establishment in the United Kingdom through which such US Holder carries on business activities or, in the case of an individual who performs independent personal services, with a fixed base situated therein, or (iii) that is a
corporation which alone or together with one or more associated corporations, controls directly or indirectly, 10% or more of the voting stock of Rank.



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Holders should consult their own tax advisors as to the consequences under UK, US federal, state and local, and other
laws, of the ownership and disposition of Ordinary shares or ADSs.



For US
federal income tax purposes and for purposes of both Conventions, beneficial owners of ADSs will be treated as the owners of the underlying Ordinary shares attributable thereto. Accordingly, the discussion of US federal income tax consequences to
Holders of ADSs (except where otherwise expressly noted) applies equally to Holders of Ordinary shares, and the discussion applicable to Ordinary shares.



Taxation of dividends



There is currently no withholding tax on dividends under UK tax legislation.



To the extent paid out of current or accumulated earnings and profits of the Company as determined under US federal income tax principles, a distribution made with respect to Ordinary shares or ADSs (including any
additional dividend income arising from a foreign tax credit claim as described below) will be includable for US federal income tax purposes in the income of a US Holder as ordinary dividend income on the date received by the US Holder, in the case
of Ordinary shares, or on the date received by the Depositary, in the case of ADSs. To the extent that such distribution exceeds the current and accumulated earnings of the Company, it will be treated first as a non-taxable return of capital to the
extent of the US Holders adjusted tax basis in the Ordinary shares or ADSs and thereafter taxable as capital gain. Corporate US Holders will not be eligible for the dividends received deduction generally allowed to US corporations under
Section 243 of the Code in respect of dividends received from other US corporations. The amount of any dividend paid in pounds sterling will equal the US dollar value of the pounds sterling received calculated by reference to the exchange rate in
effect on the date the dividend is received by the US Holder, in the case of Ordinary shares, or by the Depositary, in the case of ADSs, regardless of whether the pounds sterling are actually converted into US dollars. If the pounds sterling
received are not converted into US dollars on the date of receipt, a US Holder generally will have a basis in the pounds sterling equal to their US dollar value on the date of receipt. Any gain or loss realized on a subsequent conversion or other
disposition of the pounds sterling generally will be treated as US source ordinary income or loss.



Under the 1980 Convention, US resident individuals who are the beneficial owners of dividends on Ordinary shares are, with the exceptions mentioned below, entitled in theory to a payment from the UK tax authorities of
the amount of the tax credit to which an individual resident of the UK would be entitled. The UK tax credit is currently equal to one-ninth of the amount of the net cash dividend paid. However, the 1980 Convention permits the UK tax authorities to
withhold tax (at a rate of 15%) from the sum of the amount of the dividend and the amount of such associated tax credit in calculating the amount of the payment to which the US resident individual is entitled (however such withholding tax cannot
exceed the amount of the hypothetical payment made under the 1980 Convention). Thus the UK withholding tax is currently considered equal to the UK tax credit and consequently US Holders will not be entitled to receive any net payment under the 1980
Convention after application of the UK withholding tax and will receive only the cash dividend. As an example, for illustration purposes only, a US Holder who is entitled to a cash dividend of £80 would also be entitled to a hypothetical
Convention payment of £8.89 (one ninth of £80). However, since the UK withholding tax (15% of £88.89), would exceed the amount of the hypothetical Convention payment, no Convention payment will be made and the US Holder will
receive only the cash dividend (here, £80). A US Holder will be taxable in the US on the full dividend and full hypothetical Convention payment (here £88.89), and will be treated as having paid a foreign tax equal to the hypothetical
Convention payment (here, £8.89). The effect on each US Holder, however, will depend on circumstances that are particular to such Holder, and US Holders are advised to consult their own tax advisors in this regard. Under the 1980 Convention,
the foreign tax deemed paid generally will be available as a US credit or deduction. A US Holder electing to claim a foreign tax credit or deduction with respect to any UK withholding tax must file IRS Form 8833 (Treaty-Based Return Position
Disclosure Under Section 6114 or 7701 (b)) with their income tax return for the year in which the foreign tax credit is claimed. For purposes of calculating the foreign tax credit, dividends paid on the Ordinary shares will be treated as income from
sources outside the US and generally will constitute passive income or, for



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certain holders, financial services income. The rules relating to the determination of the foreign tax credit
are very complex. US Holders that do not elect to claim a credit with respect to any foreign taxes paid in a given taxable year may instead claim a deduction for foreign taxes paid. A deduction does not reduce US federal income tax on a dollar for
dollar basis like a tax credit. The deduction, however, is not subject to the limitations described above.



There will be no hypothetical Convention payment and no notional UK withholding tax applied to a dividend payment made under the New Convention. Therefore it will not be possible for US Holders to claim a foreign tax
credit in respect of any dividend payment made by Rank on or after May 1, 2003 (or May 1, 2004 in the case of a Holder who effectively elects to extend the applicability of the 1980 Convention as described above). US Holders should consult their own
tax advisors to determine whether the US Holder is eligible for benefits under the 1980 Convention and the New Convention, whether, and to what extent, a foreign tax credit will be available with respect to dividends received from Rank, and whether
it may be advisable in light of the Holders particular circumstances to elect to have the provisions of the 1980 Convention continue in force until May 1, 2004.



Recent US tax law changes applicable to individuals



Under 2003 US tax legislation, certain US Holders (including individuals) are eligible for reduced rates of US federal income tax (currently
a maximum of 15%) in respect of qualified dividend income received in taxable years beginning after December 31, 2002 and beginning before January 1, 2009. For this purpose, qualified dividend income generally includes dividends paid by
non-US corporations if, among other things, certain minimum holding periods are met and either (i) the ordinary shares (or ADSs) with respect to which the dividend has been paid are readily tradable on an established securities markets in the United
States, or (ii) the non-US corporation is eligible for the benefits of a comprehensive US income tax treaty (such as both Conventions) which provides for the exchange of information. Rank currently believes that dividends paid with respect to its
Ordinary shares and ADSs will constitute qualified dividend income for US federal income tax purposes, provided the individual US Holders of its Ordinary shares and ADSs meet certain requirements. Some of the eligibility requirements for non-US
corporations are not entirely certain, however, and further guidance from the US Internal Revenue Service is anticipated. In addition, the US Internal Revenue Service is expected to issue certification procedures in 2004 whereby a non-US corporation
will be required to certify as to the eligibility of its dividends for the reduced US federal income tax rates.



Taxation of capital gains



Under present UK law, individuals who are neither resident nor ordinarily resident in the United Kingdom and companies which are not resident in the United Kingdom
generally will not be liable to UK tax on capital gains recognized on the sale or other disposition of their Ordinary shares or ADSs unless, broadly, they are held in connection with a trade, profession or vocation conducted in the United Kingdom
through a branch or agency.



For US federal income tax purposes, upon the sale
or other disposition of Ordinary shares or ADSs, a US Holder will recognize capital gain or loss in an amount equal to the difference between the US dollar value of the amount realized in consideration for the disposition of the Ordinary shares or
ADSs and the US Holders adjusted tax basis (determined in US dollars) in the Ordinary shares or ADSs. Such gain or loss generally will be US source gain or loss and will be treated as long-term capital gain or loss if the Ordinary shares or
ADSs have been held for more than one year at the time of disposition. In the case of a US Holder who is an individual, any capital gain generally will be subject to US federal income tax at preferential rates if specified minimum holding periods
are met. For US federal income tax purposes, the deductibility of capital losses is subject to significant limitations.



Deposits and withdrawals of Ordinary shares by US Holders in exchange for ADSs will not be subject to any US federal income tax.



Passive foreign investment company status



Rank currently believes that it did not qualify as a Passive Foreign Investment Company (a
PFIC) for the 2003 taxable year for US federal income tax purposes. If Rank were to become a PFIC for any taxable



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year, the tax on distributions on Ranks Ordinary shares and on any gains realized upon the disposition of Ordinary
shares or ADSs may be less favorable than as described herein. Furthermore, dividends paid by Rank would not be qualified dividend income and would be taxed at the higher rates applicable to other items of ordinary income. US holders
should consult their own tax advisors regarding the application of the PFIC rules to their ownership of the Ordinary shares or ADSs.



US information reporting and backup withholding



Dividend payments made to Holders of Ordinary shares and ADSs and proceeds from the sale, exchange or redemption of Ordinary shares or ADSs may be subject to information
reporting requirements and US federal backup withholding tax at a current rate of 28%. Backup withholding generally will not apply, however, to a Holder who furnishes a correct taxpayer identification number or certificate of foreign status and
makes any other required certification or who is otherwise exempt from backup withholding. US persons who are required to establish their exempt status generally must furnish IRS Form W-9 (Request for Taxpayer Identification Number and
Certification). Non-US Holders generally will not be subject to US information reporting or backup withholding. However, such Holders may be required to provide certification of non-US status generally on IRS Form W-8 BEN in connection with payments
received in the United States or through certain US-related financial intermediaries.



Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited against a Holders US federal income tax liability, and a Holder may obtain a refund of any excess amounts withheld under the backup
withholding rules by filing the appropriate claim for refund with the US Internal Revenue Service in a timely manner and furnishing any required information.



UK inheritance tax



Under the Estate Tax Convention, ADSs or Ordinary shares held by an individual shareholder who is domiciled, for the purposes of the Estate Convention, in the US and is not, for the purposes of the Estate Convention,
a national of the United Kingdom will not be subject to the UK inheritance tax upon the individuals death or on a chargeable transfer of the ADSs or Ordinary shares during the individuals lifetime, unless the ADSs or Ordinary shares are
placed in trust by a settlor not domiciled in the US or are part of the business property of a permanent establishment of the individual in the UK or, in the case of a shareholder who performs independent personal services, pertain to a fixed base
used for the performance of such services situated in the United Kingdom. In the exceptional case where the ADSs or Ordinary shares are subject both to UK inheritance tax and to US federal estate or gift tax, the Estate Convention generally provides
for double taxation to be relieved by means of a credit.



UK
Stamp Duty and Stamp Duty Reserve Tax (UK Transfer Taxes)



A
written transfer on sale of Ordinary shares will be subject to stamp duty at a rate of 0.5% of the stampable consideration for that sale. An agreement for the transfer of Ordinary shares will be subject to stamp duty reserve tax of 0.5% of the
consideration for that transfer.



The issue/transfer of Ordinary shares to the
Depositary in exchange for an ADS is subject to Stamp Duty Reserve Tax equal to 1.5% of the value of such shares. Under current UK tax legislation, UK Transfer Taxes will not be payable in respect of a transfer/agreement to transfer an ADS provided
that any instrument by which the ADS is transferred is executed outside the United Kingdom and remains outside the United Kingdom.



Generally, UK Transfer Taxes will be imposed when the Ordinary shares represented by an ADS and held by the Depositary are subsequently transferred by the Depositary upon
the surrender of the ADS. The amount of UK Transfer Taxes will be £5 per instrument of transfer provided the person to whom the transfer of those Ordinary shares is made is the original owner of the ADS.



10F DIVIDENDS AND PAYING AGENTS



NOT APPLICABLE



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10G STATEMENT BY EXPERTS



NOT APPLICABLE



10H DOCUMENTS ON DISPLAY



All reports
and other information that Rank has with the US Securities and Exchange Commission may be inspected at the SECs public reference facilities at 450 Fifth Street, NW, Washington DC 20549, USA. These reports may also be accessed via the
SECs website at www.sec.gov.



Copies of the documents concerning the
Company which are referred to in the Annual Report may be inspected at the registered office of the Company.



10I SUBSIDIARY INFORMATION



NOT
APPLICABLE



ITEM 11 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



The table below provides information about the Groups market sensitive instruments and constitutes a forward-looking statement within the meaning of Section 27A of the US Securities Act of 1933, as
amended and Section 21E of the US Securities Exchange Act of 1934, as amended. All items described below are non-trading and are denominated in sterling.



The Groups major market risk exposure is changing interest rates in the UK and the US. The Groups policy is to manage these exposures through the use of a
combination of fixed and floating interest rates. Interest rate derivatives may be used to adjust the interest rate exposures when appropriate to attain the desired fixed/floating ratios.



The Group hedges exchange rate exposures of foreign currency denominated assets by hedging these assets with corresponding foreign currency
borrowings on a UK GAAP basis. Interest and principal repayments expose the Group to market risk associated with exchange rate movements. The Groups policy is to hedge major foreign currency transaction exposures through the use of forward
contracts. These contracts are entered into with financial institutions of high credit standing.



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|                               |  |        |   |  |        |   |  |        |   |  |        |   |  |        |   |  |              |   |  |         |   |  |                    |  
|------------------------------ |  | ------ | - |  | ------ | - |  | ------ | - |  | ------ | - |  | ------ | - |  | ------------ | - |  | ------- | - |  | ------------------ | -
|Year end maturity dates        |  | 2004£m |   |  | 2005£m |   |  | 2006£m |   |  | 2007£m |   |  | 2008£m |   |  | Thereafter£m |   |  | Total£m |   |  | Fair value 2003 £m |  
|Assets  variable rates        |  |        |   |  |        |   |  |        |   |  |        |   |  |        |   |  |              |   |  |         |   |  |                    |  
|                               |  |        |   |  |        |   |  |       
|Short term deposits            |  | 0.3    |   |  |       |   |  |       |   |  |       |   |  |       |   |  |             |   |  | 0.3     |   |  | 0.3                |  
|Current asset investments      |  | 4.2    |   |  |       |   |  |       |   |  |       |   |  |       |   |  |             |   |  | 4.2     |   |  | 4.2                |  
|Cash                           |  | 167.6  |   |  |       |   |  |       |   |  |       |   |  |       |   |  |             |   |  | 167.6   |   |  | 167.6              |  
|                               |  | 172.1  |   |  |       |   |  |       |   |  |       |   |  |       |   |  |             |   |  | 172.1   |   |  | 172.1              |  
|Debt - Fixed rates             |  |        |   |  |        |   |  |        |   |  |        |   |  |        |   |  |              |   |  |         |   |  |                    |  
|                               |  |        |   |  |        |   |  |       
|$24.8m Yankee Bond 2018        |  |       |   |  |       |   |  |       |   |  |       |   |  |       |   |  | (13.9        | ) |  | (13.9   | ) |  | (14.7              | )
|£82m Amortising Loan 2004      |  | (82.1  | ) |  |       |   |  |       |   |  |       |   |  |       |   |  |             |   |  | (82.1   | ) |  | (82.2              | )
|£65m convertible notes (2004)  |  | (65.0  | ) |  |       |   |  |       |   |  |       |   |  |       |   |  |             |   |  | (65.0   | ) |  | (70.7              | )
|$89m Senior Notes 2010         |  |       |   |  |       |   |  |       |   |  |       |   |  |       |   |  | (49.7        | ) |  | (49.7   | ) |  | (48.5              | )
|$198m Senior Notes 2013        |  |       |   |  |       |   |  |       |   |  |       |   |  |       |   |  | (110.5       | ) |  | (110.5  | ) |  | (107.4             | )
|£35m Senior Notes 2013         |  |       |   |  |       |   |  |       |   |  |       |   |  |       |   |  | (35.0        | ) |  | (35.0   | ) |  | (33.6              | )
|$90m Senior Notes 2015         |  |       |   |  |       |   |  |       |   |  |       |   |  |       |   |  | (50.3        | ) |  | (50.3   | ) |  | (48.3              | )
|                               |  |        |   |  |        |   |  |       
|Debt - Variable rates          |  |        |   |  |        |   |  |        |   |  |        |   |  |        |   |  |              |   |  |         |   |  |                    |  
|                               |  |        |   |  |        |   |  |       
|$200m Yankee Bond 2004         |  | (111.7 | ) |  |       |   |  |       |   |  |       |   |  |       |   |  |             |   |  | (111.7  | ) |  | (116.3             | )
|$100m Yankee Bond 2008         |  |       |   |  |       |   |  |       |   |  |       |   |  | (55.8  | ) |  |             |   |  | (55.8   | ) |  | (60.0              | )
|$105m Senior Notes 2007        |  |       |   |  |       |   |  |       |   |  | (58.7  | ) |  |       |   |  |             |   |  | (58.7   | ) |  | (58.7              | )
|                               |  |        |   |  |        |   |  |       
|Lease obligations              |  | (6.2   | ) |  | (2.9   | ) |  | (0.5   | ) |  | (0.1   | ) |  | (0.1   | ) |  | (0.4         | ) |  | (10.2   | ) |  | (10.2              | )
|Other (uncommitted facilities) |  | (25.6  | ) |  |       |   |  |       |   |  |       |   |  |       |   |  |             |   |  | (25.6   | ) |  | (25.6              | )
|Other (committed facilities)   |  | (1.6   | ) |  | (0.4   | ) |  | (201.2 | ) |  |       |   |  |       |   |  | (0.9         | ) |  | (204.1  | ) |  | (204.1             | )
|Net debt at December 31, 2003  |  | (120.1 | ) |  | (3.3   | ) |  | (201.7 | ) |  | (58.8  | ) |  | (55.9  | ) |  | (260.7       | ) |  | (700.5  | ) |  | (708.2             | )



|                            |  |              |   |  |                    |  
|--------------------------- |  | ------------ | - |  | ------------------ | -
|                            |  |             
|                            |  | 2002 Total£m |   |  | Fair value 2002 £m |  
|Assets - Variable rates     |  |              |   |  |                    |  
|Short term deposits         |  | 1.5          |   |  | 1.5                |  
|Current asset investments   |  | 24.0         |   |  | 24.4               |  
|Cash                        |  | 81.7         |   |  | 81.7               |  
|                            |  |              |   |  |                    |  
|                            |  | 107.2        |   |  | 107.6              |  
|                            |  |             
|Debt - Fixed rates          |  |              |   |  |                    |  
|£125m Eurobond due 2008     |  | (125.0       | ) |  | (129.6             | )
|$200m Yankee Bond due 2004  |  | (37.3        | ) |  | (62.8              | )
|$100m Yankee Bond due 2008  |  | (12.4        | ) |  | (20.6              | )
|$24.8m Yankee Bond due 2018 |  | (15.4        | ) |  | (23.2              | )



61



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##### Table of Contents

|                               |  |              |   |  |                    |  
|------------------------------ |  | ------------ | - |  | ------------------ | -
|Debt - Variable rates          |  | 2002 Total£m |   |  | Fair value 2002 £m |  
|$200m Yankee Bond due 2004     |  | (87.0        | ) |  | (146.4             | )
|$100m Yankee Bond due 2008     |  | (49.7        | ) |  | (82.6              | )
|Lease obligations              |  | (6.3         | ) |  | (6.3               | )
|Other (uncommitted facilities) |  | (21.7        | ) |  | (21.7              | )
|Other (committed facilities)   |  | (151.5       | ) |  | (151.5             | )
|                               |  |              |   |  |                    |  
|Net debt at December 31, 2002  |  | (399.1       | ) |  | (537.1             | )
|                               |  |              |   |  |                    |  



|                                                    |  |         |  |         |  |         |  |         |  |         |  |              |  |         |  |                   |  
|--------------------------------------------------- |  | ------- |  | ------- |  | ------- |  | ------- |  | ------- |  | ------------ |  | ------- |  | ----------------- | -
|Firm commitments, forward foreign exchangecontracts |  | 2004 £m |  | 2005 £m |  | 2006 £m |  | 2007 £m |  | 2008 £m |  | Thereafter£m |  | Total£m |  | Fair value2003 £m |  
|Sterling equivalent of outstanding contracts        |  |         |  |         |  |         |  |         |  |         |  |              |  |         |  |                   |  
|GBP : AUD                                           |  | 6.3     |  |        |  |        |  |        |  |        |  |             |  | 6.3     |  | (0.1              | )
|GBP : EUR                                           |  | 92.3    |  |        |  |        |  |        |  |        |  |             |  | 92.3    |  | (0.7              | )
|GBP : CAD                                           |  | 35.8    |  |        |  |        |  |        |  |        |  |             |  | 35.8    |  | 1.4               |  
|GBP : JPY                                           |  | 24.0    |  |        |  |        |  |        |  |        |  |             |  | 24.0    |  | 1.1               |  
|USD : CAD                                           |  | 4.3     |  |        |  |        |  |        |  |        |  |             |  | 4.3     |  |                  |  
|USD : GBP                                           |  | 51.1    |  |        |  |        |  |        |  |        |  |             |  | 51.1    |  | 2.3               |  
|                                                    |  |         |  |         |  |         |  |         |  |         |  |              |  |         |  |                   |  
|                                                    |  | 213.8   |  |        |  |        |  |        |  |        |  |             |  | 213.8   |  | 4.0               |  
|                                                    |  |         |  |         |  |         |  |         |  |         |  |              |  |         |  |                   |  



|                                                    |  |         |  |         |  |         |  |         |  |         |  |              |  |         |  |                   |  
|--------------------------------------------------- |  | ------- |  | ------- |  | ------- |  | ------- |  | ------- |  | ------------ |  | ------- |  | ----------------- | -
|Firm commitments, forward foreign exchangecontracts |  | 2003 £m |  | 2004 £m |  | 2005 £m |  | 2006 £m |  | 2007 £m |  | Thereafter£m |  | Total£m |  | Fair value2002 £m |  
|Sterling equivalent of outstanding contracts        |  |         |  |         |  |         |  |         |  |         |  |              |  |         |  |                   |  
|USD : CAD                                           |  | 81.1    |  | 44.3    |  | 5.6     |  | 1.6     |  |        |  |             |  | 132.6   |  | 5.2               |  
|GBP : EUR                                           |  | 6.8     |  |        |  |        |  |        |  |        |  |             |  | 6.8     |  | (0.7              | )
|USD : EUR                                           |  | 4.0     |  |        |  |        |  |        |  |        |  |             |  | 4.0     |  | 0.1               |  
|USD : GBP                                           |  | 15.6    |  |        |  |        |  |        |  |        |  |             |  | 15.6    |  |                  |  
|                                                    |  |         |  |         |  |         |  |         |  |         |  |              |  |         |  |                   |  
|                                                    |  | 107.5   |  | 44.3    |  | 5.6     |  | 1.6     |  |        |  |             |  | 159.0   |  | 4.6               |  
|                                                    |  |         |  |         |  |         |  |         |  |         |  |              |  |         |  |                   |  



|                                           |  |       |   |  |      |  |      |  |      |  |       |   |  |            |  
|------------------------------------------ |  | ----- | - |  | ---- |  | ---- |  | ---- |  | ----- | - |  | ---------- | -
|                                           |  | 2004  |   |  | 2005 |  | 2006 |  | 2007 |  | 2008  |   |  | Thereafter |  
|Average interest rates  December 31, 2003 |  |       |   |  |      |  |      |  |      |  |       |   |  |            |  
|£65m Blue Square Note 2004                 |  | 5     | % |  |     |  |     |  |     |  |      |   |  | 5          | %
|£82.1m Amortising Loan 2004                |  | 5.24  | % |  |     |  |     |  |     |  |      |   |  |           |  
|£35m Private Placement 2013                |  |      |   |  |     |  |     |  |     |  |      |   |  | 6.5        | %
|$89m Private Placement 2010                |  |      |   |  |     |  |     |  |     |  |      |   |  | 5.39       | %
|$198m Private Placement 2013               |  |      |   |  |     |  |     |  |     |  |      |   |  | 6.11       | %
|$90m Private Placement 2015                |  |      |   |  |     |  |     |  |     |  |      |   |  | 6.31       | %
|$200m Yankee bond 2004                     |  | 6.750 | % |  |     |  |     |  |     |  |      |   |  |           |  
|$200m Yankee bond 2008                     |  |      |   |  |     |  |     |  |     |  | 6.375 | % |  |           |  
|$24.8m Yankee bond 2018                    |  |      |   |  |     |  |     |  |     |  |      |   |  | 7.125      | %



62



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##### Table of Contents

|                                           |  |      |  |       |   |  |      |  |      |  |      |  |            |  
|------------------------------------------ |  | ---- |  | ----- | - |  | ---- |  | ---- |  | ---- |  | ---------- | -
|                                           |  | 2003 |  | 2004  |   |  | 2005 |  | 2006 |  | 2007 |  | Thereafter |  
|Average interest rates - December 31, 2002 |  |      |  |       |   |  |      |  |      |  |      |  |            |  
|£125m Eurobond 2008                        |  |     |  |      |   |  |     |  |     |  |     |  | 7.250      | %
|$200m Yankee bond 2004                     |  |     |  | 6.750 | % |  |     |  |     |  |     |  |           |  
|$200m Yankee bond 2008                     |  |     |  |      |   |  |     |  |     |  |     |  | 6.375      | %
|$200m Yankee bond 2018                     |  |     |  |      |   |  |     |  |     |  |     |  | 7.125      | %



There have been no material
quantitative changes in market risk exposures between this current and preceding fiscal year. Currency exposures are netted by currency and hedged forward for up to five years using forward foreign exchange contracts. At December 31, 2003 at least
80% (2002 80%) of anticipated core currency transaction exposures for the following twelve months had been hedged.



ITEM 12 DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES



NOT APPLICABLE



PART II



ITEM 13 DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES



NOT APPLICABLE



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



NOT APPLICABLE



PART III



ITEM 15 DISCLOSURE CONTROLS AND PROCEDURES



|(a) | Disclosure Controls and Procedures. Ranks Chief Executive and Ranks Finance Director, after evaluating the effectiveness of Ranks disclosure controls and
procedures (as defined in US Exchange Act Rule 13a-15(e)) as of the end of the period covered by this Form 20-F, have concluded that, as of such date, Ranks disclosure controls and procedures were effective.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(b) | Internal Control Over Financial Reporting.There were no changes in Ranks internal control over financial reporting that occurred during the year ended December 31,
2003 that have materially affected, or are reasonably likely to materially affect, Ranks internal control over financial reporting.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



ITEM 16



16A AUDIT COMMITTEE FINANCIAL EXPERT



The Board of Directors has determined that Oliver Stocken is an
audit committee financial expert as defined in Item 16A of Form 20-F. Oliver Stocken and each of the other members of the Audit Committee is an independent Director as defined in the Nasdaq marketplace rules.



63



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##### Table of Contents

16B CODE OF ETHICS



Rank has adopted a code of
ethics that applies to the Chief Executive and Finance Director. A copy of the code of ethics has been filed as an exhibit to the 20-F.



16C ACCOUNTANTS FEES AND SERVICES



PricewaterhouseCoopers LLP have served as Ranks independent public accountants for each of the financial years in the three-year period ended 31 December 2003, for which audited financial statements appear in this annual report on
Form 20-F.



The following table presents the aggregate fees for professional
services and other services rendered by PricewaterhouseCoopers LLP to Rank in 2003 and 2002.



|                       |  |        |  |       
|---------------------- |  | ------ |  | ------
|                       |  | 2003£m |  | 2002£m
|Audit Fees (1)         |  | 1.4    |  | 1.2   
|Audit-related Fees (2) |  | 0.1    |  | 0.1   
|Tax Fees (3)           |  | 0.1    |  | 0.2   
|All Other Fees (4)     |  | 0.7    |  | 1.4   
|                       |  |        |  |       
|Total                  |  | 2.3    |  | 2.9   

---

|(1) | Audit Fees consist of fees billed for the annual audit services engagement and other audit services, which are those services that only the external auditor reasonably can provide,
and include the group audit; statutory audits; comfort letters and consents; attest services; and assistance with and review of documents filed with the SEC.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Audit-related Fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of Ranks financial
statements or that are traditionally performed by the external auditor, and include consultations concerning financial accounting and reporting standards; internal control reviews of new systems, programmes and projects; review of security controls
and operational effectiveness of systems; review of plans and controls for shared service centres; due diligence related to acquisitions; accounting assistance and audits in connection with proposed or completed acquisitions; and employee benefit
plan audits.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Tax Fees include fees billed for tax compliance services, including the preparation of original and amended tax returns and claims for refund; tax consultations, such as assistance
and representation in connection with tax audits and appeals, tax advice related to mergers and acquisitions, transfer pricing, and requests for rulings or technical advice from taxing authorities; tax planning services; and expatriate tax planning
and services.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | All Other Fees include fees billed for training; forensic accounting; data security reviews; treasury control reviews and process improvement and advice; and environmental,
sustainability and corporate social responsibility advisory services.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



64



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##### Table of Contents

Audit Committee Pre-approval Policies and Procedures



During 2003, no audit-related fees, tax fees or other fees provided to Rank by
PricewaterhouseCoopers LLP were approved by the Audit Committee pursuant to the de minimis exception to the pre-approval requirement provided by paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.



However, in December 2003 the Audit Committee adopted a new policy regarding auditor
independence and the provision of non-audit services by the external Auditors. All non-audit services above £50,000 to be performed by the external auditors are required to be approved by the Audit Committee and the Groups policy remains
that, where appropriate, non-audit work is put out to competitive tender.



PART IV



ITEM 17 FINANCIAL STATEMENTS



|(a) | The following financial statements are filed as part of this Annual Report:
|--- | ---------------------------------------------------------------------------



|                                                                                           |  |     
|------------------------------------------------------------------------------------------ |  | ----
|The Rank Group Plc                                                                         |  | Page
|Report of Independent Accountants                                                          |  | F-1 
|Consolidated Profit and Loss Accounts for the years ended December 31, 2003, 2002 and 2001 |  | F-2 
|Consolidated Balance Sheets at December 31, 2003 and 2002                                  |  | F-3 
|Consolidated Cash Flow Statements for the years ended December 31, 2003, 2002 and 2001     |  | F-4 
|Group Recognized Gains and Losses                                                          |  | F-5 
|Movements in Shareholders Funds                                                           |  | F-5 
|Accounting Policies                                                                        |  | F-6 
|Notes to the Accounts                                                                      |  | F-9 
|Schedule II  Valuation and Qualifying Accounts                                            |  | F-62



65



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##### Table of Contents

REPORT OF INDEPENDENT ACCOUNTANTS



To the
Board of Directors and Shareholders of The Rank Group Plc



In our opinion, the
accompanying consolidated balance sheets and the related consolidated statements of income, of cash flows and changes in shareholders equity present fairly, in all material respects, the financial position of The Rank Group Plc and its
subsidiaries at December 31, 2003 and 2002, and the results of their operations and their cash flows for the each of the three years in the period ended December 31, 2003, in conformity with accounting principles generally accepted in the United
Kingdom. 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 of these statements in accordance
with the standards of the Public Company Accounting Oversight Board (United States), which 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.



Accounting principles generally accepted in the United Kingdom vary in certain significant respects from accounting principles generally accepted in the United States of America. Information relating to the nature and effect of such
differences is presented in Note 35 to the consolidated financial statements.



As discussed in Note 1 to the financial statements, the Company changed its method of accounting for revenue in 2003.



Our audits were made for the purpose of forming an opinion on the consolidated financial statements taken as a whole. The schedule listed in the Index to Financial
Statements and Schedules appearing under Item 17 is presented for purposes of complying with the Securities and Exchange Commissions rules and is not a part of the basic financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.



PricewaterhouseCoopers LLP

London, England

February 27, 2004



F-1



---

##### Table of Contents

CONSOLIDATED PROFIT AND LOSS ACCOUNTS



|                                                                    |  |       |  |         |   |  |                      |   |  |                      |  
|------------------------------------------------------------------- |  | ----- |  | ------- | - |  | -------------------- | - |  | -------------------- | -
|                                                                    |  | Notes |  | 2003 £m |   |  | 2002 (as restated)£m |   |  | 2001 (as restated)£m |  
|Turnover                                                            |  | 1,2   |  |         |   |  |                      |   |  |                      |  
|Continuing operations                                               |  |       |  | 1,574.7 |   |  | 1,508.5              |   |  | 1,366.9              |  
|Acquisitions                                                        |  |       |  | 351.2   |   |  |                     |   |  |                     |  
|                                                                    |  |       |  |         |   |  |                      |   |  |                      |  
|                                                                    |  |       |  | 1,925.9 |   |  | 1,508.5              |   |  | 1,366.9              |  
|                                                                    |  |       |  |         |   |  |                      |   |  |                      |  
|Operating profit                                                    |  | 1,2   |  |         |   |  |                      |   |  |                      |  
|Continuing operations                                               |  |       |  | 211.9   |   |  | 219.6                |   |  | 209.7                |  
|Acquisitions                                                        |  |       |  | 4.7     |   |  |                     |   |  |                     |  
|                                                                    |  |       |  |         |   |  |                      |   |  |                      |  
|Group operating profit before exceptional items*                    |  |       |  | 216.6   |   |  | 219.6                |   |  | 209.7                |  
|Exceptional items                                                   |  |       |  | (51.1   | ) |  | (6.2                 | ) |  | (37.5                | )
|                                                                    |  |       |  |         |   |  |                      |   |  |                      |  
|                                                                    |  |       |  | 165.5   |   |  | 213.4                |   |  | 172.2                |  
|                                                                    |  |       |  |         |   |  |                      |   |  |                      |  
|Share of operating profit in joint ventures and associates          |  |       |  |         |   |  |                      |   |  |                      |  
|Joint ventures before exceptional items                             |  | 11    |  | 1.1     |   |  | 5.3                  |   |  | 6.3                  |  
|Associated undertakings before exceptional items                    |  | 12    |  | (0.3    | ) |  | (0.5                 | ) |  |                     |  
|                                                                    |  |       |  |         |   |  |                      |   |  |                      |  
|Total*                                                              |  |       |  | 0.8     |   |  | 4.8                  |   |  | 6.3                  |  
|                                                                    |  |       |  |         |   |  |                      |   |  |                      |  
|Non-operating items                                                 |  | 3     |  |         |   |  |                      |   |  |                      |  
|Net profit on disposal of fixed assets-continuing                   |  |       |  |        |   |  |                     |   |  | 12.3                 |  
|Loss on disposal of continuing operations                           |  |       |  |        |   |  | (0.8                 | ) |  | (0.7                 | )
|Profit/(loss) on previous disposal of discontinued operations       |  |       |  | 4.6     |   |  |                     |   |  | (1.1                 | )
|                                                                    |  |       |  |        
|Net loss on disposal of fixed assets in joint ventures-discontinued |  |       |  |        |   |  | (1.0                 | ) |  | (0.6                 | )
|Profit on disposal of interest in joint venture                     |  |       |  |        |   |  | 7.7                  |   |  |                     |  
|                                                                    |  |       |  |         |   |  |                      |   |  |                      |  
|Profit (loss) before interest                                       |  |       |  | 170.9   |   |  | 224.1                |   |  | 188.4                |  
|                                                                    |  |       |  |         |   |  |                      |   |  |                      |  
|Net interest payable and similar charges                            |  |       |  |         |   |  |                      |   |  |                      |  
|Group interest before exceptional charges*                          |  | 4     |  | (29.7   | ) |  | (22.6                | ) |  | (24.3                | )
|Group interest exceptional charges                                  |  | 4     |  | (11.5   | ) |  |                     |   |  |                     |  
|Joint venture and associate interest before exceptional items*      |  | 11,12 |  | (0.4    | ) |  | (1.5                 | ) |  | (3.6                 | )
|Joint ventures interest exceptional items                           |  |       |  |        |   |  | (2.0                 | ) |  |                     |  
|                                                                    |  |       |  |         |   |  |                      |   |  |                      |  
|                                                                    |  |       |  | (41.6   | ) |  | (26.1                | ) |  | (27.9                | )
|                                                                    |  |       |  |         |   |  |                      |   |  |                      |  
|Profit on ordinary activities before tax                            |  |       |  | 129.3   |   |  | 198.0                |   |  | 160.5                |  
|Tax on profit on ordinary activities before exceptional items*      |  | 5     |  | (54.2   | ) |  | (59.8                | ) |  | (67.5                | )
|Tax on exceptional items                                            |  | 5     |  | 26.1    |   |  | 0.6                  |   |  |                     |  
|                                                                    |  |       |  |         |   |  |                      |   |  |                      |  
|Profit on ordinary activities after tax                             |  |       |  | 101.2   |   |  | 138.8                |   |  | 93.0                 |  
|Equity minority interests before exceptional items*                 |  | 23    |  | (2.3    | ) |  | (2.1                 | ) |  | (1.9                 | )
|Equity minority interests exceptional items                         |  | 23    |  | 2.8     |   |  |                     |   |  |                     |  
|                                                                    |  |       |  |         |   |  |                      |   |  |                      |  
|Profit for the financial year                                       |  |       |  | 101.7   |   |  | 136.7                |   |  | 91.1                 |  
|Profit for the financial year before exceptional items+             |  |       |  | 130.8   |   |  | 138.4                |   |  | 118.7                |  
|Exceptional charges for the financial year                          |  |       |  | (29.1   | ) |  | (1.7                 | ) |  | (27.6                | )
|Dividends and other appropriations                                  |  |       |  |         |   |  |                      |   |  |                      |  
|Preference - non-equity                                             |  | 7     |  | (17.1   | ) |  | (21.0                | ) |  | (21.0                | )
|Ordinary  equity                                                   |  | 7     |  | (82.8   | ) |  | (78.2                | ) |  | (74.5                | )
|                                                                    |  |       |  |         |   |  |                      |   |  |                      |  
|Transfer to (from) reserves                                         |  | 22    |  | 1.8     |   |  | 37.5                 |   |  | (4.4                 | )
|                                                                    |  |       |  |         |   |  |                      |   |  |                      |  
|Basic earnings (loss) per Ordinary share                            |  | 8     |  | 14.3    | p |  | 19.6                 | p |  | 11.9                 | p
|                                                                    |  |       |  |         |   |  |                      |   |  |                      |  
|Diluted earnings (loss) per Ordinary share                          |  | 8     |  | 13.8    | p |  | 19.5                 | p |  | 11.9                 | p
|                                                                    |  |       |  |         |   |  |                      |   |  |                      |  
|Basic earnings per Ordinary share before exceptional items          |  | 8     |  | 19.2    | p |  | 19.9                 | p |  | 16.5                 | p
|                                                                    |  |       |  |         |   |  |                      |   |  |                      |  
|Diluted earnings (loss) per Ordinary share before exceptional items |  | 8     |  | 18.5    | p |  | 19.8                 | p |  | 16.5                 | p
|                                                                    |  |       |  |         |   |  |                      |   |  |                      |  

---

|+ | - Summation of all items denoted by *
|- | -------------------------------------



There is no difference between the results as disclosed in the profit and loss account and that on an unmodified historical cost basis.



F-2



---

##### Table of Contents

CONSOLIDATED BALANCE SHEETS



|                                                         |  |       |  |         |   |  |         |   |  |                      |  
|-------------------------------------------------------- |  | ----- |  | ------- | - |  | ------- | - |  | -------------------- | -
|                                                         |  | Notes |  | 2003 £m |   |  | 2002 £m |   |  | 2001 (as restated)£m |  
|Fixed assets                                             |  |       |  |         |   |  |         |   |  |                      |  
|Intangible assets                                        |  | 9     |  | 123.9   |   |  | 52.3    |   |  | 7.4                  |  
|Tangible assets                                          |  | 10    |  | 803.2   |   |  | 780.7   |   |  | 726.0                |  
|                                                         |  |       |  |        
|Investments                                              |  |       |  |         |   |  |         |   |  |                      |  
|Joint ventures                                           |  | 11    |  |         |   |  |         |   |  |                      |  
|Share of gross assets                                    |  |       |  | 17.7    |   |  | 12.9    |   |  | 66.8                 |  
|Share of gross liabilities                               |  |       |  | (10.9   | ) |  | (7.5    | ) |  | (50.7                | )
|                                                         |  |       |  | 6.8     |   |  | 5.4     |   |  | 16.1                 |  
|Associated undertakings                                  |  | 12    |  | 3.0     |   |  | 4.0     |   |  | 0.8                  |  
|Other                                                    |  | 13    |  | 53.8    |   |  | 58.0    |   |  | 48.3                 |  
|                                                         |  |       |  |         |   |  |         |   |  |                      |  
|                                                         |  |       |  | 63.6    |   |  | 67.4    |   |  | 65.2                 |  
|                                                         |  |       |  |         |   |  |         |   |  |                      |  
|                                                         |  |       |  | 990.7   |   |  | 900.4   |   |  | 798.6                |  
|                                                         |  |       |  |         |   |  |         |   |  |                      |  
|Current assets                                           |  |       |  |         |   |  |         |   |  |                      |  
|Stocks                                                   |  | 14    |  | 70.2    |   |  | 74.4    |   |  | 69.4                 |  
|Debtors (amounts falling due within one year)            |  | 15    |  | 445.6   |   |  | 411.8   |   |  | 430.4                |  
|Debtors (amounts falling due after more than one year)   |  | 15    |  | 330.8   |   |  | 319.7   |   |  | 224.3                |  
|Investments                                              |  | 16    |  | 4.2     |   |  | 24.0    |   |  | 6.3                  |  
|Cash and deposits                                        |  | 16    |  | 167.9   |   |  | 83.2    |   |  | 117.6                |  
|                                                         |  |       |  |         |   |  |         |   |  |                      |  
|                                                         |  |       |  | 1,018.7 |   |  | 913.1   |   |  | 848.0                |  
|Creditors (amounts falling due within one year)          |  |       |  |         |   |  |         |   |  |                      |  
|Loan capital and borrowings                              |  | 17    |  | (292.1  | ) |  | (38.8   | ) |  | (7.9                 | )
|Other                                                    |  | 19    |  | (441.7  | ) |  | (403.5  | ) |  | (363.7               | )
|                                                         |  |       |  |         |   |  |         |   |  |                      |  
|                                                         |  |       |  | (733.8  | ) |  | (442.3  | ) |  | (371.6               | )
|                                                         |  |       |  |         |   |  |         |   |  |                      |  
|Net current assets                                       |  |       |  | 284.9   |   |  | 470.8   |   |  | 476.4                |  
|                                                         |  |       |  |         |   |  |         |   |  |                      |  
|Total assets less current liabilities                    |  |       |  | 1,275.6 |   |  | 1,371.2 |   |  | 1,275.0              |  
|                                                         |  |       |  |         |   |  |         |   |  |                      |  
|Creditors (amounts falling due after more than one year) |  |       |  |         |   |  |         |   |  |                      |  
|Loan capital and borrowings                              |  | 17    |  | (580.5  | ) |  | (467.5  | ) |  | (364.1               | )
|Other                                                    |  | 19    |  | (105.7  | ) |  | (83.5   | ) |  | (79.2                | )
|                                                         |  |       |  |         |   |  |         |   |  |                      |  
|                                                         |  |       |  | (686.2  | ) |  | (551.0  | ) |  | (443.3               | )
|                                                         |  |       |  |         |   |  |         |   |  |                      |  
|Provisions for liabilities and charges                   |  | 20    |  | (46.3   | ) |  | (51.5   | ) |  | (87.8                | )
|                                                         |  |       |  |         |   |  |         |   |  |                      |  
|                                                         |  |       |  | 543.1   |   |  | 768.7   |   |  | 743.9                |  
|                                                         |  |       |  |         |   |  |         |   |  |                      |  
|Capital and reserves                                     |  | 22    |  |         |   |  |         |   |  |                      |  
|Called up share capital                                  |  |       |  | 59.6    |   |  | 104.8   |   |  | 104.6                |  
|Share premium account                                    |  |       |  | 17.5    |   |  | 13.6    |   |  | 8.5                  |  
|Capital redemption reserve                               |  |       |  | 24.8    |   |  | 24.8    |   |  | 24.8                 |  
|Other reserves                                           |  |       |  | 425.1   |   |  | 605.4   |   |  | 590.8                |  
|                                                         |  |       |  |         |   |  |         |   |  |                      |  
|Shareholders funds                                      |  |       |  | 527.0   |   |  | 748.6   |   |  | 728.7                |  
|                                                         |  |       |  |        
|Equity interests                                         |  |       |  | 527.0   |   |  | 522.0   |   |  | 504.3                |  
|Non-equity interests                                     |  |       |  |        |   |  | 226.6   |   |  | 224.4                |  
|Equity minority interests                                |  | 23    |  | 16.1    |   |  | 20.1    |   |  | 15.2                 |  
|                                                         |  |       |  |         |   |  |         |   |  |                      |  
|                                                         |  |       |  | 543.1   |   |  | 768.7   |   |  | 743.9                |  
|                                                         |  |       |  |         |   |  |         |   |  |                      |  



F-3



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##### Table of Contents

CONSOLIDATED CASH FLOW STATEMENTS



|                                                                   |  |       |  |        |   |  |        |   |  |        |  
|------------------------------------------------------------------ |  | ----- |  | ------ | - |  | ------ | - |  | ------ | -
|                                                                   |  | Notes |  | 2003£m |   |  | 2002£m |   |  | 2001£m |  
|Net cash inflow from operating activities                          |  | 24    |  | 291.9  |   |  | 107.3  |   |  | 266.4  |  
|                                                                   |  |       |  |       
|Distributions from joint ventures and associated undertakings      |  |       |  |       |   |  |       |   |  | 2.4    |  
|                                                                   |  |       |  |       
|Returns on investment and servicing of finance                     |  |       |  |        |   |  |        |   |  |        |  
|Interest received                                                  |  |       |  | 18.4   |   |  | 8.2    |   |  | 7.5    |  
|Interest paid                                                      |  |       |  | (57.0  | ) |  | (31.3  | ) |  | (49.2  | )
|Dividends paid to Convertible preference shareholders              |  |       |  | (24.9  | ) |  | (18.8  | ) |  | (18.8  | )
|Dividends paid to minority shareholders in subsidiary undertakings |  |       |  | (2.1   | ) |  | (2.1   | ) |  | (3.0   | )
|                                                                   |  |       |  |        |   |  |        |   |  |        |  
|                                                                   |  |       |  | (65.6  | ) |  | (44.0  | ) |  | (63.5  | )
|Taxation (paid) received (net)                                     |  |       |  | (27.8  | ) |  | (27.1  | ) |  | (15.4  | )
|                                                                   |  |       |  |       
|Capital expenditure and financial investment                       |  |       |  |        |   |  |        |   |  |        |  
|Purchase of investments                                            |  |       |  | (6.5   | ) |  | (13.7  | ) |  | (12.0  | )
|Purchase of tangible fixed assets                                  |  |       |  | (111.4 | ) |  | (117.9 | ) |  | (103.3 | )
|Sale of fixed assets and assets held for disposal                  |  |       |  | 9.8    |   |  | 34.8   |   |  | 64.3   |  
|                                                                   |  |       |  |        |   |  |        |   |  |        |  
|                                                                   |  |       |  | (108.1 | ) |  | (96.8  | ) |  | (51.0  | )
|Acquisitions and disposals                                         |  |       |  |        |   |  |        |   |  |        |  
|Purchase of subsidiaries                                           |  |       |  | (53.7  | ) |  | (38.7  | ) |  |       |  
|Cash acquired with subsidiaries                                    |  |       |  | 1.6    |   |  | 3.4    |   |  |       |  
|Sale of businesses and investments                                 |  |       |  |       |   |  | 5.1    |   |  | 3.8    |  
|Investment in joint ventures and associated undertakings           |  |       |  |       |   |  | (8.5   | ) |  | (2.4   | )
|                                                                   |  |       |  |        |   |  |        |   |  |        |  
|                                                                   |  |       |  | (52.1  | ) |  | (38.7  | ) |  | 1.4    |  
|Ordinary dividends paid                                            |  |       |  | (79.4  | ) |  | (75.8  | ) |  | (72.2  | )
|                                                                   |  |       |  |        |   |  |        |   |  |        |  
|Cash (outflow) inflow before use of liquid resources and financing |  |       |  | (41.1  | ) |  | (175.1 | ) |  | 68.1   |  
|                                                                   |  |       |  |       
|Management of liquid resources                                     |  | 26    |  | 19.6   |   |  | (18.8  | ) |  | 5.4    |  
|                                                                   |  |       |  |       
|Financing                                                          |  |       |  |        |   |  |        |   |  |        |  
|(Redemption) purchase of ordinary share capital                    |  |       |  | (211.0 | ) |  | 5.2    |   |  |       |  
|Changes in debt and lease financing                                |  |       |  |        |   |  |        |   |  |        |  
|Debt due within one year:                                          |  |       |  |        |   |  |        |   |  |        |  
|new sterling borrowings                                            |  |       |  | 82.1   |   |  |       |   |  |       |  
|(repayment) drawdown of other short term loans and borrowings      |  |       |  | (24.5  | ) |  | 25.8   |   |  | (31.9  | )
|Debt due after more than one year:                                 |  |       |  |        |   |  |        |   |  |        |  
|repayment of sterling borrowings                                   |  |       |  | (125.0 | ) |  |       |   |  |       |  
|new US dollar private placements                                   |  |       |  | 304.3  |   |  |       |   |  | (40.8  | )
|net drawdown on syndicated facilities                              |  |       |  | 200.0  |   |  | 159.9  |   |  |       |  
|repayment of syndicated facilities                                 |  |       |  | (137.0 | ) |  |       |   |  |       |  
|net movements on other long term facilities                        |  |       |  | 7.2    |   |  | (25.5  | ) |  | (43.8  | )
|Capital element of finance lease rental payments                   |  |       |  | (3.8   | ) |  | (0.5   | ) |  | (0.8   | )
|                                                                   |  |       |  |        |   |  |        |   |  |        |  
|Net cash inflow (outflow) from financing                           |  |       |  | 92.3   |   |  | 164.9  |   |  | (117.3 | )
|                                                                   |  |       |  |        |   |  |        |   |  |        |  
|Increase (decrease) in cash                                        |  |       |  | 70.8   |   |  | (29.0  | ) |  | (43.8  | )
|                                                                   |  |       |  |        |   |  |        |   |  |        |  



F-4



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##### Table of Contents

GROUP RECOGNIZED GAINS AND LOSSES



|                                                                     |  |         |   |  |         |   |  |                      |  
|-------------------------------------------------------------------- |  | ------- | - |  | ------- | - |  | -------------------- | -
|                                                                     |  | 2003 £m |   |  | 2002 £m |   |  | 2001 (as restated)£m |  
|Profit (loss) for the financial year                                 |  | 101.7   |   |  | 136.7   |   |  | 91.1                 |  
|Tax on exchange adjustments offset in reserves                       |  | 8.8     |   |  | (0.5    | ) |  | (3.2                 | )
|Currency translation differences on foreign currency net investments |  | (10.2   | ) |  | (26.5   | ) |  | 2.0                  |  
|                                                                     |  |         |   |  |         |   |  |                      |  
|Total recognized gains and relating to the year                      |  | 100.3   |   |  | 109.7   |   |  | 89.9                 |  
|                                                                     |  |         |   |  |         |   |  |                      |  



MOVEMENTS IN SHAREHOLDERS FUNDS



|                                                             |  |         |   |  |         |   |  |                      |  
|------------------------------------------------------------ |  | ------- | - |  | ------- | - |  | -------------------- | -
|                                                             |  | 2003 £m |   |  | 2002 £m |   |  | 2001 (as restated)£m |  
|Profit (loss) for the financial year                         |  | 101.7   |   |  | 136.7   |   |  | 91.1                 |  
|Dividends payable excluding provision for redemption premium |  | (99.9   | ) |  | (97.0   | ) |  | (93.3                | )
|                                                             |  |         |   |  |         |   |  |                      |  
|Retained profit (loss) for the year                          |  | 1.8     |   |  | 39.7    |   |  | (2.2                 | )
|Other recognized gains and losses (net)                      |  | (1.4    | ) |  | (27.0   | ) |  | (1.2                 | )
|Issue (purchase) of Ordinary share capital                   |  | 4.1     |   |  | 5.3     |   |  |                     |  
|Redemption of Convertible preference shares                  |  | (226.1  | ) |  |        |   |  |                     |  
|Goodwill realized on disposal of subsidiaries                |  |        |   |  | 2.6     |   |  |                     |  
|Amounts deducted in respect of shares issued to the QUEST    |  |        |   |  | (0.7    | ) |  |                     |  
|                                                             |  |         |   |  |         |   |  |                      |  
|                                                             |  |         |  
|Net movement in shareholders funds                          |  | (221.6  | ) |  | 19.9    |   |  | (3.4                 | )
|Opening shareholders funds                                  |  | 748.6   |   |  | 728.7   |   |  | 732.1                |  
|                                                             |  |         |   |  |         |   |  |                      |  
|Closing shareholders funds                                  |  | 527.0   |   |  | 748.6   |   |  | 728.7                |  
|                                                             |  |         |   |  |         |   |  |                      |  



F-5



---

##### Table of Contents

ACCOUNTING POLICIES



1 Basis of preparation



The accounts are prepared under the historical cost convention, and
comply with applicable accounting standards on a basis consistent with the previous year except for the changes detailed below. The Groups profit and loss account and balance sheet include the accounts of the Company and its subsidiary
undertakings, and the Groups share of profits or losses and reserves of its joint ventures and associated undertakings. The profits or losses of subsidiary undertakings acquired or sold during the period are included as from or up to the dates
on which control passed. All business combinations are accounted for using the acquisition accounting method.



Changes in accounting policy



The Group
has amended its interactive gaming revenue recognition policy to show gross turnover (stakes) rather than gross win, reflecting current industry standards. The changes increase turnover by £43.9m for the year ended 31 December 2002 and have no
impact on turnover for the year ended 31 December 2001. There is no impact on operating profit.



2 Foreign currency



Revenues, costs and
cash flows of overseas undertakings are included in the Group profit and loss account at average rates of exchange. Assets and liabilities denominated in foreign currencies are translated into sterling at rates of exchange ruling at the balance
sheet date except where a forward exchange contract has been arranged when the contracted rate is used. Exchange differences on the retranslation of opening net assets and results for the period of foreign subsidiary undertakings are dealt with
through reserves net of differences on related foreign currency borrowings and are reported in the statement of recognized gains and losses. Other gains and losses arising from foreign currency transactions, including trading, are included in the
consolidated profit and loss account. The principal exchange rates affecting the Group were:



|                |  |          |  |         |  |          |  |         |  |          |  |        
|--------------- |  | -------- |  | ------- |  | -------- |  | ------- |  | -------- |  | -------
|                |  | 2003     |  | 2002    |  | 2001    
|                |  | Year end |  | Average |  | Year end |  | Average |  | Year end |  | Average
|US dollar       |  | 1.79     |  | 1.63    |  | 1.61     |  | 1.51    |  | 1.46     |  | 1.43   
|Canadian dollar |  | 2.31     |  | 2.32    |  | 2.54     |  | 2.40    |  | 2.32     |  | 2.23   
|Euro            |  | 1.42     |  | 1.45    |  | 1.53     |  | 1.59    |  | 1.63     |  | 1.61   



3 Income recognition



Turnover consists of sales of goods and services and is generally
recognized as goods are shipped or services are rendered. Turnover for casinos includes the gaming win before deduction of gaming duty. Turnover for sports betting represents settled stakes. The Group has considered the impact of FRS 5
Reporting the Substance of Transactions  Application Note G during the year and no significant changes are required to the income recognition policy.



4 Contract advances



The Deluxe businesses enter into contracts with major customers that span several years. As part of these contracts, Deluxe provides advance cash payments to the
customers. Both Deluxe Media and Deluxe Film capitalize the total commitment payable under each contract within debtors at the date of the agreement and record a corresponding liability on the balance sheet for any outstanding amounts. Within Deluxe
Media capitalized contract costs are amortized through the profit and loss account on the basis of units produced. Within the Deluxe Film businesses, contract advances are amortized on the basis of estimated total footage over the life of the
contract, unless the terms of the contract indicate an alternative treatment would be more appropriate.



F-6



---

##### Table of Contents

ACCOUNTING POLICIES (continued)



5 Goodwill



Goodwill arising on acquisitions made before December 31, 1997 has been written off directly to reserves. Goodwill arising on acquisitions subsequent to December 31, 1997
has been capitalized and is being amortized on a straight-line basis over its useful economic life of 20 years or less.



6 Stocks



Stocks include work in progress and are valued at the lower of cost (including an appropriate proportion of overhead) and net realizable value.



7 Tangible fixed assets



Freehold properties are depreciated on a straight-line basis over 50 years or their useful life, if less. Leased properties are depreciated over the lesser of 50 years,
their useful life or the term of the lease. No depreciation is provided on freehold land. Expenditure on major refurbishment of properties is amortized over periods of between three and 15 years. Other fixed assets are depreciated mainly at rates
between 5% and 33% per annum on a straight-line basis.



Pre-opening costs are
expensed as incurred.



Casino properties are depreciated over the useful
economic life of the physical properties to their residual values. Both the initial carrying amount and residual value take into account the trading potential of the property with the benefit of the casino licenses.



8 Leased assets



Assets acquired under finance leases are included in tangible fixed assets. Depreciation is provided at rates designed to write-off the cost
in equal annual amounts over the shorter of the estimated useful lives of the assets (which are the same as those for assets purchased outright) and the period of the leases. The capital element of future rentals is treated as a liability and the
interest element is charged to the profit and loss account over the period of the leases in proportion to the balances outstanding. Operating lease payments are charged to the profit and loss account as incurred.



9 Investments



Investments are stated at cost less any provision for impairment.



10 Pensions



The pension costs as calculated under SSAP 24 relating to the UK defined benefit scheme are assessed in accordance with the advice of a qualified actuary using the
attained age method. Actuarial surpluses and deficiencies are amortized on a straight-line basis over the expected average remaining service lives of the employees. The pension costs relating to the UK defined contribution scheme represent the
contributions payable by the Group. Overseas schemes are accounted for in accordance with local conditions and practice such that the costs are charged against profits on a systematic basis over the service lives of the employees. The disclosures
required under the transitional arrangements for FRS 17 are presented in note 29.



F-7



---

##### Table of Contents

ACCOUNTING POLICIES (continued)



11 Taxation



Current tax is applied to taxable profits at the rates ruling in the relevant country.



Deferred tax is recognized in respect of all timing differences that have originated but not reversed at the balance sheet date where
transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the balance sheet date. A net deferred tax asset is regarded as recoverable and therefore recognized only
when, on the basis of all available evidence, it can be regarded as more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted.



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



Deferred tax is measured on a non-discounted basis at the tax rates that are expected to apply in the periods in which timing differences are expected to reverse.



The Groups previous accounting policy was to recognize a deferred tax
liability to the extent that it was likely to arise in the future.



12 Financial Instruments



Derivative instruments that may be
utilized by the Group are forward interest rate swaps and caps, cross currency swaps, forward starting swaps, forward rate agreements, interest rate swaps, interest rate swap options, forward foreign exchange and commodity contracts and currency
options.



Derivative instruments that are currently used by the Group are
interest rate swaps, forward foreign exchange and commodity contracts and short term currency swaps. These instruments are used to manage interest rate and foreign exchange and commodity price risk.



The forward foreign exchange contracts are used to hedge future transaction flows. The
resulting gains and losses are recognized as they arise and offset against gains and losses in the related underlying exposure.



During 2001, the Group entered into a series of interest rate swaps with banks, the effect of which has been to replace part of the Groups fixed interest rate
exposure with a floating rate exposure on a equivalent amount of notional debt.



The interest rate differentials from interest rate swaps used to manage the amounts and periods for which interest rates on underlying debt is fixed are recorded through an adjustment of net interest payable.



Commodity forwards are used to hedge the future transaction flows arising from the sale of
precious metals produced as a by-product of film processing.



The underlying
principal amounts of short term currency swaps are revalued at the exchange rates as at the balance sheet date and included in current asset investments or creditors to the extent that they are not related to underlying debt. The interest rate
element of these contracts is recognized as part of net interest payable over the term of the agreement.



If a legally enforceable right exists to set off recognized amounts of financial assets and liabilities, which are determinable monetary amounts and the Group intends to settle on a net basis, the relevant financial
assets and liabilities are offset.



The Group capitalizes the cost of issuing
debt and amortizes the cost over the length of the debt.



F-8



---

##### Table of Contents

NOTES TO THE ACCOUNTS



1 SEGMENTAL
INFORMATION



|                         |  |          |  |               |  |        
|------------------------ |  | -------- |  | ------------- |  | -------
|                         |  | Turnover
|                         |  | 2003     |  | 2002          |  | 2001   
|                         |  |          |  | (as restated) |  |        
|                         |  | £m       |  | £m            |  | £m     
|Analysis by division (a) |  |          |  |               |  |        
|Gaming                   |  | 865.7    |  | 518.4         |  | 437.1  
|Hard Rock                |  | 234.0    |  | 242.7         |  | 248.4  
|Deluxe                   |  | 788.5    |  | 704.2         |  | 634.6  
|US Holidays              |  | 37.7     |  | 43.2          |  | 46.8   
|                         |  |          |  |               |  |        
|Continuing operations    |  | 1,925.9  |  | 1,508.5       |  | 1,366.9



|                                                   |  |                          |   |  |               |   |  |       |  
|-------------------------------------------------- |  | ------------------------ | - |  | ------------- | - |  | ----- | -
|                                                   | 
|                                                   |  | Profit (loss) before tax |  
|                                                   |  | 2003                     |   |  | 2002          |   |  | 2001  |  
|                                                   |  |                          |   |  | (as restated) |   |  |       |  
|                                                   |  | £m                       |   |  | £m            |   |  | £m    |  
|Operating profit (loss) before exceptional items   |  |                          |   |  |               |   |  |       |  
|Gaming                                             |  | 114.7                    |   |  | 104.8         |   |  | 95.7  |  
|Hard Rock                                          |  | 23.1                     |   |  | 27.6          |   |  | 38.0  |  
|Deluxe                                             |  | 89.9                     |   |  | 89.0          |   |  | 74.1  |  
|US Holidays                                        |  | 6.0                      |   |  | 8.1           |   |  | 9.5   |  
|Central costs and other                            |  | (17.1                    | ) |  | (9.9          | ) |  | (7.6  | )
|                                                   |  |                          |   |  |               |   |  |       |  
|Continuing operations                              |  | 216.6                    |   |  | 219.6         |   |  | 209.7 |  
|Exceptional items                                  |  | (51.1                    | ) |  | (6.2          | ) |  | (37.5 | )
|                                                   |  |                          |   |  |               |   |  |       |  
|                                                   |  | 165.5                    |   |  | 213.4         |   |  | 172.2 |  
|Share of investments before exceptional items (b): |  |                          |   |  |               |   |  |       |  
|Associates and joint ventures                      |  | 0.4                      |   |  | 3.3           |   |  | 2.7   |  
|                                                   |  |                          |   |  |               |   |  |       |  
|                                                   |  | 0.4                      |   |  | 3.3           |   |  | 2.7   |  
|Exceptional items                                  |  |                         |   |  | (2.0          | ) |  |      |  
|                                                   |  |                          |   |  |               |   |  |       |  
|                                                   |  | 0.4                      |   |  | 1.3           |   |  | 2.7   |  
|Non-operating items (net)                          |  | 4.6                      |   |  | 5.9           |   |  | 9.9   |  
|Group interest payable and other similar charges   |  | (41.2                    | ) |  | (22.6         | ) |  | (24.3 | )
|                                                   |  |                          |   |  |               |   |  |       |  
|Profit (loss) on ordinary activities before tax    |  | 129.3                    |   |  | 198.0         |   |  | 160.5 |  
|                                                   |  |                          |   |  |               |   |  |       |  

---

|(a) | Inter-segmental turnover is not material.
|--- | -----------------------------------------

|(b) | Share of investments is defined as share of profit before tax.
|--- | --------------------------------------------------------------



F-9



---

##### Table of Contents

NOTES TO THE ACCOUNTS (continued)



1 SEGMENTAL INFORMATION (continued)



|                                        |  |          |  |               |  |        
|--------------------------------------- |  | -------- |  | ------------- |  | -------
|                                        |  | Turnover
|                                        |  | 2003     |  | 2002          |  | 2001   
|                                        |  |          |  | (as restated) |  |        
|                                        |  | £m       |  | £m            |  | £m     
|Analysis by geographical area of origin |  |          |  |               |  |        
|UK                                      |  | 1,064.3  |  | 630.3         |  | 529.4  
|North America                           |  | 665.6    |  | 707.6         |  | 710.2  
|Rest of the world                       |  | 196.0    |  | 170.6         |  | 127.3  
|                                        |  |          |  |               |  |        
|Continuing operations                   |  | 1,925.9  |  | 1,508.5       |  | 1,366.9
|                                        |  |          |  |               |  |        



Turnover by destination is not
materially different from turnover by origin.



|                                        |  |                                           |  |               |  |      
|--------------------------------------- |  | ----------------------------------------- |  | ------------- |  | -----
|                                        |  | Operating profit before exceptional items
|                                        |  | 2003                                      |  | 2002          |  | 2001 
|                                        |  |                                           |  | (as restated) |  |      
|                                        |  | £m                                        |  | £m            |  | £m   
|Analysis by geographical area of origin |  |                                           |  |               |  |      
|UK                                      |  | 98.1                                      |  | 100.5         |  | 95.0 
|North America                           |  | 87.7                                      |  | 98.2          |  | 95.6 
|Rest of the world                       |  | 30.8                                      |  | 20.9          |  | 19.1 
|                                        |  |                                           |  |               |  |      
|Continuing operations                   |  | 216.6                                     |  | 219.6         |  | 209.7
|                                        |  |                                           |  |               |  |      



|                                        |  |                                          |  |       |  |      
|--------------------------------------- |  | ---------------------------------------- |  | ----- |  | -----
|                                        |  | Operating profit after exceptional items
|                                        |  | 2003                                     |  | 2002  |  | 2001 
|                                        |  | £m                                       |  | £m    |  | £m   
|Analysis by geographical area of origin |  |                                          |  |       |  |      
|UK                                      |  | 88.3                                     |  | 100.9 |  | 85.9 
|North America                           |  | 47.1                                     |  | 91.2  |  | 74.5 
|Rest of the world                       |  | 30.1                                     |  | 21.3  |  | 11.8 
|                                        |  |                                          |  |       |  |      
|Continuing operations                   |  | 165.5                                    |  | 213.4 |  | 172.2
|                                        |  |                                          |  |       |  |      



|                                 |  |            |   |  |         |  
|-------------------------------- |  | ---------- | - |  | ------- | -
|                                 |  | Net Assets |   |  |         |  
|                                 |  | 2003       |   |  | 2002    |  
|                                 |  | £m         |   |  | £m      |  
|Analysis by division             |  |            |   |  |         |  
|Gaming                           |  | 457.0      |   |  | 431.7   |  
|Hard Rock                        |  | 146.2      |   |  | 170.8   |  
|Deluxe                           |  | 440.6      |   |  | 453.2   |  
|US Holidays                      |  | 34.5       |   |  | 39.9    |  
|                                 |  |            |   |  |         |  
|Continuing operations            |  | 1,078.3    |   |  | 1,095.6 |  
|Investments                      |  | 63.6       |   |  | 67.4    |  
|Tax and dividends payable        |  | 14.9       |   |  | (1.6    | )
|Other non-operating assets (net) |  | (37.1      | ) |  | (45.9   | )
|Goodwill                         |  | 123.9      |   |  | 52.3    |  
|Net debt                         |  | (700.5     | ) |  | (399.1  | )
|                                 |  |            |   |  |         |  
|                                 |  | 543.1      |   |  | 768.7   |  
|                                 |  |            |   |  |         |  



F-10



---

##### Table of Contents

NOTES TO THE ACCOUNTS (continued)



1 SEGMENTAL INFORMATION (continued)



|                                                                       |  |                                |   |  |        |   |  |        |  
|---------------------------------------------------------------------- |  | ------------------------------ | - |  | ------ | - |  | ------ | -
|                                                                       |  | Net cash flow before financing |  
|                                                                       |  | 2003                           |   |  | 2002   |   |  | 2001   |  
|                                                                       |  | £m                             |   |  | £m     |   |  | £m     |  
|Analysis by division                                                   |  |                                |   |  |        |   |  |        |  
|Gaming                                                                 |  | 74.1                           |   |  | 80.1   |   |  | 85.4   |  
|Hard Rock                                                              |  | 36.0                           |   |  | 17.9   |   |  | 24.7   |  
|Deluxe                                                                 |  | 41.0                           |   |  | (78.9  | ) |  | 137.7  |  
|US Holidays                                                            |  | 7.8                            |   |  | 13.0   |   |  | 13.3   |  
|Central costs and other                                                |  | (20.7                          | ) |  | (33.1  | ) |  | (25.2  | )
|                                                                       |  |                                |   |  |        |   |  |        |  
|Continuing operations including acquisitions                           |  | 138.2                          |   |  | (1.0   | ) |  | 235.9  |  
|                                                                       |  |                                |  
|Investments                                                            |  |                                |   |  |        |   |  |        |  
|Other                                                                  |  | (6.5                           | ) |  | (22.2  | ) |  | (14.5  | )
|                                                                       |  |                                |   |  |        |   |  |        |  
|                                                                       |  | (6.5                           | ) |  | (22.2  | ) |  | (14.5  | )
|Interest paid (net)                                                    |  | (38.6                          | ) |  | (23.1  | ) |  | (41.7  | )
|Tax and dividends                                                      |  | (134.2                         | ) |  | (123.8 | ) |  | (109.4 | )
|Acquired debt and other non cash items                                 |  |                               |   |  | (5.0   | ) |  | (2.2   | )
|                                                                       |  |                                |   |  |        |   |  |        |  
|Net cash (outflow) inflow before use of liquid resources and financing |  | (41.1                          | ) |  | (175.1 | ) |  | 68.1   |  
|                                                                       |  |                                |   |  |        |   |  |        |  

|                                             |  |         |  |        
|-------------------------------------------- |  | ------- |  | -------
|                                             |  | 2003    |  | 2002   
|                                             |  | £m      |  | £m     
|Analysis of net assets by geographical area  |  |         |  |        
|UK                                           |  | 570.8   |  | 527.8  
|North America                                |  | 399.7   |  | 456.5  
|Rest of the world                            |  | 107.8   |  | 111.3  
|                                             |  |         |  |        
|Continuing operations including acquisitions |  | 1,078.3 |  | 1,095.6
|                                             |  |         |  |        



|2 | TURNOVER AND OPERATING PROFIT
|- | -----------------------------



|                                          |  |                      |   |  |              |   |  |          |   |  |                     |   |  |         |  
|----------------------------------------- |  | -------------------- | - |  | ------------ | - |  | -------- | - |  | ------------------- | - |  | ------- | -
|                                          |  | 2003                 |   |  | 2002         |   |  | 2001     |  
|                                          |  | Continuingoperations |   |  | Acquisitions |   |  | Total    |   |  | Total (as restated) |   |  | Total   |  
|                                          |  | £m                   |   |  | £m           |   |  | £m       |   |  | £m                  |   |  | £m      |  
|Turnover                                  |  | 1,574.7              |   |  | 351.2        |   |  | 1,925.9  |   |  | 1,508.5             |   |  | 1,366.9 |  
|Cost of sales                             |  | (1,169.0             | ) |  | (326.4       | ) |  | (1,495.4 | ) |  | (1,093.0            | ) |  | (991.0  | )
|                                          |  |                      |   |  |              |   |  |          |   |  |                     |   |  |         |  
|Gross profit                              |  | 405.7                |   |  | 24.8         |   |  | 430.5    |   |  | 415.5               |   |  | 375.9   |  
|Distribution costs                        |  | (50.1                | ) |  | (4.3         | ) |  | (54.4    | ) |  | (42.4               | ) |  | (42.2   | )
|Administrative expenses                   |  | (202.6               | ) |  | (15.8        | ) |  | (218.4   | ) |  | (170.2              | ) |  | (170.3  | )
|Other operating income                    |  | 7.8                  |   |  |             |   |  | 7.8      |   |  | 10.5                |   |  | 8.8     |  
|                                          |  |                      |   |  |              |   |  |          |   |  |                     |   |  |         |  
|Operating profit                          |  | 160.8                |   |  | 4.7          |   |  | 165.5    |   |  | 213.4               |   |  | 172.2   |  
|                                          |  |                      |   |  |              |   |  |          |   |  |                     |   |  |         |  
|Exceptional items included above are:     |  |                      |   |  |              |   |  |          |   |  |                     |   |  |         |  
|In cost of sales                          |  | (41.8                | ) |  |             |   |  | (41.9    | ) |  | (6.2                | ) |  | (26.2   | )
|In administrative expenses                |  | (9.3                 | ) |  |             |   |  | (9.3     | ) |  |                    |   |  | (11.3   | )
|                                          |  |                      |   |  |              |   |  |          |   |  |                     |   |  |         |  
|                                          |  | (51.1                | ) |  |             |   |  | (51.1    | ) |  | (6.2                | ) |  | (37.5   | )
|                                          |  |                      |   |  |              |   |  |          |   |  |                     |   |  |         |  
|Operating profit before exceptional items |  | 211.9                |   |  | 4.7          |   |  | 216.6    |   |  | 219.6               |   |  | 209.7   |  
|                                          |  |                      |   |  |              |   |  |          |   |  |                     |   |  |         |  



The results in 2002 and 2001 all
relate to continuing operations.



F-11



---

##### Table of Contents

NOTES TO THE ACCOUNTS (continued)



2 TURNOVER AND OPERATING PROFIT (continued)



|                                                               |  |      |  |      |  |     
|-------------------------------------------------------------- |  | ---- |  | ---- |  | ----
|                                                               |  | 2003 |  | 2002 |  | 2001
|                                                               |  | £m   |  | £m   |  | £m  
|Operating profit is stated after charging the following items: |  |      |  |      |  |     
|In normal trading                                              |  |      |  |      |  |     
|Depreciation of tangible fixed assets                          |  | 88.5 |  | 79.6 |  | 80.6
|Amortization of goodwill                                       |  | 6.4  |  | 1.0  |  | 0.5 
|Operating lease payments                                       |  |      |  |      |  |     
|- land and buildings                                           |  | 58.1 |  | 51.5 |  | 47.4
|- plant and machinery                                          |  | 14.1 |  | 10.0 |  | 7.3 
|In exceptional items                                           |  |      |  |      |  |     
|Impairment of fixed assets (including goodwill)                |  |     |  | 6.2  |  | 28.6
|Amounts provided for legal settlements                         |  | 9.3  |  |     |  |    
|Restructuring charges                                          |  | 41.8 |  |     |  | 8.9 



Exceptional items are those within
ordinary activities which, because of their size and nature, are disclosed to give a proper understanding of the underlying result for the period. These include restructuring charges in connection with reorganizing businesses (comprising impairment
of fixed assets, costs of severance, and other costs directly attributable to the restructuring). Additional costs associated with restructuring, such as training, are recognized as they arise and are not treated as exceptional.



The exceptional restructuring charges of £41.8m relate to the restructuring of Deluxe
Media Services (£35.8m) and the integration of Blue Square with Rank Interactive Gaming (£6.0m).



In North America, the transition from VHS to DVD involved the gradual relocation of DVD replication capacity from California to replace existing VHS capacity in Arkansas. This relocation programme is now complete and,
as a consequence, the DVD plants in Ontario and Carson, California have been closed. This gave rise to an exceptional charge of £15.4m comprising redundancy costs of £3.2m, asset write-offs of £3.9m and property related costs of
£8.3m.



The decline in VHS volumes and the consequent restructuring of
Arkansas for DVD has led to a reassessment of the carrying value of the Groups VHS assets. This has resulted in an impairment charge of £20.4m being made against those assets.



Blue Square was acquired for £65.0m in January 2003. The business was integrated with Rank Interactive Gaming, generating £5.0m
of operating cost savings. The cost of achieving these savings was £6.0m and this has been included as an exceptional charge in these results. The charge includes redundancy costs of £3.4m and asset write-offs of £2.6m.



The exceptional charges for legal settlements (£9.3m) relate to a number of US
actions.



The exceptional charge in 2002 reflects an impairment to the value of
Deluxes investment in the ex-Pioneer DVD facility which crystallized as a result of the venture with Ritek Corporation.



F-12



---

##### Table of Contents

NOTES TO THE ACCOUNTS (continued)



2 TURNOVER AND OPERATING PROFIT (continued)



During the year the Groups Auditors, PricewaterhouseCoopers LLP, earned the following fees:



|                                    |  |      |  |     
|----------------------------------- |  | ---- |  | ----
|                                    |  | 2003 |  | 2002
|                                    |  | £m   |  | £m  
|Audit fees:                         |  |      |  |     
|UK                                  |  | 0.8  |  | 0.7 
|Overseas                            |  | 0.7  |  | 0.6 
|                                    |  |      |  |     
|                                    |  | 1.5  |  | 1.3 
|                                    |  |      |  |     
|Non-audit services:                 |  |      |  |     
|UK                                  |  | 0.6  |  | 1.0 
|Overseas                            |  | 0.2  |  | 0.6 
|                                    |  |      |  |     
|                                    |  | 0.8  |  | 1.6 
|                                    |  |      |  |     
|                                    |  | 2.3  |  | 2.9 
|                                    |  |      |  |     
|Audit services were as follows:     |  |      |  |     
|Statutory audit                     |  | 1.4  |  | 1.2 
|Audit related regulatory reporting  |  | 0.1  |  | 0.1 
|                                    |  |      |  |     
|                                    |  | 1.5  |  | 1.3 
|                                    |  |      |  |     
|Non-audit services were as follows: |  |      |  |     
|Further assurance services          |  | 0.5  |  | 1.2 
|Compliance services                 |  | 0.2  |  | 0.2 
|Tax advisory services               |  | 0.1  |  | 0.2 
|                                    |  |      |  |     
|                                    |  | 0.8  |  | 1.6 
|                                    |  |      |  |     



The Auditors Remuneration for
the Company was £52,000 (2002 £50,000, 2001 £50,000).



It is
the Groups policy to employ PricewaterhouseCoopers LLP on assignments additional to their statutory audit duties where their expertise and experience with the Group are important, principally in the areas of transaction services, stock
exchange transactions and tax advice. The Groups policy is, where appropriate, that work is put out to competitive tender. The Audit Committee monitors the relationship with PricewaterhouseCoopers LLP, including the level of non-audit fees.



3 NON-OPERATING ITEMS



|                                                                                                                                      |  |      |  |      |   |  |      |  
|------------------------------------------------------------------------------------------------------------------------------------- |  | ---- |  | ---- | - |  | ---- | -
|                                                                                                                                      |  | 2003 |  | 2002 |   |  | 2001 |  
|                                                                                                                                      |  | £m   |  | £m   |   |  | £m   |  
|Net profit on disposal of fixed assets                                                                                                |  | 4.6  |  |     |   |  | 12.3 |  
|Net loss (including provision for loss) on disposal of continuing operations (including goodwill written back from reserves of
£2.6m) |  |     |  | (0.8 | ) |  | (0.7 | )
|Loss on disposal of discontinued operations                                                                                           |  |     |  |     |   |  | (1.1 | )
|Net loss on disposal of fixed assets in joint ventures  discontinued                                                                 |  |     |  | (1.0 | ) |  | (0.6 | )
|Profit on disposal of interest in joint venture                                                                                       |  |     |  | 7.7  |   |  |     |  
|                                                                                                                                      |  |      |  |      |   |  |      |  
|Non-operating items before interest and tax                                                                                           |  | 4.6  |  | 5.9  |   |  | 9.9  |  
|                                                                                                                                      |  |      |  |      |   |  |      |  



The non-operating items reflect the
write back of provisions set up on the disposal of businesses in 1999 and 2000 which are no longer considered necessary.



F-13



---

##### Table of Contents

NOTES TO THE ACCOUNTS (continued)



4 NET INTEREST PAYABLE AND SIMILAR CHARGES



|                                                                |  |       |   |  |      |   |  |      |  
|--------------------------------------------------------------- |  | ----- | - |  | ---- | - |  | ---- | -
|                                                                |  | 2003  |   |  | 2002 |   |  | 2001 |  
|                                                                |  | £m    |   |  | £m   |   |  | £m   |  
|Interest payable on bank loans and overdrafts                   |  | 1.0   |   |  | 0.8  |   |  | 0.7  |  
|Interest payable on other loans                                 |  | 42.4  |   |  | 30.0 |   |  | 32.2 |  
|Finance charges on finance leases                               |  | 0.5   |   |  | 0.9  |   |  | 0.4  |  
|Release of discount on provisions                               |  | 0.9   |   |  | 1.3  |   |  | 1.3  |  
|                                                                |  |       |   |  |      |   |  |      |  
|Interest payable and other similar charges                      |  | 44.8  |   |  | 33.0 |   |  | 34.6 |  
|Profit on disposal of Seminole Indian bond                      |  | (2.1  | ) |  |     |   |  |     |  
|Interest receivable from deposits and current asset investments |  | (13.0 | ) |  | (9.5 | ) |  | (7.5 | )
|Net profit on redemption of fixed rate debt                     |  |      |   |  | (0.9 | ) |  | (2.8 | )
|                                                                |  |       |   |  |      |   |  |      |  
|                                                                |  | 29.7  |   |  | 22.6 |   |  | 24.3 |  
|Exceptional premium payable on redemption of £125m Eurobond     |  | 11.5  |   |  |     |   |  |     |  
|                                                                |  |       |   |  |      |   |  |      |  
|                                                                |  | 41.2  |   |  | 22.6 |   |  | 24.3 |  
|                                                                |  |       |   |  |      |   |  |      |  



5 TAXATION ON PROFIT ON ORDINARY
ACTIVITIES



|(a) | Analysis of tax charge in year
|--- | ------------------------------



|                                            |  |                         |   |  |                  |   |  |       |  
|------------------------------------------- |  | ----------------------- | - |  | ---------------- | - |  | ----- | -
|                                            |  | 2003                    |  
|                                            |  | Before exceptionalitems |   |  | Exceptionalitems |   |  | Total |  
|                                            |  | £m                      |   |  | £m               |   |  | £m    |  
|UK corporation tax                          |  |                         |   |  |                  |   |  |       |  
|Current                                     |  | 20.1                    |   |  | (2.1             | ) |  | 18.0  |  
|Prior year                                  |  | (17.6                   | ) |  | (4.0             | ) |  | (21.6 | )
|                                            |  |                         |   |  |                  |   |  |       |  
|                                            |  | 2.5                     |   |  | (6.1             | ) |  | (3.6  | )
|Overseas tax                                |  |                         |   |  |                  |   |  |       |  
|Current                                     |  | 11.7                    |   |  |                 |   |  | 11.7  |  
|Prior year                                  |  | (1.0                    | ) |  |                 |   |  | (1.0  | )
|                                            |  |                         |   |  |                  |   |  |       |  
|                                            |  | 10.7                    |   |  |                 |   |  | 10.7  |  
|Taxation on share of profits of:            |  |                         |   |  |                  |   |  |       |  
|Associated undertakings and joint ventures  |  | 0.2                     |   |  |                 |   |  | 0.2   |  
|                                            |  |                         |   |  |                  |   |  |       |  
|Total current tax                           |  | 13.4                    |   |  | (6.1             | ) |  | 7.3   |  
|                                            |  |                         |   |  |                  |   |  |       |  
|UK deferred tax                             |  |                         |   |  |                  |   |  |       |  
|Timing differences                          |  | 12.9                    |   |  | (8.7             | ) |  | 4.2   |  
|Overseas deferred tax                       |  |                         |   |  |                  |   |  |       |  
|Timing differences                          |  | 27.9                    |   |  | (11.3            | ) |  | 16.6  |  
|                                            |  |                         |   |  |                  |   |  |       |  
|Total deferred tax                          |  | 40.8                    |   |  | (20.0            | ) |  | 20.8  |  
|                                            |  |                         |   |  |                  |   |  |       |  
|Tax on profit (loss) on ordinary activities |  | 54.2                    |   |  | (26.1            | ) |  | 28.1  |  
|                                            |  |                         |   |  |                  |   |  |       |  



The tax credit on the exceptional
charge is £13.4m. In addition, an exceptional tax credit of £12.7m has been recognised in respect of tax liabilities provided on the disposal of the Holidays business, which are no longer required.



F-14



---

##### Table of Contents

NOTES TO THE ACCOUNTS (continued)



5 TAXATION ON PROFIT ON ORDINARY ACTIVITIES



(a) Analysis of tax charge in year (continued)



|                                            |  |                        |   |  |                  |   |  |       |  
|------------------------------------------- |  | ---------------------- | - |  | ---------------- | - |  | ----- | -
|                                            |  | 2002                   |  
|                                            |  | Beforeexceptionalitems |   |  | Exceptionalitems |   |  | Total |  
|                                            |  | £m                     |   |  | £m               |   |  | £m    |  
|UK corporation tax                          |  |                        |   |  |                  |   |  |       |  
|Current                                     |  | 21.3                   |   |  |                 |   |  | 21.3  |  
|Prior year                                  |  | (0.6                   | ) |  |                 |   |  | (0.6  | )
|                                            |  |                        |   |  |                  |   |  |       |  
|                                            |  | 20.7                   |   |  |                 |   |  | 20.7  |  
|Overseas tax                                |  |                        |   |  |                  |   |  |       |  
|Current                                     |  | 9.5                    |   |  |                 |   |  | 9.5   |  
|Taxation on share of profits of:            |  |                        |   |  |                  |   |  |       |  
|Associated undertakings and joint ventures  |  | 1.4                    |   |  | (0.6             | ) |  | 0.8   |  
|                                            |  |                        |   |  |                  |   |  |       |  
|Total current tax                           |  | 31.6                   |   |  | (0.6             | ) |  | 31.0  |  
|                                            |  |                        |   |  |                  |   |  |       |  
|UK deferred tax                             |  |                        |   |  |                  |   |  |       |  
|Timing differences                          |  | 4.6                    |   |  |                 |   |  | 4.6   |  
|Overseas deferred tax                       |  |                        |   |  |                  |   |  |       |  
|Timing differences                          |  | 23.6                   |   |  |                 |   |  | 23.6  |  
|                                            |  |                        |   |  |                  |   |  |       |  
|Total deferred tax                          |  | 28.2                   |   |  |                 |   |  | 28.2  |  
|                                            |  |                        |   |  |                  |   |  |       |  
|Tax on profit (loss) on ordinary activities |  | 59.8                   |   |  | (0.6             | ) |  | 59.2  |  
|                                            |  |                        |   |  |                  |   |  |       |  



F-15



---

##### Table of Contents

NOTES TO THE ACCOUNTS (continued)



|5 | TAXATION ON PROFIT ON ORDINARY ACTIVITIES
|- | -----------------------------------------



|(a) | Analysis of tax charge in year (continued)
|--- | ------------------------------------------



|                                            |  |                                         |   |  |                     |  |                        |  
|------------------------------------------- |  | --------------------------------------- | - |  | ------------------- |  | ---------------------- | -
|                                            |  | 2001                                    |  
|                                            |  | Beforeexceptionalitems (as restated) £m |   |  | Exceptionalitems £m |  | Total (as restated) £m |  
|                                            |  |                                         |  
|UK corporation tax                          |  |                                         |   |  |                     |  |                        |  
|Current                                     |  | 11.4                                    |   |  |                    |  | 11.4                   |  
|Prior year                                  |  | (0.3                                    | ) |  |                    |  | (0.3                   | )
|                                            |  |                                         |   |  |                     |  |                        |  
|                                            |  | 11.1                                    |   |  |                    |  | 11.1                   |  
|                                            |  |                                         |  
|Overseas tax                                |  |                                         |   |  |                     |  |                        |  
|Current                                     |  | 18.3                                    |   |  |                    |  | 18.3                   |  
|Prior year                                  |  | 2.0                                     |   |  |                    |  | 2.0                    |  
|                                            |  |                                         |   |  |                     |  |                        |  
|                                            |  | 20.3                                    |   |  |                    |  | 20.3                   |  
|                                            |  |                                         |  
|Taxation on share of profits of:            |  |                                         |   |  |                     |  |                        |  
|Associated undertakings and joint ventures  |  | 0.9                                     |   |  |                    |  | 0.9                    |  
|                                            |  |                                         |   |  |                     |  |                        |  
|Total current tax                           |  | 32.3                                    |   |  |                    |  | 32.3                   |  
|                                            |  |                                         |   |  |                     |  |                        |  
|UK deferred tax                             |  |                                         |   |  |                     |  |                        |  
|Timing differences                          |  | 1.3                                     |   |  |                    |  | 1.3                    |  
|Overseas deferred tax                       |  |                                         |   |  |                     |  |                        |  
|Timing differences                          |  | 33.9                                    |   |  |                    |  | 33.9                   |  
|                                            |  |                                         |   |  |                     |  |                        |  
|Total deferred tax                          |  | 35.2                                    |   |  |                    |  | 35.2                   |  
|                                            |  |                                         |   |  |                     |  |                        |  
|                                            |  |                                         |  
|Tax on profit (loss) on ordinary activities |  | 67.5                                    |   |  |                    |  | 67.5                   |  
|                                            |  |                                         |   |  |                     |  |                        |  



F-16



---

##### Table of Contents

NOTES TO THE ACCOUNTS (continued)



|5 | TAXATION ON PROFIT ON ORDINARY ACTIVITIES (continued)
|- | -----------------------------------------------------



|(b) | Taxation reconciliation
|--- | -----------------------



|                                                                     |  |       |   |  |       |   |  |               |  
|-------------------------------------------------------------------- |  | ----- | - |  | ----- | - |  | ------------- | -
|                                                                     |  | 2003  |   |  | 2002  |   |  | 2001          |  
|                                                                     |  |       |   |  |       |   |  | (as restated) |  
|                                                                     |  | £m    |   |  | £m    |   |  | £m            |  
|Profit on ordinary activities before tax                             |  | 129.3 |   |  | 198.0 |   |  | 160.5         |  
|Profit on ordinary activities before tax at 30% (2002:30%, 2001:30%) |  | 38.8  |   |  | 59.4  |   |  | 48.2          |  
|Effects of:                                                          |  |       |   |  |       |   |  |               |  
|Permanent differences                                                |  | 23.0  |   |  | (0.5  | ) |  | 12.9          |  
|Capital allowances in excess of depreciation                         |  | (8.2  | ) |  | (4.2  | ) |  | (5.6          | )
|Differences in overseas tax rates                                    |  | (21.0 | ) |  | (23.4 | ) |  | (22.8         | )
|Adjustments relating to prior years                                  |  | (22.6 | ) |  | (0.6  | ) |  | (0.8          | )
|Other timing differences                                             |  | (2.7  | ) |  | 0.3   |   |  | 0.4           |  
|                                                                     |  |       |   |  |       |   |  |               |  
|Total current tax                                                    |  | 7.3   |   |  | 31.0  |   |  | 32.3          |  
|                                                                     |  |       |   |  |       |   |  |               |  



The effective tax rate for the year
has been reduced by a number of adjustments relating to prior years.



|6 | PROFIT ATTRIBUTABLE TO THE PARENT COMPANY
|- | -----------------------------------------



The loss for the financial year in the accounts of The Rank Group Plc was £1.9m (2002  profit £0.2m, 2001profit £0.1m). As allowed by S.230
Companies Act 1985, no profit and loss account is presented in respect of The Rank Group Plc.



|7 | DIVIDENDS
|- | ---------



|                                                          |  |      |  |      |  |     
|--------------------------------------------------------- |  | ---- |  | ---- |  | ----
|                                                          |  | 2003 |  | 2002 |  | 2001
|                                                          |  | £m   |  | £m   |  | £m  
|Convertible preference shares  non equity                |  |      |  |      |  |     
|Dividends payable for the period                          |  | 17.1 |  | 18.8 |  | 18.8
|Provision for redemption premium                          |  |     |  | 2.2  |  | 2.2 
|                                                          |  |      |  |      |  |     
|                                                          |  | 17.1 |  | 21.0 |  | 21.0
|                                                          |  |      |  |      |  |     
|Ordinary shares  equity                                  |  |      |  |      |  |     
|Interim declared of 4.6p per share (2002 4.4p, 2001 4.2p) |  | 27.3 |  | 26.1 |  | 24.8
|Final proposed of 9.3p per share ( 2002 8.8p, 2001 8.4p)  |  | 55.5 |  | 52.1 |  | 49.7
|                                                          |  |      |  |      |  |     
|                                                          |  | 82.8 |  | 78.2 |  | 74.5
|                                                          |  |      |  |      |  |     



F-17



---

##### Table of Contents

NOTES TO THE ACCOUNTS (continued)



|8 | EARNINGS PER ORDINARY SHARE
|- | ---------------------------



Basic earnings per share is calculated by dividing the earnings attributable to Ordinary shareholders by the weighted average number of Ordinary shares in issue during
the year, excluding those held in the employee benefit trust which are treated as cancelled.



For diluted earnings per share, the weighted average number of Ordinary shares in issue is adjusted to assume conversion of all dilutive potential Ordinary shares comprising those share options granted to employees
where the exercise price is less than the average price of the Companys Ordinary shares during the year and the Companys Convertible preference shares.



|                                                         |  |                        |   |  |                  |    |  |       |   |  |                        |   |  |                  |    |  |       |  
|-------------------------------------------------------- |  | ---------------------- | - |  | ---------------- | -- |  | ----- | - |  | ---------------------- | - |  | ---------------- | -- |  | ----- | -
|                                                         |  | 2003                   |   |  | 2002             |   
|                                                         |  | Beforeexceptionalitems |   |  | Exceptionalitems |    |  | Total |   |  | Beforeexceptionalitems |   |  | Exceptionalitems |    |  | Total |  
|Basic earnings (£m)                                      |  | 113.7                  |   |  | (29.1            | )  |  | 84.6  |   |  | 117.4                  |   |  | (1.7             | )  |  | 115.7 |  
|Weighted average number of Ordinary shares (m)  basic   |  |                        |   |  |                  |    |  | 592.3 |   |  |                        |   |  |                  |    |  | 589.2 |  
|Basic earnings (loss) per Ordinary share                 |  | 19.2                   | p |  | (4.9             | )p |  | 14.3  | p |  | 19.9                   | p |  | (0.3             | )p |  | 19.6  | p
|                                                         |  |                        |   |  |                  |   
|Diluted earnings (£m)                                    |  | 114.5                  |   |  | (29.1            | )  |  | 85.4  |   |  | 117.4                  |   |  | (1.7             | )  |  | 115.7 |  
|Weighted average number of Ordinary shares (m)  diluted |  |                        |   |  |                  |    |  | 618.5 |   |  |                        |   |  |                  |    |  | 592.4 |  
|Diluted earnings (loss) per Ordinary share               |  | 18.5                   | p |  | (4.7             | )p |  | 13.8  | p |  | 19.8                   | p |  | (0.3             | )p |  | 19.5  | p



|                                                     |  |                         |   |  |                  |    |  |       |  
|---------------------------------------------------- |  | ----------------------- | - |  | ---------------- | -- |  | ----- | -
|                                                     |  | 2001                    |  
|                                                     |  | Before exceptionalitems |   |  | Exceptionalitems |    |  | Total |  
|Basic and diluted earnings (£m)                      |  | 97.7                    |   |  | (27.6            | )  |  | 70.1  |  
|Weighted average number of Ordinary shares (m)       |  |                         |   |  |                  |    |  | 590.7 |  
|Basic and diluted earnings (loss) per Ordinary share |  | 16.5                    | p |  | (4.6             | )p |  | 11.9  | p
|                                                     |  |                         |   |  |                  |    |  |       |  



Earnings per share before exceptional
items has been calculated to show the impact of exceptional items as these can have a distorting effect on earnings and therefore warrant separate consideration.



F-18



---

##### Table of Contents

NOTES TO THE ACCOUNTS (continued)



|9 | INTANGIBLE FIXED ASSETS
|- | -----------------------



|                                     |  |             |  
|------------------------------------ |  | ----------- | -
|                                     |  | Goodwill £m |  
|                                     | 
|Cost at December 31, 2002            |  | 58.7        |  
|Currency translation adjustment      |  | (3.7        | )
|Additions                            |  | 77.1        |  
|Fair value adjustments               |  | 4.0         |  
|                                     |  |             |  
|Cost at December 31, 2003            |  | 136.1       |  
|                                     |  |             |  
|Amortization at December 31, 2002    |  | 6.4         |  
|Currency translation adjustment      |  | (0.6        | )
|Amortization for the year            |  | 6.4         |  
|                                     |  |             |  
|Amortization at December 31, 2003    |  | 12.2        |  
|                                     |  |             |  
|Net book amount at December 31, 2003 |  | 123.9       |  
|                                     |  |             |  
|Net book amount at December 31, 2002 |  | 52.3        |  
|                                     |  |             |  



|10 | TANGIBLE FIXED ASSETS
|-- | ---------------------



|                                       |  |                      |   |  |                                         |   |  |                                                            |   |  |          |  
|-------------------------------------- |  | -------------------- | - |  | --------------------------------------- | - |  | ---------------------------------------------------------- | - |  | -------- | -
|                                       |  | Land andbuildings £m |   |  | Fixturesfittings, plantand machinery £m |   |  | Payments on account and assets in course ofconstruction £m |   |  | Total £m |  
|                                       |  |                      |   | 
|Group                                  |  |                      |   |  |                                         |   |  |                                                            |   |  |          |  
|Cost at December 31, 2002              |  | 576.6                |   |  | 664.4                                   |   |  | 12.0                                                       |   |  | 1,253.0  |  
|Currency translation adjustment        |  | (11.0                | ) |  | (11.1                                   | ) |  | (0.4                                                       | ) |  | (22.5    | )
|Additions                              |  | 25.1                 |   |  | 82.2                                    |   |  | 10.6                                                       |   |  | 117.9    |  
|Acquisition of subsidiary undertakings |  | 8.5                  |   |  | 20.9                                    |   |  | 0.3                                                        |   |  | 29.7     |  
|Disposals                              |  | (7.5                 | ) |  | (50.7                                   | ) |  | (0.4                                                       | ) |  | (58.6    | )
|Transfers                              |  | 8.7                  |   |  | 3.4                                     |   |  | (12.1                                                      | ) |  |         |  
|                                       |  |                      |   |  |                                         |   |  |                                                            |   |  |          |  
|Cost at December 31, 2003              |  | 600.4                |   |  | 709.1                                   |   |  | 10.0                                                       |   |  | 1,319.5  |  
|                                       |  |                      |   |  |                                         |   |  |                                                            |   |  |          |  
|Depreciation at December 31, 2002      |  | 107.3                |   |  | 365.0                                   |   |  |                                                           |   |  | 472.3    |  
|Currency translation adjustment        |  | (4.7                 | ) |  | (7.7                                    | ) |  |                                                           |   |  | (12.4    | )
|Provision for impairment               |  | 4.3                  |   |  | 10.7                                    |   |  |                                                           |   |  | 15.0     |  
|Disposals                              |  | (0.7                 | ) |  | (46.4                                   | ) |  |                                                           |   |  | (47.1    | )
|Depreciation for the year              |  | 15.1                 |   |  | 73.4                                    |   |  |                                                           |   |  | 88.5     |  
|                                       |  |                      |   |  |                                         |   |  |                                                            |   |  |          |  
|Depreciation at December 31, 2003      |  | 121.3                |   |  | 395.0                                   |   |  |                                                           |   |  | 516.3    |  
|                                       |  |                      |   |  |                                         |   |  |                                                            |   |  |          |  
|Net book amount at December 31, 2003   |  | 479.1                |   |  | 314.1                                   |   |  | 10.0                                                       |   |  | 803.2    |  
|                                       |  |                      |   |  |                                         |   |  |                                                            |   |  |          |  
|Net book amount at December 31, 2002   |  | 469.3                |   |  | 299.4                                   |   |  | 12.0                                                       |   |  | 780.7    |  
|                                       |  |                      |   |  |                                         |   |  |                                                            |   |  |          |  



F-19



---

##### Table of Contents

NOTES TO THE ACCOUNTS (continued)



|10 | TANGIBLE FIXED ASSETS (continued)
|-- | ---------------------------------



|(a) | Land with a net book amount of £72.9m (2002 £69.3m) is not depreciated. The net book amount of tangible assets for the Group includes £3.1m (2002 £3.1m)
interest capitalized.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(b) | The book amounts for fixtures, fittings, plant and machinery include the following amounts in respect of assets held under finance leases: cost £19.2m (2002 £12.3m),
accumulated depreciation £5.3m (2002 £3.4m), net book amount £13.9m (2002 £8.9m). The depreciation charge in respect of these assets was £3.5m (2002 £1.8m).
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The net book amount of land and buildings comprises:



|                                      |  |         |  |        
|------------------------------------- |  | ------- |  | -------
|                                      |  | 2003 £m |  | 2002 £m
|                                      |  |        
|Freeholds                             |  | 262.0   |  | 267.4  
|Long leases (over 50 years unexpired) |  | 27.4    |  | 27.2   
|Short leases                          |  | 189.7   |  | 174.7  
|                                      |  |         |  |        
|                                      |  | 479.1   |  | 469.3  
|                                      |  |         |  |        



|11 | INTERESTS IN JOINT VENTURES (UNLISTED)
|-- | --------------------------------------



|                                     |  |                           
|------------------------------------ |  | --------------------------
|                                     |  | Participating interests £m
|                                     | 
|Balances at December 31, 2002        |  | 5.4                       
|Currency translation adjustment      |  | 0.9                       
|Share of profits after distributions |  | 0.5                       
|                                     |  |                           
|Balances at December 31, 2003        |  | 6.8                       
|                                     |  |                           



|                                                    |  |         |  |         |  
|--------------------------------------------------- |  | ------- |  | ------- | -
|                                                    |  | 2003 £m |  | 2002 £m |  
|Share of retained Profit/(loss) for the period      |  |         |  |         |  
|Share of profits less losses after taxation         |  | 0.5     |  | (0.1    | )
|Dividends and distributions receivable by the Group |  |        |  |        |  
|                                                    |  |         |  |         |  
|Amounts retained attributable to the Group          |  | 0.5     |  | (0.1    | )
|                                                    |  |         |  |         |  



The Groups interests in joint
ventures at December 31, 2002 and 2003 comprised 50% of the ordinary share capital of Atlab Holdings Pty Limited (Atlab). The remaining share capital is owned by Amalgamated Holdings Limited. The principal activity of Atlab is as an investment
holding company. The company holds the investment in the Atlab Group of operating companies whose principal activities are film processing in Australasia.



On June 18, 2003, the Group formed a joint venture between Hard Rock Hotels and Resorts and Sol Meliá SA, to develop the Hard Rock Hotel concept throughout the
Americas and Europe.



F-20



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##### Table of Contents

NOTES TO THE ACCOUNTS (continued)



12 INTERESTS IN ASSOCIATED UNDERTAKINGS (UNLISTED)



|                                    |  |      |  
|----------------------------------- |  | ---- | -
|                                    |  | £m   |  
|Balances at December 31, 2002       |  | 4.0  |  
|Currency translation adjustment     |  | (0.2 | )
|Transfer to subsidiary undertakings |  | (0.5 | )
|Share of losses after distributions |  | (0.3 | )
|                                    |  |      |  
|Balances at December 31, 2003       |  | 3.0  |  
|                                    |  |      |  



|                                            |  |         |   |  |         |  
|------------------------------------------- |  | ------- | - |  | ------- | -
|                                            |  | 2003 £m |   |  | 2002 £m |  
|Share of retained loss for the period       |  |         |   |  |         |  
|Share of profits less losses after taxation |  | (0.3    | ) |  | (0.5    | )
|Provision for impairment                    |  |        |   |  |        |  
|                                            |  |         |   |  |         |  
|Amounts retained attributable to the Group  |  | (0.3    | ) |  | (0.4    | )
|                                            |  |         |   |  |         |  



At December 31, 2002 the Group owned
331/3% of the common stock of The Lab in Toronto, Inc (The Lab), a film laboratory in Toronto that principally
offers developing services to the feature film, television and commercial markets. On July 1, 2003 the Group acquired the remaining 672/3of the common stock of The Lab.



At
December 31, 2003 the Groups interests in associated undertakings comprise 20% of the equity of EFILM LLC (EFILM), a Delaware limited liability corporation whose principal activity is the digital production of film elements necessary for bulk
film processing.



13 OTHER INVESTMENTS



|                                |  |      |  
|------------------------------- |  | ---- | -
|                                |  | £m   |  
|Balances at December 31, 2002   |  | 58.0 |  
|Currency translation adjustment |  | (4.3 | )
|Additions                       |  | 6.5  |  
|Disposals                       |  | (6.4 | )
|                                |  |      |  
|Balances at December 31, 2003   |  | 53.8 |  
|                                |  |      |  



Other investments comprises
£22.2m (2002 - £22.3m) in relation to the Groups 10% equity investment in Universal Studios Japan, £19.6m (2002 - £23.3m) in relation to the Groups investment in the Universal Rank Hotel partnerships in the US,
£4.2m (2002 - £2.0m) in relation to the Groups investment in the Hard Rock hotel partnership in Chicago, £7.0m (2002 £9.8m) in respect of 2,752,076 (2002  3,897,157) Ordinary shares in The Rank Group Plc held at
cost by The Rank Group Employee Benefit Trust (the Trust) and £0.6m (2002 - £0.6m) in respect of the Groups 10% equity investment in Medal Entertainment & Media plc and £0.2m (2002 - £Nil) in respect of
the Groups 20% investment in Fancy a Flutter Limited.



F-21



---

##### Table of Contents

NOTES TO THE ACCOUNTS (continued)



13 OTHER INVESTMENTS (continued)



Dividends on the shares held by the Trust have been waived by the trustees with the exception of one penny in total. The Trust may make such investments in the shares of
the Company or otherwise as the trustee may determine to provide benefits to any eligible employee. The benefits may be provided in the form of shares, cash or otherwise, although any share related benefit will be provided in accordance with an
appropriate employee scheme or bonus scheme of the Company. The shares held by the Trust represent 0.5% of the Companys called up share capital. The market value of the shares held by the Trust on December 31, 2003 was £7.7m.



These shares were acquired by the Trust in the open market using funds provided by the
Group to meet obligations under share schemes. The costs of administering the scheme are charged to the profit and loss account of the Group in the period which they relate to.



14 STOCKS



|                                    |  |         |  |        
|----------------------------------- |  | ------- |  | -------
|                                    |  | 2003 £m |  | 2002 £m
|Raw materials and consumables       |  | 37.1    |  | 36.8   
|Work in progress                    |  | 2.8     |  | 2.0    
|Finished goods and goods for resale |  | 21.1    |  | 27.1   
|Completed properties for resale     |  | 9.2     |  | 8.5    
|                                    |  |         |  |        
|Stock                               |  | 70.2    |  | 74.4   
|                                    |  |         |  |        



F-22



---

##### Table of Contents

NOTES TO THE ACCOUNTS (continued)



15 DEBTORS



|                                              |  |         |  |        
|--------------------------------------------- |  | ------- |  | -------
|                                              |  | 2003 £m |  | 2002 £m
|                                              |  |        
|Amounts falling due within one year           |  |         |  |        
|Trade debtors                                 |  | 202.7   |  | 209.5  
|Other debtors                                 |  | 66.8    |  | 57.3   
|Assets held for disposal                      |  |        |  | 1.6    
|Deferred consideration receivable             |  |        |  |       
|Installment sale debtors and notes receivable |  | 1.3     |  | 3.1    
|Deferred tax asset                            |  | 31.6    |  | 37.0   
|Advance contract payments                     |  | 101.6   |  | 68.7   
|Prepayments and accrued income                |  | 41.6    |  | 34.6   
|                                              |  |         |  |        
|                                              |  | 445.6   |  | 411.8  
|                                              |  |         |  |        
|Amounts falling due after more than one year  |  |         |  |        
|Other debtors                                 |  | 36.2    |  | 11.7   
|Installment sale debtors and notes receivable |  | 20.0    |  | 27.7   
|Deferred tax asset                            |  | 58.1    |  | 68.9   
|Advance contract payments                     |  | 216.0   |  | 210.5  
|Prepayments and accrued income                |  | 0.5     |  | 0.9    
|                                              |  |         |  |        
|                                              |  | 330.8   |  | 319.7  
|                                              |  |         |  |        



Further details on the movement in
advance contract payments are provided below:



|                                 |  |       |  
|-------------------------------- |  | ----- | -
|                                 |  | £m    |  
|Balance at December 31, 2002     |  | 279.2 |  
|Currency translation adjustment  |  | (24.4 | )
|Amortization charge for the year |  | (93.6 | )
|Additions                        |  | 156.4 |  
|                                 |  |       |  
|Balance at December 31, 2003     |  | 317.6 |  
|                                 |  |       |  



16 CASH, DEPOSITS AND CURRENT ASSET
INVESTMENTS



|                                              |  |         |  |        
|--------------------------------------------- |  | ------- |  | -------
|                                              |  | 2003 £m |  | 2002 £m
|                                              |  |        
|Cash, current accounts and overnight deposits |  | 167.6   |  | 81.7   
|Term deposits                                 |  | 0.3     |  | 1.5    
|                                              |  |         |  |        
|                                              |  | 167.9   |  | 83.2   
|Current asset investments                     |  | 4.2     |  | 24.0   
|                                              |  |         |  |        
|Cash, deposits and current asset investments  |  | 172.1   |  | 107.2  
|                                              |  |         |  |        



Current asset investments comprise
amounts invested in cash and fixed deposit funds operated by external fund managers. The investments can be readily converted into cash. The funds are placed with counterparties with strong credit ratings. Cash, deposits and current asset
investments are receiving interest at floating rates in their currency of denomination, with 78% of the total being held in sterling, 15% in US dollars, 7% in euros.



F-23



---

##### Table of Contents

NOTES TO THE ACCOUNTS (continued)



17 LOAN CAPITAL AND BORROWINGS



|                                         |  |         |  |        
|---------------------------------------- |  | ------- |  | -------
|                                         |  | 2003 £m |  | 2002 £m
|                                         |  |        
|Bank overdrafts                          |  | 25.6    |  | 10.1   
|                                         |  |         |  |        
|Other borrowings repayable:              |  |         |  |        
|Within one year or on demand             |  | 266.5   |  | 28.7   
|Between one and two years                |  | 3.4     |  | 140.3  
|Between two and five years               |  | 316.4   |  | 124.7  
|In five years or more                    |  | 260.7   |  | 202.5  
|                                         |  |         |  |        
|                                         |  | 847.0   |  | 496.2  
|                                         |  |         |  |        
|Total                                    |  | 872.6   |  | 506.3  
|                                         |  |         |  |        
|Unsecured convertible bond               |  | 65.0    |  |       
|Unsecured                                |  | 797.4   |  | 500.0  
|Obligations under finance leases         |  | 10.2    |  | 6.3    
|                                         |  |         |  |        
|Total                                    |  | 872.6   |  | 506.3  
|                                         |  |         |  |        
|Amounts due within one year or on demand |  | 292.1   |  | 38.8   
|Amounts due after more than one year     |  | 580.5   |  | 467.5  
|                                         |  |         |  |        
|Loan capital and borrowings              |  | 872.6   |  | 506.3  
|                                         |  |         |  |        



The Group had the following undrawn
committed borrowing facilities available at December 31, 2003 and 2002:



|                                   |  |         |  |        
|---------------------------------- |  | ------- |  | -------
|                                   |  | 2003 £m |  | 2002 £m
|                                   |  |        
|Expiring between one and two years |  |        |  | 113.2  
|Expiring after more than two years |  | 200.0   |  |       
|                                   |  |         |  |        
|Loan capital and borrowings        |  | 200.0   |  | 113.2  
|                                   |  |         |  |        



The analysis of other borrowings
repayable above includes obligations under finance leases, of which £6.2m (2002 £2.7m) expire within one year, £2.9m (2002 £3.4m) expire between one and two years and £0.7m (2002 £0.2m) expire between two and five
years, and £0.4m (2002 £nil) expire after five years.



Borrowings
shown above include:



|(a) | £304.2m Private Placements (£35m, $482m) redeemable at par in 2007, 2010, 2013, 2015 (issued in 2003);
|--- | ------------------------------------------------------------------------------------------------------



|(b) | £111.7m US$200m 6.75% Yankee bonds redeemable at par in 2004 (issued 1997);
|--- | ---------------------------------------------------------------------------



|(c) | £55.8m US$100m 6.375% Yankee bonds redeemable at par in 2008 (issued 1998);
|--- | ---------------------------------------------------------------------------



|(d) | £13.9m US$24.8m 7.125% Yankee bonds redeemable at par in 2018 (issued 1998).
|--- | ----------------------------------------------------------------------------



|(e) | £65.0m convertible unsecured loan stock redeemable at par December 2004 (issued 2003); and
|--- | ------------------------------------------------------------------------------------------



|(f) | £82.1m unsecured amortised loan due December 2004 (arranged 2003);
|--- | ------------------------------------------------------------------



The funding policy of the Group is to maintain a broad portfolio of debt, diversified by source and maturity, and to maintain committed facilities sufficient to cover
seasonal peak anticipated borrowing requirements.



The finance costs of debt
instruments are charged to the profit and loss account over the term of the debt at a constant rate on the carrying amount. Such costs include the costs of issue, any discount to face value arising on issue and any premium payable on maturity.



F-24



---

##### Table of Contents

NOTES TO THE ACCOUNTS (continued)



18 FINANCIAL INSTRUMENTS



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



(a) Interest risk management



Financial liabilities



Some 35% of the Groups gross borrowings is at fixed rates of interest, with a weighted
average interest rate of 6.0% (2002 7.0%) and a weighted average term of 5.0 years (2002 5.3 years). At December 31, 2003, the Groups net debt was predominantly denominated in US dollars.



After taking account of interest rate and currency rate swaps, the currency and interest rate
exposure of gross borrowings as at December 31, 2003 was:



|                       |  |                    |  |                            |  |                         |  |                                 |  |                                                  
|---------------------- |  | ------------------ |  | -------------------------- |  | ----------------------- |  | ------------------------------- |  | -------------------------------------------------
|2003                   |  |                    |  |                            |  | Fixed rate borrowings  
|                       |  | Grossborrowings £m |  | Floating rateBorrowings £m |  | Fixed rateborrowings £m |  | Weighted averageinterest rate % |  | Weighted average timefor which rateis fixed years
|                       |  |                    |  |                            | 
|Sterling               |  | 474.6              |  | 286.4                      |  | 188.2                   |  | 5.4                             |  | 2.6                                              
|US/Canadian dollar     |  | 570.5              |  | 344.1                      |  | 226.4                   |  | 6.0                             |  | 9.4                                              
|Other currencies (net) |  | 132.2              |  | 129.8                      |  | 2.4                     |  | 3.4                             |  | 2.6                                              
|                       |  |                    |  |                            |  |                         |  |                                 |  |                                                  
|                       |  | 1,177.30           |  | 760.3                      |  | 417.0                   |  | 6.0                             |  | 5.0                                              
|                       |  |                    |  |                            |  |                         |  |                                 |  |                                                  



|                       |  |                    |  |                             |  |                          |  |                                 |  |                                                 
|---------------------- |  | ------------------ |  | --------------------------- |  | ------------------------ |  | ------------------------------- |  | ------------------------------------------------
|2002                   |  |                    |  |                             |  | Fixed rate borrowings   
|                       |  | Grossborrowings £m |  | Floating rate borrowings £m |  | Fixed rate borrowings £m |  | Weightedaverage interest rate % |  | Weightedaverage timefor which rateis fixed years
|Sterling               |  | 213.9              |  | 86.3                        |  | 127.6                    |  | 7.3                             |  | 5.2                                             
|US/Canadian dollar     |  | 441.7              |  | 372.9                       |  | 68.8                     |  | 6.8                             |  | 5.6                                             
|Other currencies (net) |  | 111.7              |  | 111.7                       |  |                         |  |                                |  |                                                
|                       |  |                    |  |                             |  |                          |  |                                 |  |                                                 
|                       |  | 767.3              |  | 570.9                       |  | 196.4                    |  | 7.0                             |  | 5.3                                             
|                       |  |                    |  |                             |  |                          |  |                                 |  |                                                 



Floating rate borrowings incur
interest based on relevant LIBOR equivalents.



The analysis of financial
liabilities at December 31, 2003 takes account of currency swaps which have the effect of increasing Loan capital and borrowings from £872.6m (Note 17) to total financial liabilities of £1,177.3m as shown above. Offsetting
this is the increase in cash, investments and other financial assets of £304.7m in the Financial assets table below. The increase relates to the sterling element of the currency swaps.



F-25



---

##### Table of Contents

NOTES TO THE ACCOUNTS (continued)



18 FINANCIAL INSTRUMENTS (continued)



In addition to the above, the following meet the definition of financial liabilities:



| |  | the Groups provisions of £13.6m (2002 £24.8m) for vacant leasehold properties (note 20) are considered to be floating rate financial liabilities. This is because
in establishing the provisions, the cash flows have been discounted using a discount rate which is re-appraised at each half yearly reporting date to ensure it reflects current market assessments of the time value of money and the risks specific to
the liability. £12.7m (2002 £23.0m) of the balance is denominated in sterling and the remainder are US dollar denominated.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | £54.1m (2002 £22.3m) of the Groups contract advances which are payable after more than one year. No interest is payable on these US dollar denominated financial
liabilities,
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | £11.9m (2002 £26.8) of deferred consideration payable after more than one year in respect of the acquisition of subsidiary undertakings. £2.1m is US dollar
denominated, £8.5m is in sterling with the balance denominated in euros and Canadian dollars.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Financial assets



|                                             |  |       |  |      
|-------------------------------------------- |  | ----- |  | -----
|                                             |  | 2003  |  | 2002 
|                                             |  | £m    |  | £m   
|Sterling                                     |  | 373.3 |  | 302.1
|US/Canadian dollar                           |  | 78.0  |  | 51.6 
|Other currencies                             |  | 25.5  |  | 14.5 
|                                             |  |       |  |      
|Cash, investments and other financial assets |  | 476.8 |  | 368.2
|                                             |  |       |  |      



Floating rate cash earns interest
based on relevant LIBID equivalents and investments earning interest according to the performance of the funds in which they are interested.



Installment sale debtors and notes receivable after one year



|          |  |                |  |                       |  |                     |  |                                |  |                                                 
|--------- |  | -------------- |  | --------------------- |  | ------------------- |  | ------------------------------ |  | ------------------------------------------------
|          |  |                |  |                       |  | Fixed rate assets  
|          |  | Total asset £m |  | Floatingrate asset £m |  | Fixed rate asset £m |  | Weightedaverage interestrate % |  | Weightedaverage timefor whichrate is fixed years
|2003      |  |                |  |                       |  |                     |  |                                |  |                                                 
|US dollar |  | 20.0           |  | 11.3                  |  | 8.7                 |  | 13.2                           |  | 4.3                                             
|          |  |                |  |                       |  |                     |  |                                |  |                                                 



|          |  |                |  |                       |  |                     |  |                                |  |                                               
|--------- |  | -------------- |  | --------------------- |  | ------------------- |  | ------------------------------ |  | ----------------------------------------------
|          |  |                |  |                       |  | Fixed rate assets  
|          |  | Total asset £m |  | Floatingrate asset £m |  | Fixed rate asset £m |  | Weightedaverage interestrate % |  | Weightedaveragetime forwhichrate isfixed years
|2002      |  |                |  |                       |  |                     |  |                                |  |                                               
|US dollar |  | 27.7           |  | 15.6                  |  | 12.1                |  | 13.6                           |  | 4.6                                           
|          |  |                |  |                       |  |                     |  |                                |  |                                               



Floating rate installment sale debtors
and notes receivable after one year earn interest based on three and five year US treasury bills.



F-26



---

##### Table of Contents

NOTES TO THE ACCOUNTS (continued)



18 FINANCIAL INSTRUMENTS (continued)



(b) Maturity of financial liabilities



For other financial liabilities, note 20 gives an indication of the nature of the underlying liabilities. The maturity profile of these liabilities is as follows:



|                             |  |                  |  |                  |  |                       |  |      |  |     
|---------------------------- |  | ---------------- |  | ---------------- |  | --------------------- |  | ---- |  | ----
|                             |  | Onerouscontracts |  | Contractadvances |  | Deferredconsideration |  | 2003 |  | 2002
|                             |  | £m               |  | £m               |  | £m                    |  | £m   |  | £m  
|Within one year or on demand |  | 3.7              |  |                 |  |                      |  | 3.7  |  | 9.0 
|Between one and two years    |  | 3.1              |  | 26.3             |  | 5.6                   |  | 35.0 |  | 27.2
|Between two and five years   |  | 4.5              |  | 27.8             |  | 6.3                   |  | 38.6 |  | 20.0
|Over five years              |  | 2.3              |  |                 |  |                      |  | 2.3  |  | 17.7
|                             |  |                  |  |                  |  |                       |  |      |  |     
|                             |  | 13.6             |  | 54.1             |  | 11.9                  |  | 79.6 |  | 73.9
|                             |  |                  |  |                  |  |                       |  |      |  |     



(c) Exchange risk management



After taking into account the effect of forward exchange contracts, there
are no material net monetary assets/ liabilities of Group companies denominated in currencies other than the relevant Group Companys own functional currency.



The Group operates a prudent hedging policy relating to its cross currency business trading cash flows. Currency exposures are netted by
currency and hedged forward for up to five years using forward foreign exchange contracts. At the year end at least 80% of anticipated core currency transaction exposures for the following 12 months had been hedged. The fair value of these hedges is
set out in section (d) below.



(d) Fair values



The estimated fair values of the Groups financial assets and financial liabilities at
December 31, 2003 and 2002 are set out below. The fair value of quoted borrowings is based on year end mid-market quoted prices. The fair values of other borrowings and the derivative financial instruments are estimated by discounting the future
cash flows to net present values using appropriate market rates prevailing at the year end. The fair value of the Convertible preference shares is calculated by reference to the open market value at year end.



Primary financial instruments held or issued to finance the Groups operations:



|                                                                             |  |                   |   |  |           |   |  |                   |   |  |           |  
|---------------------------------------------------------------------------- |  | ----------------- | - |  | --------- | - |  | ----------------- | - |  | --------- | -
|                                                                             |  | 2003              |   |  | 2003      |   |  | 2002              |   |  | 2002      |  
|                                                                             |  | Netcarryingamount |   |  | Fairvalue |   |  | Netcarryingamount |   |  | Fairvalue |  
|                                                                             |  | £m                |   |  | £m        |   |  | £m                |   |  | £m        |  
|Short term financial liabilities and current portion of long term borrowings |  | (292.1            | ) |  | (301.0    | ) |  | (175.6            | ) |  | (175.6    | )
|Long term borrowings                                                         |  | (580.5            | ) |  | (577.6    | ) |  | (330.7            | ) |  | (338.1    | )
|Cash at bank and liquid investments                                          |  | 172.1             |   |  | 172.1     |   |  | 107.2             |   |  | 107.6     |  
|Other financial assets                                                       |  | 20.0              |   |  | 20.0      |   |  | 27.7              |   |  | 27.7      |  
|Convertible preference shares                                                |  |                  |   |  |          |   |  | (226.9            | ) |  | (237.7    | )
|Other financial liabilities                                                  |  | (79.6             | ) |  | (79.6     | ) |  | (73.9             | ) |  | (73.9     | )



F-27



---

##### Table of Contents

NOTES TO THE ACCOUNTS (continued)



18 FINANCIAL INSTRUMENTS (continued)



The difference between net carrying amount and estimated fair value reflects unrealized gains or losses inherent in the instruments based on valuations at December 31,
2003. The volatile nature of the markets means that values at any subsequent date could be significantly different from the values reported above.



Financial derivative instruments



The estimated current value of the foreign exchange forward contracts and interest rate swaps entered into to hedge future transaction flows and on balance sheet
exposures is set out below based on quoted market prices.



|                                        |  |               |  |                  |  
|--------------------------------------- |  | ------------- |  | ---------------- | -
|                                        |  | 2003          |  | 2003             |  
|                                        |  | Book value £m |  | Current value £m |  
|Foreign exchange forward rate contracts |  |              |  | 2.3              |  
|Foreign currency swaps                  |  | 2.0           |  | 2.0              |  
|Commodity forwards                      |  |              |  | (0.6             | )
|Interest rate swaps                     |  |              |  | (0.4             | )



|                                        |  |               |  |                 
|--------------------------------------- |  | ------------- |  | ----------------
|                                        |  | 2002          |  | 2002            
|                                        |  | Book value £m |  | Current value £m
|Foreign exchange forward rate contracts |  |              |  | 4.4             
|Foreign currency swaps                  |  | 3.0           |  | 3.0             
|Interest rate swaps                     |  |              |  | 10.5            
|Commodity forwards                      |  |              |  |                



(e) Hedges



The Groups policy is to hedge the following exposures:



| |  | Interest rate risk, using interest and currency swaps; and
| | - | ----------------------------------------------------------



| |  | Currency risk, using forward foreign currency contracts for foreign currency receipts and payments. Forward foreign currency contracts are also used for currency exposures on future
years forecasted sales.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The table below shows the extent
to which the Group has off-balance sheet (unrecognized) gains and losses in respect of financial instruments used as hedges at the beginning and end of the year. It also shows the amount of such gains and losses which have been included in the
profit and loss account for the year and those gains and losses which are expected to be included in next years or later profit and loss accounts.



All the gains and losses on the hedging instruments are expected to be matched by losses and gains on the hedged transactions or positions.



F-28



---

##### Table of Contents

NOTES TO THE ACCOUNTS (continued)



18 FINANCIAL INSTRUMENTS (continued)



|                                                                 |  |              |   |  |           |   |  |                            |  
|---------------------------------------------------------------- |  | ------------ | - |  | --------- | - |  | -------------------------- | -
|                                                                 |  | Unrecognized |  
|                                                                 |  | Gains £m     |   |  | Losses £m |   |  | Total netgains (losses) £m |  
|Gains and losses on hedges at January 1, 2003                    |  | 15.8         |   |  | (0.9      | ) |  | 14.9                       |  
|Arising in previous years included in 2003 income                |  | (26.6        | ) |  | 4.2       |   |  | (22.4                      | )
|                                                                 |  |              |  
|Gains and losses not included in 2003 income:                    |  |              |   |  |           |   |  |                            |  
|                                                                 |  |              |   |  |           |   |  |                            |  
|Arising before January 1, 2003                                   |  | (10.8        | ) |  | 3.3       |   |  | (7.5                       | )
|Arising in 2003 on pre January 1, 2003 contracts                 |  | 11.0         |   |  | (5.1      | ) |  | 5.9                        |  
|Arising in 2003 on 2003 contracts                                |  | 5.0          |   |  | (2.1      | ) |  | 2.9                        |  
|                                                                 |  |              |   |  |           |   |  |                            |  
|Gains and losses on hedges at December 31, 2003 of which:        |  | 5.2          |   |  | (3.9      | ) |  | 1.3                        |  
|                                                                 |  |              |   |  |           |   |  |                            |  
|Gains and losses expected to be included in 2004 income          |  | 5.2          |   |  | (3.8      | ) |  | 1.4                        |  
|Gains and losses expected to be included in 2005 income or later |  |             |   |  | (0.1      | ) |  | (0.1                       | )



There are no significant deferred
gains or losses on hedge transactions.



(f) Financial instruments held for
trading purposes



The Group does not trade in financial instruments.



(g) Credit risk



The counterparties to the forward exchange contracts and terms deposits are major
international financial institutions with strong credit ratings. The Group continually monitors its positions and the credit ratings of its counterparties.



19 OTHER CREDITORS



|                                                   |  |       |  |      
|-------------------------------------------------- |  | ----- |  | -----
|                                                   |  | 2003  |  | 2002 
|                                                   |  | £m    |  | £m   
|Amounts falling due within one year                |  |       |  |      
|Trade creditors                                    |  | 121.5 |  | 104.9
|Other creditors                                    |  | 91.2  |  | 52.0 
|Other tax and social security                      |  | 14.4  |  | 10.1 
|UK corporation tax and overseas taxation           |  | 20.6  |  | 25.6 
|Deferred consideration                             |  | 22.5  |  | 19.2 
|Accrued dividends on Convertible preference shares |  | 0.3   |  | 7.8  
|Proposed final dividend on Ordinary shares         |  | 55.5  |  | 52.1 
|Contract advances payable                          |  | 34.3  |  | 20.5 
|Accruals and deferred income                       |  | 81.4  |  | 111.3
|                                                   |  |       |  |      
|                                                   |  | 441.7 |  | 403.5
|                                                   |  |       |  |      
|Amounts falling due after more than one year       |  |       |  |      
|Other creditors                                    |  | 7.8   |  | 4.0  
|UK corporation tax and overseas taxation           |  | 31.2  |  | 30.3 
|Deferred consideration                             |  | 11.9  |  | 26.8 
|Contract advances payable                          |  | 54.1  |  | 22.3 
|Accruals and deferred income                       |  | 0.7   |  | 0.1  
|                                                   |  |       |  |      
|                                                   |  | 105.7 |  | 83.5 
|                                                   |  |       |  |      



F-29



---

##### Table of Contents

NOTES TO THE ACCOUNTS (continued)



20 PROVISIONS FOR LIABILITIES AND CHARGES



|                                  |  |                  |   |  |                    |   |  |                       |   |  |       |   |  |       |  
|--------------------------------- |  | ---------------- | - |  | ------------------ | - |  | --------------------- | - |  | ----- | - |  | ----- | -
|                                  |  | Onerouscontracts |   |  | Restructuringcosts |   |  | Provisionsondisposals |   |  | Other |   |  | Total |  
|                                  |  | £m               |   |  | £m                 |   |  | £m                    |   |  | £m    |   |  | £m    |  
|Balances at December 31, 2002     |  | 24.8             |   |  | 3.0                |   |  | 11.1                  |   |  | 12.6  |   |  | 51.5  |  
|Currency translation adjustment   |  | (0.1             | ) |  | (1.1               | ) |  |                      |   |  | (0.4  | ) |  | (1.6  | )
|Acquisition of subsidiary         |  |                 |   |  | 0.7                |   |  |                      |   |  |      |   |  | 0.7   |  
|Net interest: release of discount |  | 0.9              |   |  |                   |   |  |                      |   |  |      |   |  | 0.9   |  
|Profit and loss account           |  |                  |   |  |                    |   |  |                       |   |  |       |   |  |       |  
|-operating charge                 |  | (0.2             | ) |  | 0.4                |   |  | (0.4                  | ) |  | 4.1   |   |  | 3.9   |  
|-exceptional operating items      |  |                 |   |  | 26.9               |   |  |                      |   |  | 8.4   |   |  | 35.3  |  
|-non-operating items              |  |                 |   |  |                   |   |  | (4.0                  | ) |  |      |   |  | (4.0  | )
|Utilized in the year              |  | (11.8            | ) |  | (14.9              | ) |  | (4.0                  | ) |  | (9.7  | ) |  | (40.4 | )
|                                  |  |                  |   |  |                    |   |  |                       |   |  |       |   |  |       |  
|Balances at December 31, 2003     |  | 13.6             |   |  | 15.0               |   |  | 2.7                   |   |  | 15.0  |   |  | 46.3  |  
|                                  |  |                  |   |  |                    |   |  |                       |   |  |       |   |  |       |  



Onerous contracts



The Group is party to a number of leasehold property contracts. Provision has been made
against those leases where the property is now vacant and the unavoidable costs under the lease exceed the economic benefit expected to be derived from potential sub-letting arrangements. The provision made in the year includes costs relating to
properties which have become surplus to requirements. Further details on the maturity profile of this provision are provided in note 18.



Restructuring Costs



The restructuring provisions held at December 31, 2003 relate to provisions established in 2003 by the exceptional charge described in note 2.



Provisions on disposals



This provision was established in 2000 following the disposal of Nightscene, Odeon Cinemas, Pinewood Studios, Tom Cobleigh and UK Holidays. Various provisions which were
made at the time of the disposals are now no longer deemed to be necessary, resulting in a release of £4.0m. The provision remaining at December 31, 2003 relates to outstanding insurance claims and potential warranty claims as described in the
sales contracts.



Other provisions



Other provisions include amounts relating to the Rank Group 2000 Long Term Incentive Plan
which provides for executive Directors and selected executives to be given restricted awards over existing Ordinary shares with a market value of up to one times base salary. These awards will vest in 2004 and 2005, subject to satisfaction of
applicable performance conditions.



F-30



---

##### Table of Contents

NOTES TO THE ACCOUNTS (continued)



21 DEFERRED TAX



The analysis of the deferred tax asset included in the financial statements at the end of the year is as follows:



|                                  |  |      |   |  |       |  
|--------------------------------- |  | ---- | - |  | ----- | -
|                                  |  | £m   |   |  | £m    |  
|Accelerated capital allowances    |  | 15.6 |   |  | 15.4  |  
|Other UK timing differences       |  | (5.0 | ) |  | (1.2  | )
|Tax losses carried forward        |  | 57.5 |   |  | 72.1  |  
|Other overseas timing differences |  | 21.6 |   |  | 19.6  |  
|                                  |  |      |   |  |       |  
|                                  |  | 89.7 |   |  | 105.9 |  
|                                  |  |      |   |  |       |  



The movement in deferred tax asset is
provided below:



|                                      |  |       |  
|------------------------------------- |  | ----- | -
|                                      |  | £m    |  
|Balance at December 31, 2002          |  | 105.9 |  
|Currency translation adjustment       |  | (7.9  | )
|Companies acquired in 2003            |  | 12.5  |  
|Charge to the profit and loss account |  | (20.8 | )
|                                      |  |       |  
|Balance at December 31, 2003          |  | 89.7  |  
|                                      |  |       |  



The Group has provided for a deferred
tax asset in respect of tax losses carried forward because it believes that there will be future taxable profits against which the underlying differences will reverse.



22 CAPITAL AND RESERVES



|                                          |  |            |  |                       |  |            |  |                       |  |          |  |                 |  |          |  |                 
|----------------------------------------- |  | ---------- |  | --------------------- |  | ---------- |  | --------------------- |  | -------- |  | --------------- |  | -------- |  | ----------------
|                                          |  | 2003       |  | 2002                 
|                                          |  | Authorized |  | Issued and fully paid |  | Authorized |  | Issued and fully paid
|                                          |  | Number m   |  | Nominal value £m      |  | Number m   |  | Nominalvalue £m       |  | Number m |  | Nominalvalue £m |  | Number m |  | Nominal value £m
|US$ cumulative preference shares          |  |           |  | 3                     |  |           |  |                      |  |         |  | 3               |  |         |  |                
|Convertible preference shares of 20p each |  |           |  |                      |  |           |  |                      |  | 300      |  | 60              |  | 226.9    |  | 45.4            
|Ordinary shares of 10p each               |  | 1,200      |  | 120                   |  | 596.2      |  | 59.6                  |  | 1,200    |  | 120             |  | 594.1    |  | 59.4            
|                                          |  |            |  |                       |  |            |  |                       |  |          |  |                 |  |          |  |                 
|                                          |  |            |  | 123                   |  |            |  | 59.6                  |  |          |  | 183             |  |          |  | 104.8           
|                                          |  |            |  |                       |  |            |  |                       |  |          |  |                 |  |          |  |                 



Under the Share Savings Schemes
operated by the Company employees hold options to subscribe for up to 6,996,020 (2002 6,114,307) Ordinary shares at prices between 141p and 271.58p per share exercisable by November 30, 2008.



Under the executive share option schemes operated by the Company, Directors and executives
hold options to subscribe for up to 13,897,085 (2002 13,878,632) Ordinary shares at prices ranging between 155.25p and 475.76p per share exercisable over the period up to September 11, 2013.



F-31



---

##### Table of Contents

NOTES TO THE ACCOUNTS (continued)



22 CAPITAL AND RESERVES (continued)



Options granted pursuant to share savings schemes are issued at a discount to the prevailing market price. Under the provisions of UITF 17 (revised) no provision is
required for the difference between market price and exercise price.



Options
granted under the share savings schemes are exercisable normally within a period of six months after the third or fifth anniversary of the related savings contract. Options granted under the executive share option schemes are exercisable normally
within a period commencing on the third anniversary and ending on the tenth anniversary of the date of the grant.



During the year, 229,982 Ordinary shares were issued by virtue of the conversion of 847,644 Convertible preference shares; a further 1,804,056 Ordinary shares were issued
during the year on the exercise of options.



During the year the remaining
226,086,041 Convertible preference shares were redeemed at 100p per share. The shares were redeemed to reduce the Groups cost of finance. The shares represent 100% of issued non-equity share capital and 43% of total issued share capital.



|                                                    |  |    |     
|--------------------------------------------------- |  | -- | ----
|Share Premium account                               |  | £m
|Balances at December 31, 2002                       |  |    | 13.6
|Movement on issue of shares                         |  |    | 3.9 
|                                                    |  |    |     
|Balance at December 31, 2003                        |  |    | 17.5
|                                                    |  |    |     
|                                                    | 
|Capital redemption reserve                          |  | £  | m   
|                                                    |  |    |     
|Balances at December 31, 2002 and December 31, 2003 |  |    | 24.8
|                                                    |  |    |     



Other reserves



|                                                |  |                             |   |  |        |   |  |                        |   |  |        |  
|----------------------------------------------- |  | --------------------------- | - |  | ------ | - |  | ---------------------- | - |  | ------ | -
|                                                |  | Company and itssubsidiaries |   |  |        |   |  |                        |  
|                                                |  | Preference redemption       |   |  | Other  |   |  | Associatedundertakings |   |  | Total  |  
|                                                |  | £m                          |   |  | £m     |   |  | £m                     |   |  | £m     |  
|Balances at December 31, 2002                   |  | 13.6                        |   |  | 593.5  |   |  | (1.7                   | ) |  | 605.4  |  
|Currency translation adjustment                 |  |                            |   |  | (1.4   | ) |  |                       |   |  | (1.4   | )
|Surplus on profit and loss account for the year |  |                            |   |  | 1.8    |   |  |                       |   |  | 1.8    |  
|Total of redemption premium                     |  | (13.6                       | ) |  | (167.1 | ) |  |                       |   |  | (180.7 | )
|                                                |  |                             |   |  |        |   |  |                        |   |  |        |  
|Balances at December 31, 2003                   |  |                            |   |  | 426.8  |   |  | (1.7                   | ) |  | 425.1  |  
|                                                |  |                             |   |  |        |   |  |                        |   |  |        |  



Of the £1.4m loss on other net
currency translation adjustments, a gain of £27.5m arises from the translation of foreign currency borrowings less deposits. The total cumulative goodwill eliminated against reserves at December 31, 2003 amounted to £909.9m (2002
£957.0m).



F-32



---

##### Table of Contents

NOTES TO THE ACCOUNTS (continued)



23 ANALYSIS OF MINORITY INTERESTS



|                                                                 |  |        |  
|---------------------------------------------------------------- |  | ------ | -
|                                                                 |  | Equity |  
|                                                                 |  | £m     |  
|Balances at December 31, 2002                                    |  | 20.1   |  
|Currency translation adjustment                                  |  | (1.4   | )
|Minority interest in the profit on ordinary activities after tax |  | (0.5   | )
|Distributions to minority interests                              |  | (2.1   | )
|                                                                 |  |        |  
|Balances at December 31, 2003                                    |  | 16.1   |  
|                                                                 |  |        |  



24 RECONCILIATION OF OPERATING
PROFIT TO OPERATING CASH FLOWS



|                                                             |  |       |   |  |        |   |  |       |  
|------------------------------------------------------------ |  | ----- | - |  | ------ | - |  | ----- | -
|                                                             |  | 2003  |   |  | 2002   |   |  | 2001  |  
|                                                             |  | £m    |   |  | £m     |   |  | £m    |  
|Operating profit                                             |  | 165.5 |   |  | 213.4  |   |  | 172.2 |  
|Exceptional charges                                          |  | 51.1  |   |  | 6.2    |   |  | 37.5  |  
|Cash payments in respect of exceptional costs and provisions |  | (34.8 | ) |  | (15.8  | ) |  | (27.4 | )
|Depreciation and amortization                                |  | 94.9  |   |  | 80.6   |   |  | 81.1  |  
|(Increase) decrease in stocks                                |  | 5.1   |   |  | (9.0   | ) |  | (3.1  | )
|(Increase) decrease in debtors                               |  | 5.9   |   |  | (212.8 | ) |  | (15.3 | )
|Increase (decrease) in creditors                             |  | 2.3   |   |  | 48.7   |   |  | 27.8  |  
|Other items                                                  |  | 1.9   |   |  | (4.0   | ) |  | (6.4  | )
|                                                             |  |       |   |  |        |   |  |       |  
|Net cash inflow from operating activities                    |  | 291.9 |   |  | 107.3  |   |  | 266.4 |  
|                                                             |  |       |   |  |        |   |  |       |  



25 ACQUISITION OF SUBSIDIARY
UNDERTAKINGS



|                                                  |  |                |   |  |               |   |  |          |  |               |  
|------------------------------------------------- |  | -------------- | - |  | ------------- | - |  | -------- |  | ------------- | -
|                                                  |  | Disctronics £m |   |  | BlueSquare £m |   |  | Other £m |  | Total 2003 £m |  
|Tangible fixed assets                             |  | 22.3           |   |  | 2.8           |   |  | 4.6      |  | 29.7          |  
|Net current (liabilities) assets (excluding cash) |  | 3.6            |   |  | (4.5          | ) |  | 0.4      |  | (0.5          | )
|Cash acquired                                     |  | 0.2            |   |  | 1.4           |   |  |         |  | 1.6           |  
|Deferred tax                                      |  | 1.2            |   |  | 11.3          |   |  |         |  | 12.5          |  
|Borrowings acquired                               |  | (4.0           | ) |  |              |   |  |         |  | (4.0          | )
|Lease obligations acquired                        |  | (7.8           | ) |  |              |   |  |         |  | (7.8          | )
|                                                  |  |                |   |  |               |   |  |          |  |               |  
|Net assets acquired                               |  | 15.5           |   |  | 11.0          |   |  | 5.0      |  | 31.5          |  
|Goodwill                                          |  | 19.0           |   |  | 54.7          |   |  | 3.4      |  | 77.1          |  
|                                                  |  |                |   |  |               |   |  |          |  |               |  
|Consideration                                     |  | 34.5           |   |  | 65.7          |   |  | 8.4      |  | 108.6         |  
|                                                  |  |                |   |  |               |   |  |          |  |               |  
|Satisfied by:                                     |  |                |   |  |               |   |  |          |  |               |  
|Cash paid                                         |  | 27.8           |   |  | 0.7           |   |  | 7.4      |  | 35.9          |  
|Issue of convertible loan stock                   |  |               |   |  | 65.0          |   |  |         |  | 65.0          |  
|Deferred consideration                            |  | 6.7            |   |  |              |   |  | 1.0      |  | 7.7           |  
|                                                  |  |                |   |  |               |   |  |          |  |               |  
|                                                  |  | 34.5           |   |  | 65.7          |   |  | 8.4      |  | 108.6         |  
|                                                  |  |                |   |  |               |   |  |          |  |               |  



F-33



---

##### Table of Contents

NOTES TO THE ACCOUNTS (continued)



25 ACQUISITION OF SUBSIDIARY UNDERTAKINGS (continued)



The acquisition of Disctronics was accounted for as follows:



|                                                  |  |              |   |  |                                |   |  |                          |   |  |                             |  
|------------------------------------------------- |  | ------------ | - |  | ------------------------------ | - |  | ------------------------ | - |  | --------------------------- | -
|                                                  |  | Bookvalue £m |   |  | Accountingpolicyadjustments £m |   |  | Fair valueadjustments £m |   |  | AcquisitionofDisctronics £m |  
|Tangible fixed assets                             |  | 33.5         |   |  | (4.7                           | ) |  | (6.5                     | ) |  | 22.3                        |  
|Net current (liabilities) assets (excluding cash) |  | 4.4          |   |  |                               |   |  | (0.8                     | ) |  | 3.6                         |  
|Cash acquired                                     |  | 0.2          |   |  |                               |   |  |                         |   |  | 0.2                         |  
|Deferred tax                                      |  |             |   |  | 1.2                            |   |  |                         |   |  | 1.2                         |  
|Borrowings acquired                               |  | (4.0         | ) |  |                               |   |  |                         |   |  | (4.0                        | )
|Lease obligations acquired                        |  | (7.8         | ) |  |                               |   |  |                         |   |  | (7.8                        | )
|                                                  |  |              |   |  |                                |   |  |                          |   |  |                             |  
|Net assets acquired                               |  | 26.3         |   |  | (3.5                           | ) |  | (7.3                     | ) |  | 15.5                        |  



Significant acquisitions in 2003 are
as follows:



Blue Square



On January 27, 2003 the Group completed its acquisition of Blue Square Limited, one of the
UKs leading internet and telephone betting businesses, for a total consideration of £65.7m. The consideration includes £65.0m of unlisted convertible loan stock, convertible into Rank Ordinary shares at any time on or after October
1, 2003 at a price of 282p for every £1 of loan stock held. This represented a premium of 11% to the closing mid-market price of Rank Ordinary shares on January 17, 2003, the latest practical date prior to the acquisition. The loan notes carry
a coupon of 5% per annum. Interest on the loan stock is payable on 31 December each year and, if conversion has not taken place prior to December 31, 2004, the loan stock will be redeemed on that date at par.



The only material fair value adjustment recorded against Blue Square was to recognize a
deferred tax asset of £11.3m.



For the period since acquisition, turnover
of £308.8m and operating profit of £1.0m before exceptional items and goodwill are included within the consolidated profit and loss accounts as continuing operations  acquisitions.



Disctronics



On July 21, 2003 the Group acquired 100% of the net assets of Disctronics, one of the largest independent DVD and CD replicators in Europe,
for a total consideration of £34.5m of which £6.7m is deferred. £3.5m was paid on January 2, 2004 with the final installment due on January 3, 2005.



The book value of the assets and liabilities acquired was reduced by £10.8m. Fair value adjustments totaled £7.3m of which
£6.5m related to a decrease in tangible fixed assets. The accounting policy realignment of £3.5m included £4.7m to reduce tangible fixed assets and £1.2m to recognize a deferred tax asset.



For the period since acquisition, turnover of £39.7m and operating profit of
£6.1m are included within the consolidated profit and loss accounts as continuing operations  acquisitions.



F-34



---

##### Table of Contents

NOTES TO THE ACCOUNTS (continued)



25 ACQUISITION OF SUBSIDIARY UNDERTAKINGS (continued)



Other acquisitions



On May 16, 2003 the Group acquired certain assets and liabilities of Sonic Foundry, Inc., Sonic Foundry Media Services, Inc. and International Image Services, Inc for
cash consideration of £3.5m. Sonic is a digital media asset management company based in Santa Monica, California USA and Toronto, Canada.



On July 1, 2003 the Group acquired the remaining 67.7% of the common stock of The Lab in Toronto, Inc for total consideration of £1.4m. Deferred consideration of
£0.6m is due in March 2005 and contingent consideration of £0.1m, based on pre-defined earnings targets is also due in March 2005.



On October 21, 2003 the Group acquired a new bingo club in Santiago de Compostela for cash consideration of £2.3m.



On December 11, 2003 the Group acquired 100% of the issued share capital of A Heathorn
(Course) Limited, an on-course bookmaker with pitches at major racecourses, for total consideration of £1.2m. £0.3m deferred consideration will be settled by June 11, 2005.



There is no material difference between the book value and fair value of other acquisitions.



Since acquisition, other acquisitions did not contribute materially to turnover or operating
profit.



During the year £17.8m of deferred consideration was paid in
respect of acquisitions made in prior years.



F-35



---

##### Table of Contents

NOTES TO THE ACCOUNTS (continued)



26 RECONCILIATION TO NET DEBT



|                                                       |  |        |   |  |        |   |  |        |  
|------------------------------------------------------ |  | ------ | - |  | ------ | - |  | ------ | -
|                                                       |  | 2003£m |   |  | 2002£m |   |  | 2001£m |  
|Increase (decrease) in cash in the year                |  | 70.8   |   |  | (29.0  | ) |  | (43.8  | )
|Increase in debt and lease financing                   |  | (303.3 | ) |  | (159.7 | ) |  | 117.3  |  
|Movement in liquid resources                           |  | (19.6  | ) |  | 18.8   |   |  | (5.4   | )
|                                                       |  |        |   |  |        |   |  |        |  
|Decrease (increase) in net debt from cash flows        |  | (252.1 | ) |  | (169.9 | ) |  | 68.1   |  
|Convertible bond                                       |  | (65.0  | ) |  |       |   |  |       |  
|New finance leases                                     |  |       |   |  |       |   |  | (1.4   | )
|Borrowings and leases acquired with subsidiary         |  | (11.8  | ) |  | (10.9  | ) |  |       |  
|Gain on repayment of fixed rate debt                   |  |       |   |  | 1.0    |   |  | 7.7    |  
|Currency translation adjustment                        |  | 27.5   |   |  | 28.8   |   |  | (2.6   | )
|                                                       |  |        |   |  |        |   |  |        |  
|Increase in net debt in the year                       |  | (301.4 | ) |  | (151.0 | ) |  | 71.8   |  
|Net debt at January 1                                  |  | (399.1 | ) |  | (248.1 | ) |  | (319.9 | )
|                                                       |  |        |   |  |        |   |  |        |  
|Net debt at December 31                                |  | (700.5 | ) |  | (399.1 | ) |  | (248.1 | )
|                                                       |  |        |   |  |        |   |  |        |  
|Cash, deposits and current asset investments (Note 16) |  | 172.1  |   |  | 107.2  |   |  | 123.9  |  
|Loan capital and borrowings (Note 17)                  |  | (872.6 | ) |  | (506.3 | ) |  | (372.0 | )
|                                                       |  |        |   |  |        |   |  |        |  
|Net debt at December 31                                |  | (700.5 | ) |  | (399.1 | ) |  | (248.1 | )
|                                                       |  |        |   |  |        |   |  |        |  



The movement in liquid resources
consisted of purchases of deposits and investments of £4.5m (2002 £25.1m) and sales of £24.1m (2002 £6.3m).



27 ANALYSIS OF NET DEBT



|(a) | Year to December 31, 2003
|--- | -------------------------



|                         |  |                     |   |  |             |   |  |                |   |  |                        |   |  |                                 |   |  |                     |  
|------------------------ |  | ------------------- | - |  | ----------- | - |  | -------------- | - |  | ---------------------- | - |  | ------------------------------- | - |  | ------------------- | -
|                         |  | December 31,2002 £m |   |  | Cash Flow£m |   |  | Acquisitions£m |   |  | Othernon cashchanges£m |   |  | Currencytranslationadjustment£m |   |  | December 31,2003 £m |  
|Cash in hand and at bank |  | 83.2                |   |  | 86.3        |   |  |               |   |  |                       |   |  | (1.6                            | ) |  | 167.9               |  
|Overdrafts               |  | (10.1               | ) |  | (15.5       | ) |  |               |   |  |                       |   |  |                                |   |  | (25.6               | )
|                         |  |                     |   |  |             |   |  |                |   |  |                        |   |  |                                 |   |  |                     |  
|                         |  | 73.1                |   |  | 70.8        |   |  |               |   |  |                       |   |  | (1.6                            | ) |  | 142.3               |  
|Debt due after one year  |  | (463.9              | ) |  | (249.5      | ) |  | (4.0           | ) |  | 111.7                  |   |  | 29.2                            |   |  | (576.5              | )
|Debt due within one year |  | (26.0               | ) |  | (57.6       | ) |  |               |   |  | (176.7                 | ) |  |                                |   |  | (260.3              | )
|Finance leases           |  | (6.3                | ) |  | 3.8         |   |  | (7.8           | ) |  |                       |   |  | 0.1                             |   |  | (10.2               | )
|                         |  |                     |   |  |             |   |  |                |   |  |                        |   |  |                                 |   |  |                     |  
|                         |  | (423.1              | ) |  | (232.5      | ) |  | (11.8          | ) |  | (65.0                  | ) |  | 27.7                            |   |  | (704.7              | )
|Liquid resources         |  | 24.0                |   |  | (19.6       | ) |  |               |   |  |                       |   |  | (0.2                            | ) |  | 4.2                 |  
|                         |  |                     |   |  |             |   |  |                |   |  |                        |   |  |                                 |   |  |                     |  
|Total                    |  | (399.1              | ) |  | (252.1      | ) |  | (11.8          | ) |  | (65.0                  | ) |  | 27.5                            |   |  | (700.5              | )
|                         |  |                     |   |  |             |   |  |                |   |  |                        |   |  |                                 |   |  |                     |  



F-36



---

##### Table of Contents

NOTES TO THE ACCOUNTS (continued)



27 ANALYSIS OF NET DEBT (continued)



(b) Year to December 31, 2002



|                         |  |                      |   |  |              |   |  |                                |   |  |                          |  |                                    |   |  |                      |  
|------------------------ |  | -------------------- | - |  | ------------ | - |  | ------------------------------ | - |  | ------------------------ |  | ---------------------------------- | - |  | -------------------- | -
|                         |  | December 31, 2001 £m |   |  | Cash flow £m |   |  | Acquisitions(excludingcash) £m |   |  | Other noncash changes £m |  | Currencytranslation adjustments £m |   |  | December 31, 2002 £m |  
|Cash                     |  | 117.6                |   |  | (25.4        | ) |  |                               |   |  |                         |  | (9.0                               | ) |  | 83.2                 |  
|Overdrafts               |  | (6.5                 | ) |  | (3.6         | ) |  |                               |   |  |                         |  |                                   |   |  | (10.1                | )
|                         |  |                      |   |  |              |   |  |                                |   |  |                          |  |                                    |   |  |                      |  
|                         |  | 111.1                |   |  | (29.0        | ) |  |                               |   |  |                         |  | (9.0                               | ) |  | 73.1                 |  
|Debt due after one year  |  | (362.7               | ) |  | (134.4       | ) |  | (6.5                           | ) |  | 1.0                      |  | 38.7                               |   |  | (463.9               | )
|Debt due within one year |  | (0.2                 | ) |  | (25.8        | ) |  |                               |   |  |                         |  |                                   |   |  | (26.0                | )
|Finance leases           |  | (2.6                 | ) |  | 0.5          |   |  | (4.4                           | ) |  |                         |  | 0.2                                |   |  | (6.3                 | )
|                         |  |                      |   |  |              |   |  |                                |   |  |                          |  |                                    |   |  |                      |  
|                         |  | (254.4               | ) |  | (188.7       | ) |  | (10.9                          | ) |  | 1.0                      |  | 29.9                               |   |  | (423.1               | )
|Liquid resources         |  | 6.3                  |   |  | 18.8         |   |  |                               |   |  |                         |  | (1.1                               | ) |  | 24.0                 |  
|                         |  |                      |   |  |              |   |  |                                |   |  |                          |  |                                    |   |  |                      |  
|Total                    |  | (248.1               | ) |  | (169.9       | ) |  | (10.9                          | ) |  | 1.0                      |  | 28.8                               |   |  | (399.1               | )
|                         |  |                      |   |  |              |   |  |                                |   |  |                          |  |                                    |   |  |                      |  



(c) Year to December 31, 2001



|                         |  |                      |   |  |              |   |  |                           |   |  |                                     |   |  |                      |  
|------------------------ |  | -------------------- | - |  | ------------ | - |  | ------------------------- | - |  | ----------------------------------- | - |  | -------------------- | -
|                         |  | December 31, 2000 £m |   |  | Cash flow £m |   |  | Other non cash changes £m |   |  | Currency translation adjustments £m |   |  | December 31, 2001 £m |  
|Cash                     |  | 156.0                |   |  | (46.6        | ) |  |                          |   |  | 8.2                                 |   |  | 117.6                |  
|Overdrafts               |  | (9.3                 | ) |  | 2.8          |   |  |                          |   |  |                                    |   |  | (6.5                 | )
|                         |  |                      |   |  |              |   |  |                           |   |  |                                     |   |  |                      |  
|                         |  | 146.7                |   |  | (43.8        | ) |  |                          |   |  | 8.2                                 |   |  | 111.1                |  
|Debt due after one year  |  | (444.1               | ) |  | 84.6         |   |  | 7.7                       |   |  | (10.9                               | ) |  | (362.7               | )
|Debt due within one year |  | (32.2                | ) |  | 31.9         |   |  |                          |   |  | 0.1                                 |   |  | (0.2                 | )
|Finance leases           |  | (2.0                 | ) |  | 0.8          |   |  | (1.4                      | ) |  |                                    |   |  | (2.6                 | )
|                         |  |                      |   |  |              |   |  |                           |   |  |                                     |   |  |                      |  
|                         |  | (331.6               | ) |  | 73.5         |   |  | 6.3                       |   |  | (2.6                                | ) |  | (254.4               | )
|Liquid resources         |  | 11.7                 |   |  | (5.4         | ) |  |                          |   |  |                                    |   |  | 6.3                  |  
|                         |  |                      |   |  |              |   |  |                           |   |  |                                     |   |  |                      |  
|Total                    |  | (319.9               | ) |  | 68.1         |   |  | 6.3                       |   |  | (2.6                                | ) |  | (248.1               | )
|                         |  |                      |   |  |              |   |  |                           |   |  |                                     |   |  |                      |  



Liquid resources comprise current
asset investments which, as described in Note 16, represent amounts readily convertible into cash.



Other non-cash changes comprise the gain on repayment of fixed rate debt and the inception of new finance leases.



F-37



---

##### Table of Contents

NOTES TO THE ACCOUNTS (continued)



28 DIRECTORS



|(a) | Directors interests
|--- | --------------------



The Directors interests in shares or stocks of the Company, including options to purchase Ordinary shares under the terms of the Groups Executive Share Option
Schemes (ESOS), Long Term Incentive Plan (LTIP) and Share Savings Schemes (SAYE) are as detailed below.



|                |  |                                  |  |                               
|--------------- |  | -------------------------------- |  | ------------------------------
|                |  | December 31, 2003Ordinary shares |  | January 1, 2003Ordinary shares
|Alun Cathcart   |  | 100,000                          |  | 75,000                        
|Ian Dyson       |  | 118,293                          |  | 20,000                        
|Peter Jarvis    |  | 25,525                           |  | 25,525                        
|Mike Smith      |  | 300,000                          |  | 120,000                       
|Oliver Stocken  |  | 40,090                           |  | 38,188                        
|John Sunderland |  | 1,058                            |  | 1,058                         



No options to subscribe for Ordinary
shares of the Company were granted to Directors, or lapsed, during the year ended December 31, 2003.



The market price of an Ordinary share at December 31, 2003 was 279.25 pence and the range during the preceding 12 months was 307.00 pence to 212.50 pence. Options outstanding at December 31, 2003 are exercisable at
various dates between April 1, 2002 and September 12, 2009, subject to satisfaction of applicable performance conditions.



Pursuant to the provisions of the Companies Act 1985, each executive Director is also deemed to be interested in the Ordinary shares of the Company held by The Rank Group
Plc Employee Benefit Trust. At January 1, 2003, the interest was in a total of 3,897,157 Ordinary shares and, at December 31, 2003, the interest was in a total of 2,752,076 Ordinary shares.



The Companys register of Directors interests (which is open to inspection)
contains full details of Directors shareholdings and options to subscribe for shares.



Long Term Incentive Plan



The current
long term incentive plan, the Rank Group 2000 Long Term Incentive Plan, provides for executive Directors and selected executives to be given restricted awards over existing Ordinary shares with a market value of up to one times base salary. Awards
are released if a total shareholder return (TSR) target is achieved and if there is an average annual real growth in normalized earnings per share of at least 2% over the relevant performance period, comprising three consecutive
financial years of the Company. TSR is measured by reference to the change in the price of Ordinary shares over the performance period and the gross value of dividends received on the shares, assuming they are immediately reinvested in shares during
that period.



F-38



---

##### Table of Contents

NOTES TO THE ACCOUNTS (continued)



28 DIRECTORS (continued)



|(b) | Total emoluments of the Directors of The Rank Group Plc:
|--- | --------------------------------------------------------



|                                                                                                            |  |          |  |          |  |         
|----------------------------------------------------------------------------------------------------------- |  | -------- |  | -------- |  | --------
|                                                                                                            |  | 2003£000 |  | 2002£000 |  | 2001£000
|Fees                                                                                                        |  | 113      |  | 95       |  | 110     
|Base salaries, allowances and taxable benefits                                                              |  | 1,120    |  | 1,043    |  | 1,087   
|Bonuses                                                                                                     |  | 227      |  | 407      |  | 541     
|Pension contributions-defined contributions                                                                 |  | 257      |  | 238      |  | 238     
|Salary supplements.                                                                                         |  | 64       |  | 60       |  | 54      
|Compensation for loss of office (including contribution to unapproved retirement benefit scheme - £166,000) |  |         |  |         |  | 751     
|                                                                                                            |  |          |  |          |  |         
|Total emoluments                                                                                            |  | 1,781    |  | 1,843    |  | 2,781   
|                                                                                                            |  |          |  |          |  |         
|(c) Emoluments of current Chairman                                                                          |  | 177      |  | 160      |  | 107     
|(d) Emoluments of highest paid director (including pension contributions)                                   |  | 1,003    |  | 1,058    |  | 1,103   
|                                                                                                            |  |          |  |          |  |         



29 EMPLOYEES



|                      |  |        |  |        |  |       
|--------------------- |  | ------ |  | ------ |  | ------
|                      |  | 2003£m |  | 2002£m |  | 2001£m
|Employee costs        |  |        |  |        |  |       
|Wages and salaries    |  | 353.2  |  | 322.5  |  | 303.3 
|Social security costs |  | 36.3   |  | 28.7   |  | 25.7  
|Other pension costs   |  | 7.0    |  | 6.3    |  | 7.9   
|                      |  |        |  |        |  |       
|                      |  | 396.5  |  | 357.5  |  | 336.9 
|                      |  |        |  |        |  |       



|                                                 |  |        |  |        |  |       
|------------------------------------------------ |  | ------ |  | ------ |  | ------
|                                                 |  | 2003   |  | 2002   |  | 2001  
|Average number of employees by geographical area |  |        |  |        |  |       
|UK                                               |  | 11,453 |  | 10,628 |  | 10,560
|North America                                    |  | 8,971  |  | 8,772  |  | 8,190 
|Rest of the World                                |  | 3,579  |  | 2,462  |  | 2,205 
|                                                 |  |        |  |        |  |       
|Continuing operations                            |  | 24,003 |  | 21,862 |  | 20,955
|Discontinued operations                          |  |       |  |       |  |      
|                                                 |  |        |  |        |  |       
|Average in year                                  |  | 24,003 |  | 21,862 |  | 20,955
|                                                 |  |        |  |        |  |       



The Group has continued to account for
pensions in accordance with SSAP 24 and the disclosures given in (a) below are those required by that standard. FRS 17 Retirement Benefits was issued in November 2000 but will not require full implementation for the Group and Company in
the current year. Phased transitional disclosures are required from December 31, 2001. The disclosures required are presented in (b) below.



F-39



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##### Table of Contents

NOTES TO THE ACCOUNTS (continued)



29 EMPLOYEES (continued)



|(a) | Provision for pension and similar obligations United Kingdom
|--- | ------------------------------------------------------------



The Group has two pension schemes for UK employees, both of which are contracted out of the State Second Pension arrangements. The schemes are externally funded under
separate trusts and the funds assets are held separately from Group assets. The accounts of both schemes for the year ended April 5, 2002 have been reported upon by their Auditors without qualification.



The Rank Pension Plan (the Plan) is a defined benefit scheme with pensions fixed
by reference to final pay and length of service. The market value of the Plans assets at April 5, 2003 was £455.3m (2002 £575.2m).



Formal actuarial valuations of the Plan are carried out triennially by an independent actuary, Mercer Human Resource Consulting Limited. The most recent valuation has an
effective date of April 5, 2001 and has been used to determine the pension charge for the year December 31, 2003. The main actuarial assumptions adopted were:



|                                             |  |             
|-------------------------------------------- |  | ------------
|Valuation method                             |  | attained age
|Rate of return on investments                |  |             
|- pre retirement                             |  | 6.25% p.a.  
|- post retirement                            |  | 5.25% p.a.  
|Rate of increase of pensionable remuneration |  | 3.75% p.a.  
|Rate of discretionary pension increases      |  | 1.50% p.a.  
|Rate of pensions in payment increases*       |  | 2.50% p.a.  



|*Pensions | in payment are entitled to increases in line with price inflation subject to a maximum of 5% per annum.
|--------- | -------------------------------------------------------------------------------------------------------



In prior years, the Plan has been valued under the projected unit method. Following the closure of the scheme to new entrants, the attained
age valuation method has been adopted since 2001.



Assets were taken at their
market value. As at the actuarial valuation date the value of the assets was sufficient to cover 109% of the accrued benefits allowing for expected future increases in earnings.



The pension charge for the year December 31, 2003 was £0.2m (2002 £0.6m expense). The charge was determined after recognizing a
credit of £4.7m resulting from spreading the expensing surplus of £36.5m as at January 1, 2001 over the average remaining service lives of the active members of the Plan. The decline in stock market values since the actuarial valuation
of the Plan on April 5, 2001 and the increase in accrued liabilities as a result of changes in financial conditions have resulted in a deficit in the fund at December 31, 2002 calculated in accordance with the requirements of FRS 17. Under current
accounting policies these matters are not required to be reflected in the pension charge until the next formal actuarial valuation, which will take place no later than April 5, 2004.



At December 31, 2003 there was a prepayment in debtors of £25.7m (2002 £15.1m) resulting from the difference between pension
costs charged in the accounts and the amounts funded to date.



The Rank Money
Purchase Pension Scheme is a defined contribution scheme with benefits which depend on the contribution levels and the emerging investment performance. The market value of its assets at April 5, 2003 was £34.7m (2002 £35.4m). Group
contributions to this scheme in the year to December 31, 2003 totaled £2.6m (2002 £1.3m).



USA The Group operates defined contribution schemes in the USA. Group contributions to these schemes totaled £3.1m (2002 £3.9m).



F-40



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##### Table of Contents

NOTES TO THE ACCOUNTS (continued)



29 EMPLOYEES (continued)



|(b) | FRS 17  Retirement Benefits (continued)
|--- | -----------------------------------------



The Group has continued to adopt FRS 17 Retirement benefits under the phased transitional arrangements allowed by the standard. The disclosures below relate
to all retirement benefit plans in the UK.



A full actuarial valuation was
carried out at April 5, 2001 and updated by an independent actuary to December 31,2002.



The main actuarial assumptions used to calculate the Plans liabilities under FRS 17 are:



|                                        |  |                |   |  |                |       
|--------------------------------------- |  | -------------- | - |  | -------------- | ------
|                                        |  | 2003           |   |  | 2002           |       
|Valuation method                        |  | Projected unit |   |  | Projected unit |       
|Discount rate                           |  | 5.25           | % |  | 5.50           | % p.a.
|Inflation assumption                    |  | 2.75           | % |  | 2.25           | % p.a.
|Rate of increase in salaries            |  | 4.00           | % |  | 3.50           | % p.a.
|Rate of increase of deferred pensions   |  | 2.75           | % |  | 2.25           | % p.a.
|Rate of increase of pensions in payment |  |                |   |  |                |       
|- increases (5% LPI increases)          |  | 2.75           | % |  | 2.25           | % p.a.
|- discretionary increases               |  |               |   |  | 1.25           | % p.a.



The assets in the scheme and the
expected rate of return were:



|                                               |  |                                                    |   |  |                            |   |  |                                                     |   |  |                             |  
|---------------------------------------------- |  | -------------------------------------------------- | - |  | -------------------------- | - |  | --------------------------------------------------- | - |  | --------------------------- | -
|                                               |  | Long termrate of returnexpected atDecember 31,2003 |   |  | Value atDecember31, 2003£m |   |  | Long term rate of returnexpected atDecember31, 2002 |   |  | Value atDecember 31,2002 £m |  
|Equities                                       |  | 7.25                                               | % |  | 352.2                      |   |  | 7.0                                                 | % |  | 280.0                       |  
|Government bonds                               |  | 4.75                                               | % |  | 85.9                       |   |  | 4.5                                                 | % |  | 90.0                        |  
|Non-government bonds                           |  | 5.25                                               | % |  | 63.1                       |   |  | 5.5                                                 | % |  | 66.4                        |  
|Insurance policies                             |  | 5.25                                               | % |  | 11.6                       |   |  | 5.5                                                 | % |  | 13.3                        |  
|Cash                                           |  | 3.75                                               | % |  | 11.0                       |   |  | 4.0                                                 | % |  | 16.0                        |  
|                                               |  |                                                    |   |  |                            |   |  |                                                     |   |  |                             |  
|Total market value of assets                   |  |                                                    |   |  | 523.8                      |   |  |                                                     |   |  | 465.7                       |  
|Actuarial value of defined benefit liabilities |  |                                                    |   |  | (588.6                     | ) |  |                                                     |   |  | (556.6                      | )
|                                               |  |                                                    |   |  |                            |   |  |                                                     |   |  |                             |  
|(Deficit) surplus in the Plan                  |  |                                                    |   |  | (64.8                      | ) |  |                                                     |   |  | (90.9                       | )
|Related deferred tax asset (liability)         |  |                                                    |   |  | 19.4                       |   |  |                                                     |   |  | 27.3                        |  
|                                               |  |                                                    |   |  |                            |   |  |                                                     |   |  |                             |  
|Net pension (liability) asset                  |  |                                                    |   |  | (45.4                      | ) |  |                                                     |   |  | (63.6                       | )
|                                               |  |                                                    |   |  |                            |   |  |                                                     |   |  |                             |  



F-41



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##### Table of Contents

NOTES TO THE ACCOUNTS (continued)



29 EMPLOYEES (continued)



|(b) | FRS 17  Retirement Benefits (continued)
|--- | -----------------------------------------



If FRS 17 had been adopted in the financial statements, the Groups net assets and profit and loss reserve at December 31, 2003 and December 31, 2002 would have been
as follows:



|                                               |  |         |   |  |         |  
|---------------------------------------------- |  | ------- | - |  | ------- | -
|                                               |  | 2003 £m |   |  | 2002 £m |  
|Net assets                                     |  |         |   |  |         |  
|Net assets excluding pension asset             |  | 525.1   |   |  | 753.6   |  
|Pension (liability) asset                      |  | (45.4   | ) |  | (63.6   | )
|                                               |  |         |   |  |         |  
|Net assets including pension (liability) asset |  | 479.1   |   |  | 690.0   |  
|                                               |  |         |   |  |         |  



|                                                 |  |         |   |  |         |  
|------------------------------------------------ |  | ------- | - |  | ------- | -
|                                                 |  | 2003 £m |   |  | 2002 £m |  
|Reserves                                         |  |         |   |  |         |  
|Profit and loss reserve excluding pension assets |  | 409.5   |   |  | 578.4   |  
|Pension reserve                                  |  | (45.4   | ) |  | (63.6   | )
|                                                 |  |         |   |  |         |  
|Profit and loss reserve                          |  | 364.1   |   |  | 514.8   |  
|                                                 |  |         |   |  |         |  



The Plan is closed to new entrants.
Under the projected unit method, the current service cost will increase as the members of the Plan approach retirement.



F-42



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##### Table of Contents

NOTES TO THE ACCOUNTS (continued)



29 EMPLOYEES (continued)



(b) FRS 17  Retirement Benefits (continued)



The following amounts would have been recognized in the performance statements in the year to December 31, 2003 under the requirements of FRS 17:



|                                                                            |  |        |  
|--------------------------------------------------------------------------- |  | ------ | -
|                                                                            |  | 2003£m |  
|Operating profit                                                            |  |        |  
|Current service cost                                                        |  | 4.8    |  
|Past service cost                                                           |  |       |  
|                                                                            |  |        |  
|Total operating charge                                                      |  | 4.8    |  
|                                                                            | 
|Other finance income                                                        |  |        |  
|Expected return on Plan assets                                              |  | 28.5   |  
|Interest on Plan liabilities                                                |  | (30.1  | )
|                                                                            |  |        |  
|Net return                                                                  |  | (1.6   | )
|                                                                            | 
|Statement of total recognized gains and losses                              |  |        |  
|Actual return less expected return on Plan assets                           |  | 39.7   |  
|Experience gains and losses arising on Plan liabilities                     |  | 14.6   |  
|Removal of allowance for discretionary pension increases                    |  | 49.1   |  
|Changes in assumptions underlying the present value of the Plan liabilities |  | (81.3  | )
|                                                                            |  |        |  
|Actuarial loss recognized                                                   |  | 22.1   |  
|                                                                            | 
|Movement in (deficit) surplus during the year                               |  |        |  
|Surplus in Plan at beginning of the year                                    |  | (90.9  | )
|Movement in year:                                                           |  |        |  
|Current service cost                                                        |  | (4.8   | )
|Contributions                                                               |  | 10.4   |  
|Past service costs                                                          |  |        |  
|Other finance income                                                        |  | (1.6   | )
|Actuarial loss                                                              |  | 22.1   |  
|                                                                            |  |        |  
|Deficit in Plan at end of the year                                          |  | (64.8  | )
|                                                                            |  |        |  
|Details of experience gains and losses for the year to December 31, 2003    |  |        |  
|Difference between the expected and actual return on Plan assets:           |  |        |  
|Amount (£m)                                                                 |  | 39.7   |  
|Percentage of Plan assets                                                   |  | 7.6    | %
|                                                                            | 
|Experience gains and losses on Plan liabilities:                            |  |        |  
|Amount (£m)                                                                 |  | 14.6   |  
|Percentage of present value of Plan liabilities                             |  | 2.5    | %
|                                                                            | 
|Total amount recognized in statement of total recognized gains and losses:  |  |        |  
|Amount (£m)                                                                 |  | 22.1   |  
|Percentage of present value of Plan liabilities                             |  | 3.8    | %



F-43



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##### Table of Contents

NOTES TO THE ACCOUNTS (continued)



30 CONTINGENT LIABILITIES



|                                                         |  |         |  |        
|-------------------------------------------------------- |  | ------- |  | -------
|                                                         |  | 2003 £m |  | 2002 £m
|Guarantees by the Company and by subsidiary undertakings |  | 27.3    |  | 38.9   
|                                                         |  |         |  |        



The Group is involved in a dispute
with Serena Holdings Limited over the purchase consideration of an acquisition which has been referred to an expert for determination. The dispute centers upon the parties contentions in relation to the accounts and the profits of the
businesses based upon which an additional purchase consideration may be payable. The Directors are strongly resisting the payment of any further sum. At the present time the outcome to the Group cannot be determined and the potential liability
cannot be quantified. However, it is the opinion of the Directors that it is unlikely that the outcome of this dispute will have a material effect on the Groups financial position.



31 COMMITMENTS



Future capital expenditure



At December 31, 2003 commitments for capital expenditure amounted to £35.6m (2002 £24.1m).



Group operating lease commitments



At December 31, 2003 commitments to make payments under operating leases in the following 12 months were:



|                                       |  |                    |  |                     |  |         |  |        
|-------------------------------------- |  | ------------------ |  | ------------------- |  | ------- |  | -------
|                                       |  | Land and buildings |  | Plant and machinery
|                                       |  | 2003£m             |  | 2002£m              |  | 2003 £m |  | 2002 £m
|Leases expiring in one year            |  | 3.3                |  | 3.3                 |  | 0.5     |  | 0.2    
|Leases expiring in two to five years   |  | 8.2                |  | 5.7                 |  | 14.3    |  | 14.3   
|Lease expiring in more than five years |  | 49.3               |  | 47.4                |  |        |  |       
|                                       |  |                    |  |                     |  |         |  |        
|                                       |  | 60.8               |  | 56.4                |  | 14.8    |  | 14.5   
|                                       |  |                    |  |                     |  |         |  |        



F-44



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##### Table of Contents

NOTES TO THE ACCOUNTS (continued)



32 RELATED PARTY TRANSACTIONS



During the year the Group traded with its associate undertakings, The Lab and EFILM. Group sales to these associated undertakings totaled £1.0m, purchases totaled
£0.3m, marketing fees totaled £0.3m and as at December 31, 2003 EFILM owed the Group £0.7m. On July 1, 2003 the Group purchased the remaining 672/3% of the common stock of the Lab as described in note 12. During the year the Group forgave EFILM trade debtors of £0.7m.



During the year the Group traded with its joint venture Atlab. Group sales to Atlab totaled
£2.4m, purchases totaled £10.6m marketing fees totaled £0.2m and at December 31, 2003 Atlab owed the Group £0.3m. The Group also provides Atlab with a bank guarantee for £3.2m.



The Group recharges the Rank Group UK Pension schemes with the costs of administration and
independent pension advisers borne by the Group. The total amount recharged in the year ended December 31, 2003 was £1.9m (2002 - £1.6m).



33 POST BALANCE SHEET EVENTS



On February 10, 2004, the Group completed the disposal of the business, assets and liabilities of Rank Leisure Machine Services Limited and Rank Seasonal Amusements
Limited to Gamestec Leisure Limited for a total consideration of £30.0m.



For the year ended December 31, 2003, the turnover of the disposed businesses was £56.8m and operating profit was £3.6m.



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##### Table of Contents

NOTES TO THE ACCOUNTS (continued)



|34 |  | PRINCIPAL SUBSIDIARY UNDERTAKINGS
|-- |  | ---------------------------------



Except where otherwise stated, The Rank Group Plc (Rank) owns directly or indirectly 100% of the Ordinary share capital and voting rights of the following
companies. The companies are incorporated in Great Britain unless otherwise indicated after the company name. The principal operations are carried out in the country of registration.



|                                             |  |                                                                                                         
|-------------------------------------------- |  | --------------------------------------------------------------------------------------------------------
|                                             |  | Principal Activities                                                                                    
|GAMING                                       |  |                                                                                                         
|Grosvenor Casinos Limited                    |  | London and provincial casinos                                                                           
|Mecca Bingo Limited                          |  | Social and bingo clubs                                                                                  
|Rank Leisure Machine Services Limited        |  | Amusement machine hire and sales                                                                        
|Rank Group Gaming Division                   |  | Owns the Groups investments in Gaming division companies.                                              
|Blue Square Limited                          |  | Interactive Gaming                                                                                      
|                                             | 
|HARD ROCK                                    |  |                                                                                                         
|Hard Rock Cafe International (USA) Inc. (US) |  | Operates and franchises Hard Rock cafes                                                                 
|Hard Rock International Limited              |  | Operates and franchises Hard Rock cafes                                                                 
|Hard Rock Canada Inc (Canada)                |  | Operates and franchises Hard Rock cafes                                                                 
|                                             | 
|DELUXE                                       |  |                                                                                                         
|Deluxe Laboratories Limited                  |  | Film processing laboratory                                                                              
|Deluxe Laboratories Inc. (US)                |  | Film processing laboratory                                                                              
|Deluxe Toronto Limited (Canada)              |  | Film processing laboratory                                                                              
|Deluxe Media Services Inc. (US)              |  | VHS duplication and distribution                                                                        
|Deluxe Global Media Services LLC (US)        |  | DVD replication                                                                                         
|Rank owns 88% of the issued shares           |  |                                                                                                         
|                                             | 
|HOLDING AND OTHER COMPANIES                  |  |                                                                                                         
|Rank America Inc. (US)                       |  | Owns the Groups investments in the US                                                                  
|Rank Group Finance Plc*                      |  | Funding operations for the Group                                                                        
|Rank Leisure Holdings Plc*                   |  | Owns the Groups investments in the UK operating subsidiary undertakings, Rank Overseas Holdings Limited
|Rank Overseas Holdings Limited               |  | Owns the Groups investment in Rank Holdings (Netherlands) BV and Rank America Inc.                     

---

|* | directly held by the Company
|- | ----------------------------



F-46



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##### Table of Contents

NOTES TO THE ACCOUNTS (continued)



|35 |  | SIGNIFICANT DIFFERENCES BETWEEN UK AND US GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
|-- |  | ----------------------------------------------------------------------------------



The Groups financial statements have been prepared in accordance with generally accepted accounting principles in the United Kingdom
(UK GAAP) which differ in certain respects from generally accepted accounting principles in the United States (US GAAP).



The following is a summary of the significant differences between UK and US GAAP, as they apply to the Group:



|(a) |  | Interactive gaming turnover
|--- |  | ---------------------------



Under UK GAAP and in line with industry standards, interactive gaming turnover is recognized on a gross basis to show gross turnover (stakes) rather than gross wins only.
Under US GAAP, these revenues are reported as the net win from the activities and represent the difference between gaming wins and losses. There is no impact on operating profit.



|(b) |  | Goodwill and identifiable intangible assets
|--- |  | -------------------------------------------



Both UK GAAP and US GAAP require purchase consideration to be allocated to the net assets acquired at their fair value on the date of acquisition, with the difference
between the consideration and the fair value on the date of acquisition of the identifiable net assets recorded as goodwill.



Under UK GAAP, prior to the implementation of FRS 10 Goodwill and Intangible Assets, goodwill arising on acquisitions made before December 31, 1997 has been
written off directly to reserves. Goodwill arising on acquisitions subsequent to December 31, 1997 has been capitalized and is being amortized over its useful economic life.



For the purposes of US GAAP, all goodwill written off against reserves under UK GAAP has been reinstated as an intangible asset on the
balance sheet and through December 31, 2001 was being amortized using the straight line method over its estimated useful life of twenty years, which equates to the useful economic life, except when management consider that there has been an
impairment in the value of goodwill, whereupon this element of the goodwill is charged to the profit and loss account immediately. Effective January 1, 2002, the Group adopted SFAS 142. This statement requires that goodwill no longer be amortized as
of January 1, 2002. Additionally, goodwill recorded from business combinations occurring subsequent to June 30, 2001 has not been amortized.



At the time of business combination, the Group must analyze its excess of purchase price over the fair value of the assets received to determine if there are any
identifiable intangibles to be recorded in accordance with FAS 141. These assets must be designated as either definite or indefinite-lived intangibles with amortization charged against definite lived intangibles over their useful life.



Goodwill and identifiable intangible assets that have indefinite lives are assessed
annually for impairment. Additionally, upon adoption of SFAS 142, management completed an impairment assessment and have concluded that there is no impairment of goodwill or identifiable intangibles with indefinite lives. In addition, at December
31, 2003 and December 31, 2002, the Group performed its annual impairment test and determined that there was no impairment necessary to the carrying value of goodwill.



An analysis of goodwill by reporting segment is given below:



|                                |  |           |  |        |  |        |   |  |       |  |       |  
|------------------------------- |  | --------- |  | ------ |  | ------ | - |  | ----- |  | ----- | -
|£m                              |  | Hard Rock |  | Gaming |  | Deluxe |   |  | Other |  | Total |  
|Balance at January 1, 2003      |  | 170.4     |  | 83.7   |  | 121.0  |   |  | 0.5   |  | 375.6 |  
|Currency translation adjustment |  | 0.1       |  |       |  | (6.3   | ) |  |      |  | (6.2  | )
|Fair value adjustment           |  |          |  |       |  | 4.0    |   |  |      |  | 4.0   |  
|Acquisitions                    |  |          |  | 26.6   |  | 16.4   |   |  |      |  | 43.0  |  
|                                |  |           |  |        |  |        |   |  |       |  |       |  
|Balance at December 31, 2003    |  | 170.5     |  | 110.3  |  | 135.1  |   |  | 0.5   |  | 416.4 |  
|                                |  |           |  |        |  |        |   |  |       |  |       |  



F-47



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##### Table of Contents

NOTES TO THE ACCOUNTS (continued)



|35 |  | SIGNIFICANT DIFFERENCES BETWEEN UK AND US GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (continued)
|-- |  | ----------------------------------------------------------------------------------------------



|(b) |  | Goodwill and identifiable intangible assets (continued)
|--- |  | -------------------------------------------------------



An analysis of the identifiable intangible assets is given below:



|                             |  |                   |   |  |       |  |               |   |  |            |   |  |       |  
|---------------------------- |  | ----------------- | - |  | ----- |  | ------------- | - |  | ---------- | - |  | ----- | -
|                             |  | Customercontracts |   |  | Brand |  | Customerlists |   |  | Technology |   |  | Total |  
|                             |  | £m                |   |  | £m    |  | £m            |   |  | £m         |   |  | £m    |  
|Balance at January 1, 2003   |  | 12.2              |   |  |      |  |              |   |  | 3.6        |   |  | 15.8  |  
|Additions                    |  | 4.7               |   |  | 18.0  |  | 4.9           |   |  | 6.5        |   |  | 34.1  |  
|Foreign exchange             |  | (1.4              | ) |  |      |  |              |   |  |           |   |  | (1.4  | )
|Amortization expense         |  | (4.6              | ) |  |      |  | (1.9          | ) |  | (0.5       | ) |  | (7.0  | )
|                             |  |                   |   |  |       |  |               |   |  |            |   |  |       |  
|Balance at December 31, 2003 |  | 10.9              |   |  | 18.0  |  | 3.0           |   |  | 9.6        |   |  | 41.5  |  
|                             |  |                   |   |  |       |  |               |   |  |            |   |  |       |  



Amortization expense is expected to be
£7.0m, £4.3m, £4.3m, £1.6m and £1.0m for each of the next five years, respectively.



All identifiable intangible assets, except for the Brand and technology licenses acquired on the acquisition of Blue Square, are amortized.



Had the Group accounted for its goodwill and identifiable intangible assets that have
indefinite lives under SFAS 142 for the year ending December 31, 2001, the impact on reported results would have been as follows:



|                                             |  |      
|-------------------------------------------- |  | -----
|                                             |  | 2001 
|                                             |  | £m   
|Net income under US GAAP as reported         |  | 315.8
|Amortization:                                |  |      
|Goodwill                                     |  | 40.6 
|Intangibles                                  |  |     
|Adjusted net income (loss) per US GAAP       |  | 356.4
|Adjusted basic net income (loss) per share   |  | 60.3p
|Adjusted diluted net income (loss) per share |  | 60.2p



|(c) |  | Profit on disposal of businesses
|--- |  | --------------------------------



Differing treatments between UK and US GAAP for the initial recording, determination of impairment and provisions for losses for certain of the Groups tangible and
intangible assets has led to differences in the carrying values of these assets. The differences in carrying values between UK and US GAAP gave rise to a difference in the profit recognized on disposal of managed businesses, resulting in a lower
loss being recognized under US GAAP compared to that under UK GAAP.



|d) |  | Casino licenses
|-- |  | ---------------



Under UK GAAP casino licenses are considered together with casino property. Casino properties are depreciated over the useful economic life of the physical properties to their residual values. Both the initial
carrying amount and residual value take into account the trading potential of the property with the benefit of the casino licenses. In view of the high residual values, casino properties are reviewed annually for potential impairment.



F-48



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##### Table of Contents

NOTES TO THE ACCOUNTS (continued)



|35 |  | SIGNIFICANT DIFFERENCES BETWEEN UK AND US GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (continued)
|-- |  | ----------------------------------------------------------------------------------------------



|(d) |  | Casino licenses (continued)
|--- |  | ---------------------------



In accordance with SFAS 142, it has been determined that casino licenses have an indefinite life and will no longer be amortized as of January 1, 2002. Casino licenses
will be evaluated for impairment annually. Upon adoption of SFAS 142, management completed an impairment assessment and concluded that there is no impairment of casino licenses. In addition, at December 31, 2003 and 2002 the Group performed its
annual impairment test and determined that there was no impairment necessary to the carrying value of casino licenses.



|(e) |  | Depreciation
|--- |  | ------------



Prior to January 1, 2000, under UK GAAP, no depreciation was provided on certain freehold properties, or leasehold properties with an unexpired term exceeding 20 years, where the Directors were of the opinion that the
properties were sufficiently well maintained to ensure that the residual values of such properties were such that the depreciation would be insignificant.



Following the introduction of FRS 15, which was implemented by the Group with effect from January 1, 2000, all properties are depreciated under UK GAAP. Freehold
properties are depreciated on a straight-line basis over 50 years or their useful life, if less. Leased properties are depreciated over the lesser of 50 years, their useful life or the term of the lease. No depreciation is provided on freehold land.



Under US GAAP, such assets are depreciated based upon their historical cost on
a straight-line basis over the lesser of 50 years, their useful life or the term of the lease.



|(f) |  | Impairment of long lived assets
|--- |  | -------------------------------



Under UK GAAP, formal impairment reviews are required if adverse events or changes in circumstances indicate that asset carrying values may not be recoverable. In
addition, purchased goodwill or intangible assets with a useful life of more than twenty years must be reviewed for impairment each year. Impairment is indicated (and measured) if the discounted future cash flows attributable to the asset are less
than its carrying value.



Under US GAAP, long lived assets held for use are
tested for impairment whenever events or changes in circumstances indicate that their carrying values may not be recoverable. When impairment is believed to exist, an analysis is performed to compare the gross, undiscounted cash flows attributable
to the asset over its remaining useful life to its carrying value. If the gross, undiscounted cash flows are less than the carrying value of the asset, impairment exists. The impairment loss is recorded as the difference between the assets carrying
value and its fair value. Fair value is the amount at which an asset could be bought or sold in a current transaction between willing parties, that is, other than in a forced or liquidation sale. Quoted market prices in active markets are the best
evidence of fair value and are used as the basis for measurement, if available. If quoted market prices are not available, the estimate of fair value is based on the best information available in the circumstances. The estimate of fair value
considers prices for similar assets and the results of valuation techniques to the extent available in the circumstances.



F-49



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NOTES TO THE ACCOUNTS (continued)



|35 |  | SIGNIFICANT DIFFERENCES BETWEEN UK AND US GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (continued)
|-- |  | ----------------------------------------------------------------------------------------------



|(g) |  | Sale and leaseback transactions
|--- |  | -------------------------------



Under UK GAAP, sale and leaseback transactions between related parties may qualify for sale and leaseback accounting as set out in SSAP 21 and the recognition
of a profit or loss on disposal may be allowable.



Under US GAAP, sale and
leaseback transactions in which the seller-lessee holds a beneficial interest in the buyer-lessor do not qualify for sale and leaseback accounting and are required to be accounted for as financing arrangements. Accordingly, no revenues on the sale
are recognized. In addition, the seller-lessee is required to account for a portion of payments to the buyer-lessor as interest expense, while the balance of the payments are debited to the liability account over the term of the lease.



As a result of the differences above any profit or loss on disposal will vary under US
GAAP from that reported under UK GAAP.



Under UK GAAP gains and losses arising
on sale and leaseback transactions are recorded in income in the period in which the transaction occurs. Under US GAAP losses are recognized in income in the period the transaction occurs, whilst gains are typically deferred and amortized to income
over the period of the lease.



|(h) | Pensions
|--- | --------



US GAAP requires the use of a discount rate, which reflects current market rates in determining the provision for pension benefits. UK GAAP permits the use of longer term discount rates. In addition to the difference
in discount rates, the amortization procedure under US GAAP applies a corridor approach for recognizing gains and losses in the determination of periodic pension expense.



SFAS No. 88, Employers Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination
Benefits, requires immediate recognition of settlement or curtailment gains and losses upon the occurrence of certain events, including the sale or disposal of operations which results in a significant decrease in the number of employees
participating in a pension plan. Statement of Standard Accounting Practice 24, Accounting for Pension Costs (SSAP 24), permits any such gains and losses to be deferred and amortized to the profit and loss account in the overall context
of the SSAP 24 pension charge.



The principal actuarial assumptions under SFAS
No. 132 are as follows:



|                                                |  |                   |   |  |                   |   |  |                   |   |  |                   |  
|----------------------------------------------- |  | ----------------- | - |  | ----------------- | - |  | ----------------- | - |  | ----------------- | -
|                                                |  | December 31, 2003 |   |  | December 31, 2002 |   |  | December 31, 2001 |   |  | December 31, 2000 |  
|Discount rate                                   |  | 5.25              | % |  | 5.50              | % |  | 6.00              | % |  | 5.75              | %
|Investment return                               |  | 6.50              | % |  | 6.25              | % |  | 6.75              | % |  | 7.50              | %
|Salary inflation                                |  | 4.00              | % |  | 3.50              | % |  | 3.50              | % |  | 4.75              | %
|Inflation                                       |  | 2.75              | % |  | 2.25              | % |  | 2.25              | % |  | 2.75              | %
|Pension increases (post April 6, 1997 benefits) |  | 2.75              | % |  | 2.25              | % |  | 2.25              | % |  | 2.75              | %
|Pension increases (pre April 6, 1997 benefits)  |  |                  |   |  | 1.25              | % |  | 1.25              | % |  |                  |  



The disclosures below are presented in
accordance with SFAS 132.



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|35 |  | SIGNIFICANT DIFFERENCES BETWEEN UK AND US GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (continued)
|-- |  | ----------------------------------------------------------------------------------------------



NOTES TO THE ACCOUNTS (continued)



The components of pension expense which arise under SFAS No. 132 are as follows:



|                                      |  |       |   |  |       |   |  |       |  
|------------------------------------- |  | ----- | - |  | ----- | - |  | ----- | -
|                                      |  | 2003  |   |  | 2002  |   |  | 2001  |  
|                                      |  | £m    |   |  | £m    |   |  | £m    |  
|Service cost                          |  | 5.0   |   |  | 5.2   |   |  | 8.7   |  
|Interest cost                         |  | 29.9  |   |  | 31.0  |   |  | 26.6  |  
|Expected return on assets             |  | (28.5 | ) |  | (37.5 | ) |  | (45.8 | )
|Net amortization and deferral         |  | 6.7   |   |  | 2.7   |   |  | 0.4   |  
|                                      |  |       |   |  |       |   |  |       |  
|Net periodic pension expense (income) |  | 13.1  |   |  | 1.4   |   |  | (10.1 | )
|                                      |  |       |   |  |       |   |  |       |  



The reconciliation of funded status
under FAS No. 132 are as follows:



|                                                                      |  |        |   |  |        |  
|--------------------------------------------------------------------- |  | ------ | - |  | ------ | -
|                                                                      |  | 2003£m |   |  | 2002£m |  
|Projected Benefit Obligation                                          |  |        |   |  |        |  
|At beginning of year                                                  |  | 556.6  |   |  | 529.0  |  
|Effect of change in benefit obligation                                |  |       |   |  |       |  
|Service cost                                                          |  | 5.0    |   |  | 5.2    |  
|Interest cost                                                         |  | 29.9   |   |  | 31.0   |  
|Actuarial loss (gain)                                                 |  | 23.2   |   |  | 20.1   |  
|Benefits paid                                                         |  | (27.5  | ) |  | (24.5  | )
|Employee contributions                                                |  | 2.3    |   |  | 2.3    |  
|Disposal gain                                                         |  | (0.8   | ) |  | (6.5   | )
|                                                                      |  |        |   |  |        |  
|Benefit obligation at end of year                                     |  | 588.7  |   |  | 556.6  |  
|                                                                      |  |        |   |  |        |  
|Plan Assets                                                           |  |        |   |  |        |  
|Fair value of asset at beginning of year                              |  | 465.7  |   |  | 565.0  |  
|Actual return on plan assets                                          |  | 73.8   |   |  | (75.2  | )
|Employer contributions                                                |  | 10.4   |   |  | 4.6    |  
|Employee contributions                                                |  | 2.2    |   |  | 2.3    |  
|Benefits paid                                                         |  | (27.5  | ) |  | (24.5  | )
|Disposal                                                              |  | (0.8   | ) |  | (6.5   | )
|                                                                      |  |        |   |  |        |  
|Fair value of asset at end of year                                    |  | 523.8  |   |  | 465.7  |  
|                                                                      |  |        |   |  |        |  
|Funded status at year end                                             |  | (64.9  | ) |  | (90.9  | )
|Unrecognized prior service cost                                       |  | 29.3   |   |  | 32.0   |  
|Unrecognized net actuarial loss (gain)                                |  | 81.9   |   |  | 107.9  |  
|                                                                      |  |        |   |  |        |  
|Net amount recognized                                                 |  | 46.3   |   |  | 49.0   |  
|                                                                      |  |        |   |  |        |  
|Amount recognized in the statement of financial position consists of: |  |        |   |  |        |  
|(Accrued) pension liability                                           |  | (42.8  | ) |  | (70.7  | )
|Unrecognized prior service cost                                       |  | 29.3   |   |  | 32.0   |  
|Accumulated other comprehensive income                                |  | 59.8   |   |  | 87.7   |  
|                                                                      |  |        |   |  |        |  
|Net amount recognized                                                 |  | 46.3   |   |  | 49.0   |  
|                                                                      |  |        |   |  |        |  



F-51



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NOTES TO THE ACCOUNTS (continued)



|35 |  | SIGNIFICANT DIFFERENCES BETWEEN UK AND US GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (continued)
|-- |  | ----------------------------------------------------------------------------------------------



|(h) |  | Pensions (continued)
|--- |  | --------------------



An analysis of the plan assets, by category is as follows:



|                   |  |       |  |       |  |                  
|------------------ |  | ----- |  | ----- |  | -----------------
|Category of assets |  | 2003% |  | 2002% |  | Targetallocation%
|Equity securities  |  | 69    |  | 62    |  | 65               
|Debt securities    |  | 29    |  | 35    |  | 35               
|Real estate        |  |      |  |      |  |                 
|Other              |  | 2     |  | 3     |  |                 
|                   |  |       |  |       |  |                  
|Total              |  | 100   |  | 100   |  | 100              
|                   |  |       |  |       |  |                  



The investment policy of the Rank
Pension Plan is set out in its Statement of Investment Principles. The Trustee takes professional advice and regularly considers its investment strategy. The asset allocation is determined with consideration to the Plans Liabilities.
Individual stock selection decisions are delegated to the investment managers who operate within a mandate determined by the Trustee and there is no bias towards holding Rank Group stock.



The long-term rate of return of plan assets reflects the average rate of earnings expected on the funds invested or expected to be invested
to provide for the benefits included in the projected benefit obligation.



The
accumulated benefit obligation, as at December 31, 2003 is £566.6m. The estimated future benefit payments are expected to be £27.5m, £28.3m, £29.2m, £30.0m and £31.0m for each of the next five years and
£169.2m for the following five years.



Contributions to the plan in 2004
are expected to be £10.4m.



Under US GAAP an additional minimum asset is
recognized and a charge made to other comprehensive income when the accumulated benefit obligation is less than the fair value of plan assets to the extent that this amount is not covered by the net liability already recognized. In 2003, a credit of
£59.9m was recognized in other comprehensive income partially reversing the charge of £119.7m recognized in 2002.



|(i) |  | Share Options
|--- |  | -------------



Under UK GAAP, the Group does not recognize compensation costs under share option schemes that have not been approved by the Inland Revenue unless the exercise price is at a discount to the open market value at date
of grant or the shares, on exercise, granted were purchased from the equities market. In addition, a provision is made for the employers share of the National Insurance Contributions (NIC) on outstanding share options that are
expected to be exercised.



Under US GAAP, the compensation expense associated
with all stock-based awards is recognized in accordance with APB 25, Accounting For Stock Issued to Employees. Under APB 25, compensation expense, if any, is determined based upon the excess of the fair value of the shares at the grant
date over the exercise price of the awards and recognized over the service life of the awards. EITF 00-16, Recognition and Measurement of Employer Payroll Taxes on Employee Stock-Based Compensation, requires that the NIC liability on
employee stock compensation be recognized on the date of the event triggering the measurement and payment of tax, which is deemed to be the exercise date.



F-52



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NOTES TO THE ACCOUNTS (continued)



|35 |  | SIGNIFICANT DIFFERENCES BETWEEN UK AND US GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (continued)
|-- |  | ----------------------------------------------------------------------------------------------



|(j) |  | Software application development costs
|--- |  | --------------------------------------



Under UK GAAP, the Group has capitalized certain software consultancy costs.



Under US GAAP, such costs can only be capitalized when they meet the requirements for capitalization under SOP 98-1 (Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use). Under the provisions of SOP 98-1, costs can usually only be capitalized, whether expended internally or to third parties, if they are directly attributable to the project and incurred in the application
development stage of the project. The resulting adjustment takes into consideration the treatment of these costs, as well as any depreciation taken in subsequent periods. As at December 31, 2003, the capitalized software costs have been fully
depreciated.



|(k) |  | Accruals - Employee expenses
|--- |  | ----------------------------



Under UK GAAP certain amounts earned by employees are recognized in the financial statements as they are incurred.



Under US GAAP certain amounts payable to employees are accrued during the period to reflect
the potential cost in that period.



|(l) |  | Provisions
|--- |  | ----------



Under UK GAAP certain provisions against debtors were recognized in the financial statements.



Under US GAAP these provisions were not recognized.



|(m) |  | Financial instruments
|--- |  | ---------------------



Under UK GAAP, periodic gains and losses on interest and foreign currency derivatives are not recognized in earnings until the operational transactions to which they are
linked occur. On January 1, 2001 for US GAAP reporting purposes, the Group adopted Financial Accounting Standard No. 133 Accounting for Derivative Instruments and Hedging Activities (FAS 133) as amended by FAS 137 and FAS 138.
Accordingly, all derivative instruments are recorded on the balance sheet at fair value. Changes in fair values are recorded in earnings or other comprehensive income, depending on whether the derivative instrument is part of a hedge transaction
and, if it is, the type of hedge transaction. The Group has also reviewed its contractual arrangements for the existence of embedded derivatives that should be separately accounted for under FAS 133. If embedded derivatives are identified as a
result of this review, they are recorded separately from their host contracts at fair value, with changes in fair value recognized in current earnings. The Group did not identify any such embedded derivatives as of January 1, 2002, December 31, 2002
or December 31, 2003.



Under UK GAAP, the £65m convertible bond issued in
January 2003 is recognized at par, with the fair value at December 31, 2003 disclosed. Under US GAAP, the convertible bond is fair valued as at December 31, 2003.



In accordance with the transition provisions of FAS 133 on January 1, 2001, the Group recorded a cumulative-effect-type adjustment of
£7.4m within Other Comprehensive Income in connection with certain foreign currency derivative instruments. During 2001 and 2002 the Group reclassified within earnings all the transition adjustments that were recorded in Accumulated Other
Comprehensive Income as the instruments matured.



F-53



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NOTES TO THE ACCOUNTS (continued)



|35 |  | SIGNIFICANT DIFFERENCES BETWEEN UK AND US GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (continued)
|-- |  | ----------------------------------------------------------------------------------------------



|(n) |  | Deferred taxation
|--- |  | -----------------



Under UK GAAP, deferred taxation is recognized in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events that result in an obligation to pay more
tax in the future or a right to pay less tax in the future have occurred at the balance sheet date. A net deferred tax asset is regarded as recoverable and therefore recognized only when, on the basis of all available information, it can be regarded
as more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted. Rank adopted FRS 19 Deferred Tax in 2002. This results in a prior period adjustment
and accordingly the results for 2001 were restated in the prior year.



Under US
GAAP, deferred taxation is accounted for on all timing differences, and a valuation allowance is established in respect of those deferred taxation assets where it is more likely than not that some portion will not be realized. Additionally, for US
GAAP purposes deferred taxes are provided in respect of US GAAP adjustments to the book basis of assets and liabilities.



|(o) |  | Redeemable Preference shares
|--- |  | ----------------------------



Under UK GAAP, convertible cumulative redeemable preference shares are included in shareholders funds.



Under US GAAP, because these shares have a mandatory redemption feature, they are not classified as shareholders equity.



All the preference shares were redeemed in December 2003.



|(p) |  | Ordinary dividends
|--- |  | ------------------



Under UK GAAP, Ordinary dividends proposed are provided for in the year in respect of which they are recommended by the Board of Directors although approval of the final dividend will not take place until the annual
general meeting subsequent to the year end.



Under US GAAP, such dividends are
provided for in the period in which they are declared and approved by the Board of Directors.



|(q) |  | Contingent consideration
|--- |  | ------------------------



Under UK GAAP, contingent consideration on acquisition of an entity is estimated at the acquisition date and subsequently corrected against goodwill when the actual
amount is paid.



Under US GAAP, contingent consideration is not recognized
until the contingency is resolved or the amount is determinable.



|(r) |  | Exceptional items
|--- |  | -----------------



Under UK GAAP, exceptional items are items which derive from events or transactions that fall within the ordinary activities of the reporting entity which individually or, if of a similar type, in aggregate, need to
be disclosed by virtue of their of incidence.



Under US GAAP, only items which
are deemed unusual in nature and infrequent in occurrence (not reasonably expected to recur in the foreseeable future) qualify for presentation as extraordinary items and are presented below income before extraordinary items in the
statement of profit and loss.



F-54



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NOTES TO THE ACCOUNTS (continued)



|35 |  | SIGNIFICANT DIFFERENCES BETWEEN UK AND US GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (continued)
|-- |  | ----------------------------------------------------------------------------------------------



|(s) |  | Current assets and liabilities
|--- |  | ------------------------------



Under UK GAAP, current assets include amounts which fall due after more than one year.



Under US GAAP, such assets would be reclassified as non-current assets. Provisions for liabilities and charges under UK GAAP include amounts
due within one year which would be reclassified to current liabilities under US GAAP.



|(t) |  | Other differences
|--- |  | -----------------



Other minor differences exist between UK GAAP and US GAAP in respect of certain items reflected in the consolidated financial statements, such as the accounting for shares help by ESOP trusts which are consolidated.
Such differences are insignificant to the reconciliation of net income and shareholders funds and accordingly have been excluded from the reconciliations on the following pages.



|(u) |  | Guarantees
|--- |  | ----------



Under UK GAAP, guarantees relating to contingent liabilities and acquisitions are required to be disclosed. The disclosures are given in notes 25 and 30 of the Notes to the Accounts.



Under US GAAP, guarantees must be accounted for using the guidance of FIN 45,
Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. FIN 45 elaborates on the existing disclosure requirements for most guarantees and clarifies that at the time
the Group issues a guarantee, the Group must recognize an initial liability for the fair value, or market value of the obligations it assumes under the guarantee.



In addition to the disclosure given in notes 25 and 30 of the Notes to the Accounts, the following is required to be disclosed under US
GAAP:



The Groups Gaming and Hard Rock divisions enter into contracts
that guarantee a minimum purchase amount or volume. Based on past consumption levels and future forecasts, the Group believes normal trading demands will satisfy all minimum requirements and therefore no additional amounts will require to be paid.
Details of the main contracts are given below:



| |  | Contract ending March 2004 guaranteeing the purchase of £1m in electricity. If the minimum purchase amount is not met by the contract end date, the outstanding amount is
rolled forward until the guaranteed amount has been purchased;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Contract ending March 2004 guaranteeing the purchase of £0.3m in gas. If the minimum purchase amount is not met by the contract end date, the outstanding amount is rolled
forward until the guaranteed amount has been purchased;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Contract ending December 2005 guaranteeing the purchase of a minimum volume of soft drinks. At current prices, the minimum purchase volume equates to £2m annually and normal
trading demands are expected to exceed the minimum purchase volume;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-55



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NOTES TO THE ACCOUNTS (continued)



35 SIGNIFICANT DIFFERENCES BETWEEN UK AND US GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (continued)



(u) Guarantees (continued)



| |  | Contract ending February 2010 guaranteeing the purchase of a minimum volume of soft drinks. At current prices, the minimum purchase volume equates to £0.4m annually and normal
trading demands are expected to exceed the minimum purchase volume;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Contract ending October 2004 guaranteeing the purchase of a minimum volume of ingredients. At current prices, the minimum purchase volume equates to £0.7m annually and normal
trading demands are expected to exceed the minimum purchase volume;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In addition, many Deluxe customer contracts have performance obligations mainly focussed around the timeliness of delivery, quality of product and security. The implications of failing to meet these obligations vary from contract to
contract. In the worst cases repeated offences and failure to remedy the breach could end in termination of contract and the financial loss of any advance.



F-56



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35 SIGNIFICANT DIFFERENCES BETWEEN UK AND US GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (continued)



(v) Effect on turnover of differences between UK GAAP and US GAAP



|                                                           |  |         |   |  |         |   |  |        
|---------------------------------------------------------- |  | ------- | - |  | ------- | - |  | -------
|                                                           |  | 2003 £m |   |  | 2002 £m |   |  | 2001 £m
|Turnover for the financial year in accordance with UK GAAP |  | 1,925.9 |   |  | 1,508.5 |   |  | 1,366.9
|                                                           |  |         |   |  |         |   |  |        
|US GAAP adjustments:                                       |  |         |   |  |         |   |  |        
|Interactive gaming turnover (a)                            |  | (350.4  | ) |  | (43.9   | ) |  |       
|                                                           |  |         |   |  |         |   |  |        
|Turnover in accordance with US GAAP                        |  | 1,575.5 |   |  | 1,464.6 |   |  | 1,366.9
|                                                           |  |         |   |  |         |   |  |        



(w) Effect on net income of
differences between UK GAAP and US GAAP



|                                                                                    |  |        |   |  |        |   |  |        |   
|----------------------------------------------------------------------------------- |  | ------ | - |  | ------ | - |  | ------ | --
|                                                                                    |  | 2003£m |   |  | 2002£m |   |  | 2001£m |   
|                                                                                    |  |        |  
|Profit for the financial year in accordance with UK GAAP                            |  | 101.7  |   |  | 136.7  |   |  | 91.1   |   
|US GAAP adjustments:                                                                |  |        |   |  |        |   |  |        |   
|Goodwill amortization (b)                                                           |  | (0.6   | ) |  | 0.3    |   |  | (40.6  | ) 
|Profit on disposal of businesses (c)                                                |  |       |   |  | 2.6    |   |  |       |   
|Amortization of casino licenses (d)                                                 |  |       |   |  |       |   |  | (5.8   | ) 
|Depreciation of fixed assets (e)                                                    |  | 0.3    |   |  |       |   |  | (0.7   | ) 
|Impairment of long lived assets (f)                                                 |  |       |   |  | (15.7  | ) |  | 23.8   |   
|Sale and leaseback transaction (g)                                                  |  | 0.5    |   |  | 18.9   |   |  | (15.4  | ) 
|Pension cost (h)                                                                    |  | (13.3  | ) |  | (0.9   | ) |  | 16.6   |   
|Share options (i)                                                                   |  | 1.2    |   |  |       |   |  |       |   
|Capitalized software costs (j)                                                      |  | 0.8    |   |  | 0.8    |   |  | 1.3    |   
|Accruals (k)                                                                        |  | 0.2    |   |  | (0.5   | ) |  |       |   
|Provisions (l)                                                                      |  | 5.4    |   |  |       |   |  |       |   
|Derivative financial instruments (m)                                                |  | (13.6  | ) |  | 25.7   |   |  | (10.8  | ) 
|Fair value adjustment to current liabilities (m)                                    |  | (8.9   | ) |  |       |   |  |       |   
|Deferred taxation                                                                   |  |        |   |  |        |   |  |        |   
|- full provisioning (n)                                                             |  | 0.8    |   |  | (3.4   | ) |  | 248.9  |   
|- adjustments in respect of other US GAAP differences                               |  | 4.0    |   |  | 0.3    |   |  | 7.4    |   
|                                                                                    |  |        |   |  |        |   |  |        |   
|Net profit in accordance with US GAAP                                               |  | 78.5   |   |  | 164.8  |   |  | 315.8  |   
|                                                                                    |  |        |   |  |        |   |  |        |   
|Earnings (loss) per share:                                                          |  |        |   |  |        |   |  |        |   
|Basic: Continuing operations                                                        |  | 13.3   | p |  | 28.0p  |   |  | 53.7p  |   
|Discontinued operations                                                             |  |       |   |  |       |   |  | (0.2   | )p
|                                                                                    |  |        |   |  |        |   |  |        |   
|Net basic earnings per share                                                        |  | 13.3   | p |  | 28.0   | p |  | 53.5p  |   
|                                                                                    |  |        |   |  |        |   |  |        |   
|Diluted: Continuing operations                                                      |  | 12.7   | p |  | 27.8   | p |  | 53.7p  |   
|Discontinued operations                                                             |  |       |   |  |       |   |  | (0.2   | )p
|                                                                                    |  |        |   |  |        |   |  |        |   
|Net diluted earnings per share                                                      |  | 12.7   | p |  | 27.8   | p |  | 53.5   | p 
|                                                                                    |  |        |   |  |        |   |  |        |   
|Number of shares used in calculating US GAAP basic income per share (in millions)   |  | 592.3  |   |  | 589.2  |   |  | 590.7  |   
|Number of shares used in calculating US GAAP diluted income per share (in millions) |  | 618.5  |   |  | 592.4  |   |  | 592.4  |   



F-57



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##### Table of Contents

NOTES TO THE ACCOUNTS (continued)



35 SIGNIFICANT DIFFERENCES BETWEEN UK AND US GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (continued)



(x) Effect on shareholders equity of differences between UK GAAP and US GAAP



|                                                      |  |        |   |  |        |  
|----------------------------------------------------- |  | ------ | - |  | ------ | -
|                                                      |  | 2003£m |   |  | 2002£m |  
|Shareholders funds in accordance with UK GAAP        |  | 527.0  |   |  | 748.6  |  
|US GAAP adjustments:                                  |  |        |   |  |        |  
|Goodwill (b)                                          |  | 292.5  |   |  | 323.6  |  
|Intangible assets (b)                                 |  | 41.5   |   |  | 15.8   |  
|Contingent consideration (q)                          |  | 5.1    |   |  | 5.1    |  
|Accumulated amortization of casino licenses (d)       |  | (53.4  | ) |  | (53.4  | )
|Accumulated depreciation of fixed assets (e)          |  | (46.9  | ) |  | (47.2  | )
|Impairment of long lived assets (f)                   |  | 65.4   |   |  | 64.9   |  
|Sale and leaseback transactions (g)                   |  | (12.6  | ) |  | (13.1  | )
|Accrued pension costs (h)                             |  | (39.2  | ) |  | (85.8  | )
|Share options (i)                                     |  | 1.2    |   |  |       |  
|Capitalized software costs (j)                        |  |       |   |  | (0.8   | )
|Accruals (k)                                          |  | (0.3   | ) |  | (0.5   | )
|Debtors (l)                                           |  | 5.4    |   |  |       |  
|Derivative financial instruments (m)                  |  | 1.3    |   |  | 14.9   |  
|Fair value adjustment to current liabilities (m)      |  | (8.9   | ) |  |       |  
|Convertible preference shares (o)                     |  |       |   |  | (226.6 | )
|Proposed ordinary dividends (p)                       |  | 55.5   |   |  | 52.1   |  
|Deferred taxation                                     |  |        |   |  |        |  
|- full provisioning (n)                               |  | 67.9   |   |  | 77.4   |  
|- adjustments in respect of other US GAAP differences |  | (3.8   | ) |  | (7.8   | )
|                                                      |  |        |   |  |        |  
|Shareholders equity in accordance with US GAAP       |  | 897.7  |   |  | 867.2  |  
|                                                      |  |        |   |  |        |  



The Group has adopted Statement of
Accounting Standards No. 130, Reporting Comprehensive Income, which establishes standards for the reporting and presentation of comprehensive income and its components. Components of comprehensive income consist of the following:



|                                        |  |        |   |  |        |   |  |        |  
|--------------------------------------- |  | ------ | - |  | ------ | - |  | ------ | -
|                                        |  | 2003£m |   |  | 2002£m |   |  | 2001£m |  
|Net income under US GAAP                |  | 78.5   |   |  | 164.8  |   |  | 315.8  |  
|                                        |  |        |   |  |        |   |  |        |  
|Foreign currency translation adjustment |  | (15.5  | ) |  | (42.8  | ) |  | (8.8   | )
|Additional minimum pension liability    |  | 59.9   |   |  | (119.7 | ) |  |       |  
|                                        |  |        |   |  |        |   |  |        |  
|                                        |  | 44.4   |   |  | (162.5 | ) |  | (8.8   | )
|Comprehensive income                    |  | 122.9  |   |  | 2.3    |   |  | 307.0  |  
|                                        |  |        |   |  |        |   |  |        |  
|Accumulated other comprehensive income  |  | (136.7 | ) |  | (181.1 | ) |  | (18.6  | )
|                                        |  |        |   |  |        |   |  |        |  



F-58



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##### Table of Contents

NOTES TO THE ACCOUNTS (continued)



35 SIGNIFICANT DIFFERENCES BETWEEN UK AND US GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (continued)



(x) Effect on shareholders equity of differences between UK GAAP and US GAAP
(continued)



Changes in US GAAP shareholders equity are as follows:



|                                                              |  |        |  
|------------------------------------------------------------- |  | ------ | -
|                                                              |  | £m     |  
|Shareholders equity at December 31, 2001                     |  | 957.1  |  
|Net income for the period                                     |  | 164.8  |  
|Ordinary share dividends                                      |  | (75.8  | )
|Convertible preference share dividends and redemption premium |  | (21.0  | )
|New share capital subscribed                                  |  | 5.3    |  
|Amounts deducted in respect if shares issued to the QUEST     |  | (0.7   | )
|Additional minimum pension liability                          |  | (119.7 | )
|Currency translation adjustment                               |  | (42.8  | )
|                                                              |  |        |  
|Shareholders equity at December 31, 2002                     |  | 867.2  |  
|Net profit for the period                                     |  | 78.5   |  
|New share capital subscribed                                  |  | 4.1    |  
|Ordinary share dividends                                      |  | (79.4  | )
|Convertible preference share dividends and redemption premium |  | (17.1  | )
|Additional minimum pension liability                          |  | 59.9   |  
|Currency translation adjustment                               |  | (15.5  | )
|                                                              |  |        |  
|Shareholders equity at December 31, 2003                     |  | 897.7  |  
|                                                              |  |        |  



(y) Consolidated statement of cash
flows



Under UK GAAP, the consolidated cash flow statement is prepared in
accordance with FRS 1, as revised, Cash Flow Statements and presents substantially the same information as that required under US GAAP SFAS 95, Statement of Cash Flows. However, there are certain differences in classification
of items within the cash flow statement and with regard to the definition of cash and cash equivalents between UK and US GAAP.



Cash flow under UK GAAP represents increases or decreases in cash, which comprises cash in hand and repayable on demand and overdrafts. Under US GAAP, cash
flow represents increases or decreases in cash and cash equivalents, which include short term, highly liquid investments with original maturities of less than 90 days, and exclude overdrafts.



Under UK GAAP, cash flows are presented for operating activities; distributions from joint
ventures and associated undertakings; returns on investments and servicing of finance; taxation; capital expenditure and financial investment; acquisitions and disposals; Ordinary dividends paid; management of liquid resources and financing. US GAAP
only requires presentation of cash flows as resulting from three activities: operating, investing and financing.



Cash flows under UK GAAP in respect of interest received, interest paid, investment income and taxation would be included within operating activities under US GAAP.
Capital expenditure and financial investment, distributions received from joint ventures and associates, and cash flows from acquisitions and disposals would be included within investing activities under US GAAP. Equity dividends paid would be
included within financing activities under US GAAP. Management of liquid resources may be included within financing activities or the liquid resources may be considered a cash equivalent under US GAAP, depending on the nature of the liquid
resources.



F-59



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##### Table of Contents

NOTES TO THE ACCOUNTS (continued)



35 SIGNIFICANT DIFFERENCES BETWEEN UK AND US GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (continued)



(y) Consolidated statement of cash flows (continued)



The following table summarizes the statement of cash flows for the Group as if they had been
presented in accordance with US GAAP and include the adjustments which reconcile cash and cash equivalents under US GAAP to cash and cash equivalents under UK GAAP.



|                                                             |  |        |   |  |        |   |  |        |  
|------------------------------------------------------------ |  | ------ | - |  | ------ | - |  | ------ | -
|                                                             |  | 2003£m |   |  | 2002£m |   |  | 2001£m |  
|Net cash flow from operating activities                      |  | 225.5  |   |  | 57.1   |   |  | 209.3  |  
|Net cash (used in) provided by investing activities          |  | (185.1 | ) |  | (154.3 | ) |  | (67.4  | )
|Net cash provided by (used in) financing activities          |  | 26.3   |   |  | 90.6   |   |  | (195.3 | )
|                                                             |  |        |   |  |        |   |  |        |  
|Net (decrease) increase in cash and cash equivalents under   |  |        |   |  |        |   |  |        |  
|US GAAP                                                      |  | 66.7   |   |  | (6.6   | ) |  | (53.4  | )
|                                                             |  |        |  
|Effect of exchange rates on cash and cash equivalents        |  | (1.8   | ) |  | (10.1  | ) |  | 8.2    |  
|                                                             |  |        |  
|Cash and cash equivalents under US GAAP at beginning of year |  | 107.2  |   |  | 123.9  |   |  | 169.1  |  
|                                                             |  |        |   |  |        |   |  |        |  
|Cash and cash equivalents under US GAAP at end of year       |  | 172.1  |   |  | 107.2  |   |  | 123.9  |  
|                                                             |  |        |   |  |        |   |  |        |  



(z) Post Balance Events Review
(Unaudited)



Deluxe Media Services (DMS) has two contracts due to expire
in 2004. One of these contracts which covers the production of VHS and the distribution of VHS and DVD in the US has been extended until at least the end of 2005. As part of the new arrangements, DMS has gained additional compression, encoding and
authoring business from the studio concerned.



As announced on May 18, 2004, in
respect of the other contract, which relates primarily to the European DVD manufacturing and distribution business, DMS has been informed that the studio concerned will be transferring the business to a new supplier on a staged basis over the period
to July 2005. In 2003, this contract accounted for 48% of DVD units supplied and 18% of total packaged media units distributed by DMS. In view of the anticipated timing of transfer of the business, Rank expects that there will only be a small impact
on the Groups operating profit before exceptional items in 2004.



While
the loss of this contract is disappointing, active negotiations for additional contract business in both the US and Europe are currently in progress and are expected to reach a conclusion over the next few months. The underlying growth in the DVD
market is expected to remain strong for the next few years, but the ability of DMS to continue to deliver an acceptable return and maintain profitability at the level anticipated in 2004 will be dependent upon gaining new studio contracts.



Subject to progress made on new contract wins during the remainder of the
year, an exceptional charge may be incurred in 2004 relating to the impairment of certain manufacturing and distribution assets associated with the lost contract.



F-60



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##### Table of Contents

NOTES TO THE ACCOUNTS (continued)



36 RECENTLY ISSUED ACCOUNTING STANDARDS



In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities (FIN 46) as revised in December 2003 by FIN46-R.
Under that interpretation, certain entities known as Variable Interest Entities (VIEs) must be consolidated by the primary beneficiary of the entity. The primary beneficiary is generally defined as having the majority of the
risks and rewards arising from the VIE. For VIEs in which a significant (but not majority) variable interest is held, certain disclosures are required. The measurement principles of the interpretation are effective for all entities created
subsequent to January 31, 2003 in the 2003 financial statements. There was not significant impact to the financial statements as a result of these new requirements. The measure principles will be effective for all remaining entities in 2004. The
Company is currently completing its evaluation for all remaining entities, but does not expect a significant impact to the financial statements as a result.



In November 2003, the EITF reached a final consensus on Issue No. 00-21, Accounting for Revenue Arrangements with Multiple Deliverables. This EITF provides
guidance on when and how to separate elements of an arrangement that may involve the delivery or performance of multiple products, services and rights to use assets into separate units of accounting. The guidance in the consensus is effective for
revenue arrangements entered into in fiscal periods beginning after June 15, 2003 and will apply to the Group for any arrangements entered into after January 1, 2004. This is not expected to have a significant impact on the financial statements.



Other recently issued accounting pronouncements will not have a material
impact on the Groups financial position or results of operations.



37
COMPANIES ACT 1985



The Consolidated Financial Statements do not
constitute statutory accounts within the meaning of the Companies Act 1985 of Great Britain for any of the periods presented. Statutory accounts for the years ended December 31, 2001, 2000, 1999 and 1998 have been filed with the United
Kingdoms Registrar of Companies. The Auditors have reported on these accounts. Their reports were unqualified and did not contain statements under Section 237 (2) or (3) of that Act.



These Consolidated Financial Statements exclude certain parent company statements and other
information required by the Companies Act 1985. However, they include all material disclosures required by generally accepted accounting principles in the United Kingdom including those Companies Act 1985 disclosures relating to the profit and loss
account and balance sheet items.



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##### Table of Contents

SCHEDULE II



VALUATION AND QUALIFYING
ACCOUNTS



|                                    |  |                   |   |  |                    |  
|----------------------------------- |  | ----------------- | - |  | ------------------ | -
|                                    |  | StockProvisions£m |   |  | DebtorProvisions£m |  
|Balance at December 31, 2000        |  | 3                 |   |  | 17                 |  
|Charges to profit and loss          |  |                   |   |  | 8                  |  
|Utilization of provision            |  | (2                | ) |  | (13                | )
|Currency translation adjustment     |  |                  |   |  | 1                  |  
|                                    |  |                   |   |  |                    |  
|Balance at December 31, 2001        |  | 1                 |   |  | 13                 |  
|                                    |  |                   |   |  |                    |  
|Currency translation adjustments    |  |                  |   |  | 5                  |  
|Utilization of provision            |  |                  |   |  | (8                 | )
|Business acquisitions and disposals |  |                  |   |  | 2                  |  
|                                    |  |                   |   |  |                    |  
|Balance at December 31, 2002        |  | 1                 |   |  | 12                 |  
|                                    |  |                   |   |  |                    |  
|Charges to profit and loss          |  | 1                 |   |  | 5                  |  
|Utilization of provision            |  |                  |   |  |                   |  
|Business acquisitions and disposals |  | 1                 |   |  | 1                  |  
|Currency translation adjustment     |  |                  |   |  | (1                 | )
|                                    |  |                   |   |  |                    |  
|Balance at December 31, 2003        |  | 3                 |   |  | 17                 |  
|                                    |  |                   |   |  |                    |  



F-62



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##### Table of Contents

ITEM 18 FINANCIAL STATEMENTS



NOT
APPLICABLE



ITEM 19 EXHIBITS



The following documents are
filed as exhibits to this Registration Statement:



|          |  |                                                                                                                                                                                                                                                                
|--------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1.1*      |  | Memorandum and Articles of Association.                                                                                                                                                                                                                        
|          | 
|2.1*      |  | Form of Note and Guarantee Agreement between The Rank Group Plc and Holders of Guaranteed Senior Notes Issuable in Series.                                                                                                                                     
|          | 
|4.1**     |  | The Rank Organization Overseas Executive Share Option Plan, The Rank Organization 1995 Executive Share Option Scheme, The Rank Group 1996 Executive Share Option Scheme, The Rank Group 1996
Share Savings Scheme, and The Rank Group Long Term Incentive Plan.
|          | 
|4.2***    |  | An agreement dated February 19, 2000 between Rank Leisure Holdings Plc and Reamace Limited.                                                                                                                                                                    
|          | 
|4.3***    |  | An agreement dated February 22, 2000 between Rank Leisure Holdings Plc and Shelfco (No. 1797) Limited.                                                                                                                                                         
|          | 
|4.4***    |  | An agreement dated May 19, 2000 by and among Rank America, Inc., Rank Orlando II, Inc., Rank Orlando, Inc. and Blackstone USE Acquisition company LLC.                                                                                                         
|          | 
|4.5***    |  | An agreement dated September 3, 2000 by and among Rank Leisure Division Limited, Creamford Limited and The Rank Group Plc.                                                                                                                                     
|          | 
|4.6***    |  | An agreement dated September 27, 2000 by and among The Rank Group Plc, Rank Holidays Division Limited, Rank Holdings (France) SA, Rank Holdings Espana SA, Rank Holdings (Netherlands) BV,
Butlins Limited, Foray 989 Limited and Bourne Leisure Limited.      
|          | 
|4.7***    |  | Directors Service Contract for Michael Edward Smith dated February 25, 1999.                                                                                                                                                                                  
|          | 
|4.8***    |  | Directors Service Contract for Ian Dyson dated August 17, 1999.                                                                                                                                                                                               
|          | 
|4.9***    |  | Directors Service Contract for Alun Cathcart dated April 10, 2001.                                                                                                                                                                                            
|          | 
|4.10****  |  | Rank Group 2000 Long Term Incentive Plan.                                                                                                                                                                                                                      
|          | 
|4.11***** |  | Rank Group 2002 Executive Share Option Scheme.                                                                                                                                                                                                                 
|          | 
|6.1       |  | Calculation of earnings per share included in note 8 of the Consolidated Financial Statements in Item 17 of this Annual Report.                                                                                                                                
|          | 
|11.1      |  | Code of Ethics (see 16.b).                                                                                                                                                                                                                                     
|          | 
|12.1      |  | Certification of Mike Smith, Chief Executive of The Rank Group Plc, pursuant to Rules 13a  14(a) and 15d  14(a) of the US Exchange Act of 1934, as amended, as adapted pursuant to
section 302 of The Sarbanes Oxley Act of 2002.                            
|          | 
|12.2      |  | Certification of Ian Dyson, Finance Director of The Rank Group Plc, pursuant to Rules 13a  14(a) and 15d  14(a) of the US Exchange Act of 1934, as amended, as adapted pursuant to
section 302 of The Sarbanes Oxley Act of 2002.                            



F-63



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##### Table of Contents

|     |  |                                                                                                                                                                                                                                    
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     | 
|13.1 |  | Certification of Mike Smith, Chief Executive of The Rank Group Plc and Ian Dyson, Finance Director of The Rank Group Plc, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section
906 of the Sarbanes Oxley Act of 2002.
|     | 
|14.1 |  | Consent of PricewaterhouseCoopers LLP.                                                                                                                                                                                             
|    
|    

|      |  |                                                                                                                                             
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------
|      | 
|*     |  | Previously filed as exhibits to the Annual Report on Form 20-F for the year ended December 31, 2002 and incorporated by reference herein.   
|      | 
|**    |  | Incorporated by reference to the Groups registration statement on Form S-8 (No. 333- 06752) filed with the Commission on April 7, 1997.    
|      | 
|***   |  | Previously filed as exhibits to the Annual Report on Form 20-F for the year ended December 31, 2000 and incorporated by reference herein.   
|      | 
|****  |  | Incorporated by reference to the Groups registration statement on Form S-8 (No. 333  12838) filed with the Commission on November 3, 2000.
|      | 
|***** |  | Incorporated by reference to the Groups registration statement on Form S-8 (No. 333  87314) filed with the Commission on April 26, 2002.  

|
|



F-64



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SIGNATURES



Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant certifies that it meets all of the requirements for filing on Form
20-F and has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.



The Rank Group Plc



By:

/s/ IAN DYSONIan DysonFinance Director