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SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

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FORM 20-F

|(MARK ONE)                               |                                                                                               
|---------------------------------------- | ----------------------------------------------------------------------------------------------
|o                                        | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
|OR                                      
|ý                                        | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934          
|FOR THE FISCAL YEAR ENDED APRIL 30, 2003
|OR                                      
|o                                        | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934      

COMMISSION FILE NUMBER 0-19696

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Merant plc(Exact name of Registrant as specified in charter)

England and Wales(Jurisdiction of incorporation or organization)

Abbey View,
Everard Close,
St. Albans, Hertfordshire
AL1 2PS, England(Address of principal executive offices)

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

Securities registered or to be registered pursuant to Section 12(g) of the Act:Ordinary shares of 2p each

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

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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:

103,936,267 ordinary shares of 2p each

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

Yes  ý    No  o

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

Item 17  ý    Item 18  o

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TABLE OF CONTENTS

|                           |    |                                                       |                                                         | Page
|-------------------------- | -- | ----------------------------------------------------- | ------------------------------------------------------- | ----
|GENERAL INTRODUCTION       |    | 4                                                    
|FORWARD-LOOKING STATEMENTS |    | 4                                                    
|PART I                     |    |                                                      
|ITEM 1.                    |    | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS |                                                         | 6   
|ITEM 2.                    |    | OFFER STATISTICS AND EXPECTED TIMETABLE               |                                                         | 6   
|ITEM 3.                    |    | KEY INFORMATION                                       |                                                         | 6   
|                           | A. |                                                       | Selected Financial Data                                 |     
|                           | B. |                                                       | Capitalization and Indebtedness                         |     
|                           | C. |                                                       | Reasons for the Offer and Use of Proceeds               |     
|                           | D. |                                                       | Risk Factors                                            |     
|ITEM 4.                    |    | INFORMATION ON THE COMPANY                            |                                                         | 14  
|                           | A. |                                                       | History and Development of the Company                  |     
|                           | B. |                                                       | Business Overview                                       |     
|                           | C. |                                                       | Organizational Structure                                |     
|                           | D. |                                                       | Property, Plant and Equipment                           |     
|ITEM 5.                    |    | OPERATING AND FINANCIAL REVIEW AND PROSPECTS          |                                                         | 20  
|                           | A. |                                                       | Operating Results                                       |     
|                           | B. |                                                       | Liquidity and Capital Resources                         |     
|                           | C. |                                                       | Research and Development, Patents and Licenses, etc.    |     
|                           | D. |                                                       | Trend Information                                       |     
|ITEM 6.                    |    | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES            |                                                         | 29  
|                           | A. |                                                       | Directors and Senior Management                         |     
|                           | B. |                                                       | Compensation                                            |     
|                           | C. |                                                       | Board Practices                                         |     
|                           | D. |                                                       | Employees                                               |     
|                           | E. |                                                       | Share Ownership                                         |     
|ITEM 7.                    |    | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS     |                                                         | 37  
|                           | A. |                                                       | Major Shareholders                                      |     
|                           | B. |                                                       | Related Party Transactions                              |     
|                           | C. |                                                       | Interests of Experts and Counsel                        |     
|ITEM 8.                    |    | FINANCIAL INFORMATION                                 |                                                         | 38  
|                           | A. |                                                       | Consolidated Statements and Other Financial Information |     
|                           | B. |                                                       | Significant Changes                                     |     
|ITEM 9.                    |    | THE OFFER AND LISTING                                 |                                                         | 39  
|                           | A. |                                                       | Offer and Listing Details                               |     
|                           | B. |                                                       | Plan of Distribution                                    |     
|                           | C. |                                                       | Market                                                  |     
|                           | D. |                                                       | Selling Shareholders                                    |     
|                           | E. |                                                       | Dilution                                                |     
|                           | F. |                                                       | Expenses of the Issue                                   |     
|ITEM 10.                   |    | ADDITIONAL INFORMATION                                |                                                         | 40  
|                           | A. |                                                       | Share Capital                                           |     
|                           | B. |                                                       | Memorandum and Articles of Association                  |     
|                           | C. |                                                       | Material Contracts                                      |     
|                           | D. |                                                       | Exchange Controls                                       |     
|                           | E. |                                                       | Taxation                                                |     
|                           | F. |                                                       | Dividends and Paying Agents                             |     
|                           |    |                                                       |                                                         |     

2

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|          | G. |                                                                              | Statement by Experts   |    | 46
|--------- | -- | ---------------------------------------------------------------------------- | ---------------------- | -- | --
|          | H. |                                                                              | Documents on Display   |    | 46
|          | I. |                                                                              | Subsidiary Information |    | 46
|ITEM 11.  |    | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                   |                        | 46
|ITEM 12.  |    | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES                       |                        | 47
|PART II   |    |                                                                             
|ITEM 13.  |    | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES                              |                        | 48
|ITEM 14.  |    | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS |                        | 48
|ITEM 15.  |    | DISCLOSURE CONTROLS AND PROCEDURES                                           |                        | 48
|ITEM 16A. |    | AUDIT COMMITTEE FINANCIAL EXPERT                                             |                        | 48
|ITEM 16B. |    | CODE OF ETHICS                                                               |                        | 48
|ITEM 16C. |    | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                       |                        | 48
|ITEM 16D. |    | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES                   |                        | 48
|PART III  |    |                                                                             
|ITEM 17.  |    | FINANCIAL STATEMENTS                                                         |                        | 49
|ITEM 18.  |    | FINANCIAL STATEMENTS                                                         |                        | 82
|ITEM 19.  |    | EXHIBITS                                                                     |                        | 82

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GENERAL INTRODUCTION

Merant plc publishes annual reports containing annual audited consolidated financial statements and opinions on the financial statements by independent auditors.
We prepare our financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (U.K. GAAP), and expressed in pounds sterling. U.K. GAAP differs from U.S. GAAP in some
areas, and an analysis of differences is set forth in note 25 to our financial statements, included elsewhere in this Form 20-F.

We
also publish quarterly updates and semi-annual reports containing unaudited financial information prepared on the same basis as the annual audited consolidated financial
statements.

We
deliver each of these reports to The Bank of New York, which acts as depositary under a deposit agreement. The depositary generally will mail these reports to record-holders of
American depositary receipts, or ADRs. We also furnish to the depositary all notices of shareholders' meetings and other reports and communications that are made generally available to our
shareholders. The depositary makes these communications available for inspection by ADR record-holders and mails notices of shareholders' meetings to them.

As
a foreign private issuer in the United States, we are required to file an annual report on Form 20-F and furnish certain other information. The U.S. Securities and
Exchange Commission ("SEC") maintains a web site located at http://www.sec.gov that contains a searchable database of filings, reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC.

You
may obtain a copy of this Form 20-F without charge, upon written request to "Investor Relations" at our offices:

3445,
NW 211th Terrace,
Hillsboro, Oregon, 97124, U.S.A., or

Abbey
View,
Everard Close,
St. Albans, AL1 2PS, U.K.

The
financial statements and other financial information in this Form 20-F do not comprise "statutory accounts" within the meaning of Section 240 of the
Companies Act 1985 of Great Britain. Statutory accounts of Merant plc for the year ended April 30, 2003 were delivered to the Registrar of Companies for England and Wales on 27 October,
2003. Statutory accounts of Merant plc for the fiscal years ended April 30, 2002 and 2001 have been delivered previously to the Registrar of Companies for England and Wales. The auditors'
reports on these accounts were unqualified.

In
this Form 20-F we use the terms 2003 and fiscal 2003 to mean the fiscal year ended April 30, 2003, and we use similar terms to refer to prior years. We use
the terms pounds sterling, £, pence and p to refer to the U.K. currency, and the terms U.S. dollar and $ to indicate the U.S. currency.

Merant
and PVCS are registered trademarks of Merant. Other trademarks belonging to other companies appear in this report and are the property of their respective owners.

FORWARD-LOOKING STATEMENTS

We have made forward-looking statements in this annual report about our industry, our business, our plans and objectives and our financial condition and results
of operations that are based on the current expectations, assumptions and estimates of our management and on information currently available to us. These statements constitute forward-looking
statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and are subject to various risks and uncertainties, known and unknown, that could cause our actual results
and financial position to differ materially from

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the
information presented in this annual report. When used in this document, the words "may," "anticipate," "objective," "believe," "intend," "estimate," "expect," "realize," "likely," "unlikely" and
other similar expressions, as they relate to Merant, its business or its management, are intended to identify forward-looking statements.

Forward-looking
statements reflect our current view with respect to future events and are subject to certain risks, uncertainties and assumptions. Many factors could cause our actual
results, performance or achievements to be materially different from the future results, performance and achievements that
may be expressed or implied by the forward-looking statements, including, among others, those set forth elsewhere in this annual report, especially under the heading "Risk Factors", in our reports
filed with the SEC under the U.S. Securities Exchange Act of 1934 and the following:



Should
one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this annual
report as anticipated, believed, estimated, expected, planned or intended. We disclaim any obligation to update the forward-looking statements contained herein, except as may be required by the United
States' federal securities laws.

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PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not required.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not required.

ITEM 3. KEY INFORMATION

A.    SELECTED FINANCIAL DATA.

The summary of financial information set forth below is derived from, and should be read in conjunction with, the more detailed financial statements and notes
thereto appearing elsewhere in this Annual Report on Form 20-F (the "Form 20-F"). This data has been derived from our audited financial statements, prepared in
accordance with U.K. GAAP, expressed in pounds sterling. Our fiscal year is from May 1 to April 30.

We
prepare our financial statements in accordance with United Kingdom Generally Accepted Accounting Practices (U.K. GAAP), and expressed in pounds sterling. U.K. GAAP differs from U.S.
GAAP in some areas and an analysis of differences is set forth in note 25 to our financial statements, included elsewhere in this Form 20-F.

The
table below sets forth selected consolidated financial data at the dates and for the periods indicated, prepared in accordance with U.K. GAAP and expressed in pounds sterling:

|                                                                                                     |  | YEARS ENDED APRIL 30, |   
|---------------------------------------------------------------------------------------------------- |  | --------------------- | --
|
|
|OPERATING RESULTS FOR THE YEAR:                                                                      |  |                       |   
|Turnover                                                                                             |  | 78,592                |   
|Operating (loss)                                                                                     |  | (10,692               | ) 
|Operating (loss) from continuing operations                                                          |  | (10,692               | ) 
|(Loss) for the year                                                                                  |  | (12,498               | ) 
|(Loss) per share: basic and diluted                                                                  |  | (12.4                 | )p
|Weighted average number of shares used in computing basic and diluted earnings per share (thousands) |  | 100,739               |   
|FINANCIAL POSITION AT END OF YEAR:                                                                   |  |                       |   
|Cash and bank deposits                                                                               |  | 45,538                |   
|Total assets                                                                                         |  | 82,655                |   
|Total shareholders funds                                                                             |  | 33,316                |   
|Total number of shares in issue                                                                      |  | 103,936               |   
|Share capital                                                                                        |  | 2,078                 |   
|FINANCIAL CONDITION AT END OF YEAR:                                                                  |  |                       |   
|Working capital                                                                                      |  | 20,226                |   

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The
table below sets forth selected consolidated financial data at the dates and for the periods indicated, prepared in accordance with U.S. GAAP and expressed in pounds sterling:

|                                                                                                     |  | YEARS ENDED APRIL 30, |  
|---------------------------------------------------------------------------------------------------- |  | --------------------- | -
|
|
|RESULTS OF OPERATIONS                                                                                |  |                       |  
|Revenue                                                                                              |  | 78,592                |  
|Operating profit (loss)                                                                              |  | 2,565                 |  
|Operating profit (loss) from continuing operations                                                   |  | 2,565                 |  
|Net income (loss) for the year                                                                       |  | 1,123                 |  
|Earnings (loss) per share: basic and diluted                                                         |  | 1.1                   | p
|Earnings (loss) per share from continuing operations: basic and diluted                              |  | 0.5                   | p
|Weighted average number of shares used in computing basic and diluted earnings per share (thousands) |  | 100,739               |  
|FINANCIAL POSITION AT END OF YEAR:                                                                   |  |                       |  
|Cash and Cash Equivalents                                                                            |  | 45,538                |  
|Total assets                                                                                         |  | 74,470                |  
|Shareholders' equity                                                                                 |  | 25,131                |  
|Total number of shares in issue                                                                      |  | 103,936               |  
|Share capital                                                                                        |  | 2,078                 |  
|FINANCIAL CONDITION AT END OF YEAR:                                                                  |  |                       |  
|Working capital                                                                                      |  | 20,226                |  

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Exchange rates

We prepare our financial statements in accordance with U.K. GAAP, and expressed in pounds sterling. On 14 October 2003, the latest practicable date before
printing this report, the noon buying rate was $1.6737 per £1. The following table shows the high and low noon buying rates during the months indicated:

$ per £1

HIGH

LOWApril 2003

1.6035

1.5458May 2003

1.6545

1.5919June 2003

1.6903

1.6234July 2003

1.6742

1.6214August 2003

1.6194

1.5621September 2003

1.6760

1.5610


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The
following table shows the average exchange rates for our last four fiscal periods, based on the average of the exchange rates on the last day of each month during the period:

$ per £1Year ended April 30, 2003

1.60Year ended April 30, 2002

1.44Year ended April 30, 2001

1.46Year ended April 30, 2000

1.60


B.    CAPITALIZATION AND INDEBTEDNESS

Not required.

C.    REASONS FOR THE OFFER AND USE OF PROCEEDS

Not required.

D.    RISK FACTORS

You should carefully consider the following risk factors. The risks described below are not the only risks we face. Additional risks not currently known to us or
that we currently deem immaterial may also impair our business operations. Our business, financial condition or results of operations could be materially adversely affected by any of these risks. This
annual report on Form 20-F also contains forward-looking statements that involve risks and uncertainties. Our results could materially differ from those anticipated in these
forward-looking statements as a result of certain factors, including the risks we face as described below and elsewhere. See "Forward-Looking Statements."

Our operating results may fluctuate significantly, and any fluctuations could adversely affect the price of our securities.

Historically, our quarterly and annual operating results have fluctuated and we expect them to continue to fluctuate in the future. If we fail to meet the
expectations of securities analysts and investors as a result of any future fluctuations in our quarterly operating results, the market price of our securities would likely decrease. We expect that
our operating results may fluctuate significantly in the future due to a variety of factors, including:



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Market volatility may cause the price of our securities to decline.

The market price of our securities has been, and is likely to continue to be, highly volatile. The global stock markets have experienced extreme volatility that
has particularly affected the market prices of equity securities of many high technology companies. These market fluctuations, as well as general economic, political and market conditions, may
adversely affect the market price of our securities.

Factors
that could adversely affect our market price include:



In
the past fiscal year, the Company and certain of its present and former officers and/or directors agreed to settle a class action lawsuit alleging, among other things, violations of
the U.S. securities laws (see note 22 to the financial statements set out elsewhere in this 20-F). There can be no assurance that the Company and/or its officers and directors may
not be the subject of additional lawsuits in the future in connection with, among other things, the possible market price volatility of our securities.

Our insignificant backlog and long sales cycle combined with costs that are fixed, make it difficult to predict future revenue and compensate for a
revenue shortfall.

Historically, we have operated with little product backlog because we generally ship our products when we receive an order. As a result, our product revenue in
any quarter will depend on the volume, magnitude and timing of orders received in that quarter, and our ability to fill those orders. In addition, the purchase process of our customers typically
ranges from a few weeks to several months or

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longer
from initial inquiry to order, which makes it difficult to predict the timing of sales and license fees. Furthermore, the timing of customer orders is typically weighted toward the end of the
fiscal quarter and we therefore derive a substantial portion of our quarterly revenue from transactions occurring relatively late in the quarter. Our staffing and operating expenses are based on
anticipated revenue levels, and a high percentage of our costs is fixed in the short term and does not vary with revenue. Because of these factors, small variations between anticipated orders and
actual orders, as well as the occurrence or non-occurrence of non-recurring or large orders, can cause disproportionate variations in our operating results from quarter to
quarter. As a result, and due to the typical size of customers' orders, our quarterly operating results and cash flow would suffer from a lost or delayed sale. Historically, we have been dependent
upon large enterprise transactions with individual customers. Moreover, if significant sales occur earlier in a given period than expected, operating results for later quarters may suffer.

The current depressed general economic and market conditions could cause decreases in demand for our software and related services, which could
negatively affect our revenue and operating results and the market price of our securities.

Downturns in general economic and market conditions such as those being experienced at present may result in customers postponing or cancelling software
purchasing decisions. If demand for our software and related services decreases, our revenues may decrease and our operating results would be negatively impacted. The market price of our securities
could similarly be negatively impacted as the result of this decreased demand and resulting effect on operating results.

Seasonality can cause our operating results to fluctuate.

Our revenue also is affected by seasonal fluctuations resulting from lower sales that typically occur during the summer months in Europe and other parts of the
world. In addition, historically, we have experienced lower revenue for the first quarter of a fiscal year than in the fourth quarter of the prior fiscal year. We typically recognise a high proportion
of quarterly revenue during the last month of a fiscal quarter and significant fluctuations in new order revenue can occur due to the timing of customer
orders. Quarterly results therefore can vary to the extent that sales for a quarter are delayed, particularly since a relatively high proportion of our expenses do not vary with revenue.

If our new products and services fail to achieve customer acceptance, or if we fail to manage product transitions, our business reputation and financial
performance would suffer.

We are in a market that is subject to rapid technological change. We must continually adapt to that change by improving our products and introducing new products,
technologies and services. Our growth and financial performance will depend in part on our ability to develop and introduce enhancements of existing products and new products that accommodate the
latest technological advances and standards, customer requirements and market conditions on a timely and cost-effective basis. This depends in part on our ability to attract and retain
qualified employees. In the past, we have experienced delays and increased expenses in developing new products. We may not be successful in marketing, on a timely basis or at all, competitive
products, product enhancements and new products that respond to technological change, changes in customer requirements and emerging industry standards.

Product defects can be expensive to fix and can cause us to lose customers.

Software products as complex as those we offer may contain undetected errors or failures when first introduced or as new versions are released. Despite our
testing, as well as testing and use by current and potential customers, errors might be found in new products after commencement of commercial shipments. The cost of correcting such errors could be
substantial and there could be

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associated
adverse publicity. For these reasons, the occurrence of errors could result in loss of or delay in market acceptance of our products.

Protection of our intellectual property is limited, which may affect our competitive position.

Our success depends upon our proprietary software technology. Despite the precautions we take to protect our proprietary rights, it may be possible for a third
party to copy or otherwise obtain and use our products or technology without authorization, or to develop similar technology independently. Policing unauthorized use of our products is difficult, and
although we are unable to determine the extent to which software piracy of our products exists, software piracy can be expected to be a persistent problem. In addition, effective protection of
intellectual property rights may be unavailable or limited in some foreign countries where we distribute our products. Patents have been granted on fundamental technologies in software, and third
party patents may issue that relate to fundamental technologies incorporated into our products.

Our products may infringe the intellectual property rights of third parties, which may result in lawsuits and prevent us from selling our products.

Third parties may, as has occurred in the past, assert intellectual property infringement claims against us concerning our products, trademarks or other
proprietary rights. If such claims are asserted, we may have to seek licenses, defend infringement actions or challenge the validity of the disputed third party intellectual property rights. Licenses
may not be available on reasonable commercial terms, if at all and the failure to obtain a license from a third party for technology that we use could cause us to incur substantial liabilities and to
suspend the production and sale of certain products. If we cannot obtain required licenses, are found liable for infringement or are not able to have the disputed third party intellectual property
rights declared invalid, we may be liable for significant monetary damages, encounter significant delays in bringing products to market or be precluded from participating in the development, use or
sale of technologies covered by the intellectual property rights of others.

With
regard to those technologies that we license from third parties, we must rely upon those third parties for information on the ownership of the licensed technologies. As a result,
our exposure to infringement claims may increase. We generally obtain representations as to the ownership of licensed technology and seek indemnification to cover any breach of these representations.
However, representations may not be accurate and indemnification, if available, may not provide adequate compensation or protection for breach of the representations.

In
addition, we may initiate claims or litigation against third parties for infringement of our proprietary rights or to establish their validity. Litigation to determine the validity of
any claims could result in significant expense and divert the efforts of our technical and management personnel from operating activities, whether or not the litigation is determined in our favour. In
the event of an adverse ruling in any litigation, we may be required to pay substantial damages, to discontinue the use and sale of infringing products, to expend significant resources to develop
non-infringing technology or to obtain licenses to the infringed technology. Our failure to develop or license a substitute technology could prevent us from selling our products. As the
number of software products in the industry increases and the functionality of these products further overlaps, it is possible that software developers may become increasingly subject to infringement
claims. Any claims against us, with or without merit, as well as claims we initiate against third parties, can be time consuming and expensive to defend or prosecute and to resolve.

Competition can lead to pricing pressures and loss of market.

Rapid technological change and aggressive competition characterize the markets in which we compete. We expect competition to increase in the future from existing
competitors and from other

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companies
that may enter our existing or future markets with similar or substitute solutions that may be less costly or provide better performance or functionality than our products. Some of our
current and prospective competitors have greater financial, marketing or technical resources and may be able to adapt more quickly to new or emerging technologies, or devote greater resources to the
promotion and sale of their products than we can. Other companies, including customers, may develop competitive products in the future. In addition, the software industry is characterized generally by
low barriers to entry, as a result of which new competitors with technological, marketing or other competitive advantages may emerge and rapidly acquire market share. Furthermore, we may not be able
to compete effectively in the future in the professional services market. If price competition increases significantly, competitive pressures could cause us to reduce the prices of our products and
services, which would result in reduced profit margins and could harm our ability to provide adequate service to our customers. Consolidation within our industry may exacerbate the competitive risks
described above.

International sales account for a significant portion of our revenue, which exposes us to the business and economic risks of global operations.

In fiscal years 2003, 2002 and 2001, sales to customers outside of the United States represented approximately 38%, 43% and 39% of our revenue, respectively. We
intend to continue our non-U.S. business.

The
risks inherent in conducting international business generally include:



If we lose key personnel or are unable to hire additional qualified personnel as necessary, we may not be able to manage our business successfully or
sell our products.

Substantially all of our senior management personnel are relatively recent hires, including but not limited to our President and Chief Executive Officer, Gerald
Perkel, who joined the company in September 2001, and our success will depend in part on the successful assimilation and performance of these individuals. Competition for qualified personnel in
the software industry is intense, and we may not be able to attract and retain a sufficient number of qualified personnel to successfully conduct our business in the future. Our success depends, to a
significant degree, upon the continued contributions of our key management, marketing, product development, professional services and operational personnel, including, as the case may be, key
personnel of acquired companies. We cannot ensure the continued employment of our key personnel and we do not maintain key person life insurance on any of these persons.

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If we are unable to manage growth, our business may be adversely affected.

To manage our growth effectively, we must continue to improve our systems and to motivate and effectively manage an evolving workforce. If management is unable to
effectively manage a changing and growing business, the quality of our products, retention of key employees and our results of operations could be materially adversely affected.

If we engage in future business combinations, we may fail to integrate acquired businesses effectively, which could disrupt our ongoing business and
generate negative publicity.

We have completed a number of business combinations in recent years, most recently the merger with Intersolv, Inc. in September 1998, and the
acquisitions of Essential Software, Inc. in August 1999, EnterpriseLink Technology Corporation in November 1999, Trillium Software Corporation in December 1999, Northern
Software Partners AS in January 2000, and the Enterprise Division of NetObjects, Inc. in February 2001. We may complete additional acquisitions in the future. The process of
integrating an acquired company's business into our operations may result in unforeseen operating difficulties and expenditures. It may also absorb significant management attention that would
otherwise be available for the ongoing development and operation of our business. Moreover, the anticipated financial, strategic and other benefits of an acquisition might not be realized. Future
acquisitions could result in potentially dilutive issuances of equity securities, the incurring of debt and contingent liabilities, and amortization provisions related to goodwill and other intangible
assets. In addition, acquisitions involve numerous risks, including:



The rights of our shareholders may differ from the shareholder rights of a U.S. corporation.

The rights of shareholders and, therefore, certain of the rights of holders of ADSs, are governed by English law, including the Companies Act 1985, and by our
Memorandum and Articles of Association. These rights differ in many respects from the rights of shareholders in typical U.S. corporations. You may have more difficulty asserting your rights as a
shareholder than you would as a shareholder of a company organized in a jurisdiction within the United States.

U.S. investors may have difficulty in serving process or enforcing a judgment against us.

We are a public limited company organized under the laws of England and Wales. Judgments of U.S. courts, including judgments against us, predicated on the civil
liability provisions of the federal securities laws of the United States, may not be enforceable in English courts.

Exchange rate fluctuations can cause operating results to fluctuate.

Historically the majority of our revenue arose in U.S. dollars, whereas our costs were incurred approximately equally in U.S. dollars and other currencies,
predominately pounds sterling. More recently, however, the currencies of revenue and expenses have been closely aligned. Nevertheless, fluctuations in exchange rates, particularly between the U.S.
dollar and the G.B. pound, may have a significant impact on our operating results, notably when expressed in G.B. pounds. In 2003 and 2002 fluctuations between the U.S. dollar and the pound sterling
have been significant, going from $1.4572

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per
£1 at April 30 2002 to $1.5982 per £1 at April 20 2003. In fiscal years 2002 and 2001 and, fluctuations between the U.S. dollar and the G.B. pound were not
significant, and net exchange rate gains or losses on operational transactions were not material. We prepare consolidated financial statements expressed in G.B. pounds. We translate revenue, costs and
expenses arising in currencies other than the reporting currency using average exchange rates. We translate assets and liabilities denominated in currencies other than the reporting currency at
exchange rates in effect at the balance sheet date.

Risks related to doing business with the United States government

We sell our products, maintenance, training and services, directly and indirectly, from time to time, to agencies of the U.S. government. Companies selling to the
U.S. government may be subject to a variety of specialized regulations governing areas such as employment practices, product pricing and discount practices, and contract management. Our compliance
with the terms and conditions of individual government contracts, including, but not limited to contractual disclosures, and sales activity reporting systems, have been audited in the past, are
currently audited, and may be audited in the future. There can be no assurance that any such audit may not result in a cost adjustment, refund, penalty and/or further investigation. Any of these
possible scenarios could be expensive and distracting to us, in terms of the time and management of personnel and outside professional resources needed to respond to the government's audit or
investigation demands, and the associated costs.

ITEM 4. INFORMATION ON THE COMPANY

A.    HISTORY AND DEVELOPMENT OF THE COMPANY

We are a U.K. resident public limited company (registered company number 01709998) and we operate under the laws of England and Wales. We were incorporated in
England on March 28, 1983 as a public limited company under the Companies Acts of Great Britain under our original name, Micro Focus Group plc. In May 1983, we obtained a quotation on
the Unlisted Securities Market of the London Stock Exchange, and in June 1984 became a fully listed company on the London Stock Exchange. In May 1992, we became listed on the Nasdaq
National Market. In February 1999, we changed our name from Micro Focus Group plc to Merant plc. Our registered office is Abbey View, Everard Close, St. Albans, Hertfordshire AL1 2PS, England,
and our telephone number at that location is 011 44 1727 812812.

Our
operational headquarters and the principal place of business in the United States of our indirect wholly owned subsidiary, Merant Inc., is 3445 NW 211th Terrace,
Hillsboro, Oregon 97124. We have appointed CT Corporation, 818 West Seventh St., 2nd Floor, Los Angeles, CA 90017 as the agent for service of process for Merant Inc.

Important Events

Fiscal 2003

During the prior year, we began a process of returning excess capital to shareholders through the repurchase for cancellation of its ordinary shares on the open
market. This activity continued in the year ended April 30, 2003.

14

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Between 11 June 2002 and 15 January 2003 we purchased for cancellation 11,991,229 ordinary shares (having a nominal value of £240,000), representing
approximately 10% of our issued share capital at the time the authority was granted. The aggregate consideration was £11,777,000, representing an average price of approximately
£0.98 per ordinary share. Authority to make these purchases was granted by shareholders at an extraordinary general meeting on 6 June 2002. The shares were purchased on the London
Stock Exchange and were cancelled immediately. The authority expired, however, on 6 June 2003 and as such we have no further buy back authority.

On
18 December 2002, the United States District Court for the Northern District of California approved the proposed settlement of all claims in the class action securities litigation
pending against us and certain of our current and former officers and directors. All payments made under the settlement and associated costs have been paid by our insurance carrier and, as a result,
the settlement did not impact our financial statements.

During
2003 we created the Merant Employee Benefit Trust 2003 for the purpose of granting share options to our employees. We directed Merant Trustees Limited (the trustees of
Merant's 1994 Employee Benefit Trust and Merant's 2003 Employee Benefit Trust) to purchase ordinary shares for use under Merant's 1999 Employee share Purchase Plan and 2003 Share Incentive Plan. From
March 2003 through 1 October 2003 the Trustees had completed the purchase of 3,400,000 shares at a total cost of £4,687,650.

Fiscal 2002

We began the fiscal year ended April 30, 2002 operating in three business segments: Enterprise Change Management (or ECM), Enterprise Data Connectivity (or
EDC), and Application Creation and Transformation (or ACT). During the 2002 fiscal year, we restructured our company with the goal of focusing on our ECM business, which provides solutions under the
PVCS brand. As part of this restructuring, we sold our EDC and ACT Divisions.

Fiscal 2001

In February 2001 a plan was announced to discontinue the operations and business of the E-Solutions division. The plan was completed during
May 2001. The results of operations
of the business amounted to a net loss of £9.5m in fiscal 2001 and net income of £0.3m in 2000. In fiscal 2001 we also recorded the loss arising on the discontinuance of the
business which amounted to £11.2m. The loss included the write off of unamortised goodwill, which totaled £8.0m.

In
the fourth quarter of fiscal 2001, on February 20, 2001, we completed the acquisition of the Enterprise Division of NetObjects, Inc. and entered the web content
management segment of the enterprise change management market. Merant Collage, formerly NetObjects Collage, is a browser-based, scalable enterprise content management platform that manages the web
content lifecycle. The total consideration for the transaction was £12.6m, payable in cash. This transaction has been accounted for using the purchase accounting method. We capitalized the
difference between the purchase price and the estimated fair value of the net tangible liabilities acquired as goodwill. We are amortizing this amount, which totaled £13.1m, over its
estimated economic life of five years.

Discontinued operations

On
November 8, 2001, we completed the sale of our EDC Division to Golden Gate Capital for £20.5m, payable in cash, subject to post-closing adjustment based
on the value of assets transferred. Our shareholders approved the transaction at an extraordinary general meeting held on October 30,

15

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2001.
On completion, we received a cash payment of £15.2m. After writing off the unamortized portion of goodwill attributed to the EDC Division, we recorded a loss of £2.1m on
the disposal.

In
the third quarter of fiscal 2000, on November 23, 1999, we acquired for the ACT Division all of the outstanding stock of EnterpriseLink Technology Corporation, a privately held
supplier of enterprise extension software based in Campbell, California. The total consideration for the transaction was £8.7m, payable as a combination of cash and assumption of debt.

Also
in the third quarter of fiscal 2000, on January 8, 2000, we acquired for the ACT Division the remaining 79.9% of the outstanding stock of Northern Software Partners AS, our
distributor for the Nordic region, based in Oslo, Norway. The total consideration for the transaction was £2.6m, payable in cash. Northern Software Partners AS changed its name to Merant
Nordic AS on January 21, 2000.

On
August 10, 2001, we completed the sale of our ACT Division to Golden Gate Capital and Parallax Partners. Our shareholders approved the transaction at an extraordinary general
meeting held on July 23, 2001. On completion, we received a cash payment of £37.6m. After writing off the unamortized portion of goodwill which arose on the acquisitions for the ACT
Division, we recorded a loss of £1.0 million on the disposal.

In
the fiscal year ended April 30, 2003 we finalised the sale of the EDC and ACT divisions (see below). The final settlement after all post closing contractual adjustments
resulted in a reduction in the total loss on disposal of £0.6m for both EDC and ACT which is recorded as an exceptional gain in 2003.

In
October 2001 we completed the sale of our real estate in Newbury, England, for £10.8m. Following the disposal of the ACT Division, we decided it was no longer
appropriate to retain ownership of this facility. We realized a pre-tax loss of £1.8m on the transaction.

Principal Capital Expenditures

During 2003, we invested £2.6m for the purchase of computer hardware, leasehold improvements, and for further investment in our management information
systems, compared to £2.6m in 2002 and £6.8m in 2001. The decline in these expenditures from 2001 to 2002 reflects the disposal of the ACT and EDC Divisions.

B.    BUSINESS OVERVIEW

OPERATIONS AND PRINCIPAL ACTIVITIES

Merant designs, develops and markets software products and services for enterprise change management, software configuration management and web content
management, under the Merant brand (formerly the PVCS® brand). Merant solutions help companies improve their ability to manage change software applications, code and web content. Managing
change well helps customers align IT initiatives to business requirements and provides the ability to see, measure and analyze assets and processes to optimize return on investments (ROI).

Merant Professional

Merant Professional combines Merant Version Manager, Merant Tracker and Merant Build in a single package for software
configuration management. Targeted at the team-centric needs of software projects, Merant Professional enables teams of any size to protect software assets, automate development tasks and
manage the many changes and issues involved in team development.

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Merant Dimensions

Merant Dimensions is a complete enterprise change management infrastructure that enables cross-platform and distributed process enforcement and
configuration management for both software and hardware assets. Unique to the market, Merant Dimensions provides the benefits of a single metadata repository for change management across the
enterprise, regardless of platform, location or IDE, and with the security of rigorous closed-loop change management. In a single, tightly integrated system, Dimensions provides everything
businesses need to understand, implement, and audit changes to assets and business operations, with full, auditable control of the process. Dimensions is available in Standard, Enterprise and z/OS
editions.

Merant Collage

Merant Collage is a complete web content lifecycle solution that provides automated web content management, design, contribution and deployment. At
far lower cost than comparable solutions, Collage provides an easy way to manage and track web assets and content contributors, while
enforcing access rights, improving productivity, speeding deployment, and freeing busy IT staff from routine web maintenance chores.

The Merant Professional Services Business

Merant's Professional Services organization assesses customer requirements, helps identify and establish best practices for a customer's needs, selects the
appropriate Merant products for the customer's goals, and helps implement the solution. The Merant Professional Services organization also includes Merant University to provide product training for
customers, Merant Hosted Services for an ASP licensing model to obtain selected Merant products, and the SupportNet service for worldwide 24/7 technical support of Merant products.

Application Change Management:

During the three fiscal years ended April 30, 2002, we also provided solutions through our ACT, EDC, and E-Solutions businesses, which we now
report as discontinued operations:

Our
ACT (or Micro Focus) solutions enabled companies to leverage existing investments in IT systems and extend these assets into new business applications. We sold the ACT division in
August 2001.

Our
EDC (or DataDirect) solutions provided standards-based data connectivity technology to integrate varied systems, applications and data across their enterprise. We sold our EDC
business in November 2001.

Our
E-Solutions business delivered applications to accelerate customers' e-business solution initiatives. We discontinued the E-Solutions business in
February 2001.

Principal Markets

Our end-user customers consist of corporate data processing center personnel, independent software vendors, software developers, value-added resellers
and computer equipment manufacturers worldwide. Our customer base is broad, and no individual customer accounted for more than 10% of total revenue in fiscal years 2003, 2002 or 2001. Additionally,
our business does not concentrate on any specific industry.

We
market our products and services throughout the world. For a geographic analysis of our revenue based on operations in the Americas, Europe, and Asia/Pacific, see Item 5.A.
"Operating Results".

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Seasonality

Our revenue is affected by seasonal fluctuations resulting from lower sales that typically occur during the summer months in Europe and other parts of the world.
In addition, we have historically experienced lower revenue for the first quarter of a fiscal year than in the fourth quarter of the prior fiscal year. We typically recognise a high proportion of
quarterly revenue during the last several weeks of a fiscal quarter and significant fluctuations in new order revenue can occur due to the size and timing of customer orders. Our quarterly results
therefore can vary to the extent that sales for a quarter are delayed, particularly since a relatively high proportion of our expenses do not vary with revenue.

Raw Materials

The products that we ship are comprised primarily of software programs copied onto CD-ROM. The raw materials used for this medium are widely
available.

Marketing Channels

We market and distribute our products on a worldwide basis through multiple channels. Sales are made directly, using a combination of telesales, field sales,
third party distribution and the Internet. We currently have local sales and marketing operations in the United States, the United Kingdom, Australia, France, Germany, Italy, Japan, Korea and
Singapore. Our direct sales effort is augmented with a network of independent software vendors, dealers, distributors, original equipment manufacturers and value added resellers in many countries
around the world, in addition to Merant offices.

In
some cases, our products are embedded in other independent software vendors' products under licensing arrangements. In addition, we have license and distribution arrangements that
enable us to sell products developed by third parties. We pay license fees to these third parties, which typically have a continuing obligation to improve and maintain the products supplied to us.

Intellectual Property

We regard much of our intellectual property as proprietary. We seek to protect our intellectual property rights through a combination of copyright, trademark,
patent and trade secret laws, employee and third-party non-disclosure agreements and certain technical measures. We have registered, or have applications pending for, certain trademarks.

We
market and license our products in many countries worldwide, and the laws of various countries in which our products may be used may not protect proprietary rights to the same extent
as the laws of the United States and the United Kingdom.

For
more information regarding our proprietary technology, see Item 3.D. "Risk Factors'Protection of our intellectual property is limited, which may affect our
competitive position' and 'Our products may infringe the intellectual property rights of third parties, which may result in lawsuits and prevent us from selling our products' ".

Competition

Rapid technological change and aggressive competition characterize the markets we serve. Competition can lead to pricing pressures and loss of market share. We
expect competition to increase in the future from existing competitors and from other companies that may enter our existing or future markets with similar or substitute solutions. These solutions may
be less costly or provide better performance or functionality than our products. Some of our current and prospective competitors have greater financial, marketing or technical resources and may be
able to adapt more quickly to new or

18

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emerging
technologies, or devote greater resources to the promotion and sale of their products than we can. Other companies, including customers, may develop competitive products. In addition, the
software industry is characterized generally by low barriers to entry, meaning new competitors with technological, marketing or other competitive advantages may emerge and rapidly acquire market
share. Furthermore, we may not be able to compete effectively in the future in the professional services market. If price competition increases significantly, competitive pressures could cause us to
reduce the prices of our products and services, which would result in reduced profit margins and could harm our ability to provide adequate service to our customers.

Government Regulations

We are a U.K. company with substantial operations in, and revenue derived from, U.S.-based activities. Accordingly, we are subject to the Companies Act 1985,
among other applicable laws of England and Wales, as well as to U.S. federal securities laws, and other applicable U.S. federal, state and local laws. For more information regarding issues associated
with our various corporate legal relationships, please see Item 3.D. "Risk Factors'The rights of our shareholders may differ from the shareholder rights of a U.S. corporation' and
'U.S. judgments may not be enforceable against us' ".

C.    ORGANIZATIONAL STRUCTURE

We operate in many countries around the world through direct and indirect subsidiaries, of which two are significantMerant International Ltd.,
incorporated in England and Wales, and Merant Inc. incorporated in California. Both of these subsidiaries are wholly-owned and controlled, directly or indirectly, by Merant plc.

D.    PROPERTY, PLANT AND EQUIPMENT

In October 2001, we sold our real estate, which consisted of approximately 80,000 square feet of office space located on an 8-acre site in
Newbury, England. We presently lease approximately 6,000 square feet of office space in this facility from the new owner.

We
also lease office space for our sales, distribution and development operations. Major facility leases at April 30, 2003 include the following:

|LOCATION          |  | PURPOSE                  |  | FACILITY SIZE (SQUARE FEET)
|----------------- |  | ------------------------ |  | ---------------------------
|Hillsboro, OR     |  | Operational headquarters |  | 63,785                     
|Mountain View, CA |  | Sales & development      |  | 56,000                     
|St. Albans, U.K.  |  | Sales & development      |  | 20,000                     

We
also maintain facilities, principally sales and distribution offices, around the world. In the United States, these are located in Rockville, MD and Chicago, IL. We
sub-lease a facility in Morrisville, NC. Outside the United States, we maintain offices in Melbourne, Australia; Duffel, Belgium; Allerod, Denmark; Paris, France; Ismaning, Germany; Milan
and Rome, Italy; Newbury, United Kingdom; Tokyo, Japan; Seoul, Korea; and Singapore.

We
are not aware of any environmental issues that may affect the utilization of any of these facilities. We have no present material plans to construct new facilities, or to expand or
improve any of these existing facilities, as our facilities are sufficient to meet our current needs.

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ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The following discussion should be read in conjunction with our consolidated financial statements, set forth elsewhere in this Form 20-F.

We
prepare our financial statements in accordance with United Kingdom Generally Accepted Accounting Practices (U.K. GAAP), and expressed in pounds sterling. Profit and loss accounts are
translated at average rates. An analysis of the differences between U.K. and U.S. GAAP applicable to us is set forth in note 25 to our financial statements, included elsewhere in this
Form 20-F.

In
addition to historical information, this discussion contains forward-looking statements as more fully described above in "Forward-Looking Statements" that involve risks and
uncertainties that could cause actual results to differ materially from those indicated by the forward-looking statements. Factors that might cause or contribute to such differences include, but are
not limited to, those discussed above under Item 3.D. "Risk Factors".

Critical accounting policies

The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and
expenses, and related disclosure of contingent assets and liabilities. We base our 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 judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

Note 1
to the financial statements provides a summary of the significant accounting policies followed in the preparation of the financial statements.

We
believe that the following critical accounting policies affect our more significant estimates and judgments used in preparing our consolidated financial statements.

Revenue recognition

We derive revenues from three primary sources: (1) software licenses, (2) maintenance subscriptions, and (3) training and consulting. While
the basis for software license revenue recognition is substantially governed by the provisions of Statement of Position No. 97-2,Software Revenue
Recognition, and Statement of Provision No. 98-9,Modification of SOP 97-2, Software Revenue
Recognition,issued by the American Institute of Certified Public Accountants, we exercise judgment and use estimates in connection with the determination of the amount of new
software license, software license updates and product support and services revenues to be recognized in each accounting period.

For
software license arrangements we recognize software license revenue when: (1) we enter into a legally binding arrangement with a customer for the license of software;
(2) we deliver the products; (3) fees are deemed fixed or determinable; and (4) collection is probable.

The
vast majority of our software license arrangements include maintenance contracts, which are recognized ratably over the term of the arrangement, typically one year. Software license
updates and product support are generally priced as a percentage of the net new software license fees.

Certain
of our software arrangements include training and consulting services. Consulting revenues from these arrangements are accounted for separately from new software license revenues
when payment of the licence fees is not dependent on the performance of the training and consulting services. These service revenues are typically recognized as the service is provided.

For
arrangements with multiple elements, we allocate revenue to each element of a transaction based upon its fair value as determined by "vendor specific objective evidence." Vendor
specific

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objective
evidence of fair value for all elements of an arrangement is based upon the normal pricing and discounting practices for those products and services when sold separately. If we cannot
objectively determine the fair value of any undelivered element included in bundled software and service arrangements, we defer revenue until all elements are delivered and services have been
performed, or until fair value can objectively be determined for any remaining undelivered elements. When the fair value of a delivered element has not been established, we use the residual method to
record revenue if the fair value of all undelivered elements is determinable. Under the residual method, the fair value of the undelivered elements is deferred and the remaining portion of the
arrangement fee is allocated to the delivered elements and is recognized as revenue.

Allowance for doubtful accounts

We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. We regularly review the
adequacy of our accounts receivable allowance by making a provision based upon the size of the accounts receivable balance and based upon invoices with known issues that may affect payment. The
allowance for doubtful accounts represent our best estimate, but changes in circumstances relating to accounts receivable may result in a requirement for additional allowances in the future.

Valuation of goodwill

Goodwill arising on acquisitions, under U.K GAAP, is capitalised and amortised over the expected useful economic life which is generally five years. Under U.S.
GAAP goodwill arising on acquisitions is also capitalised but is not amortised. We regularly review business conditions for an event that may signify goodwill impairment. If such an event is
identified then we will undertake an impairment test on the value of goodwill and if an impairment is identified we will make the necessary adjustments in accordance with Financial Reporting Standard
11.

Goodwill,
under U.K GAAP, is required to be tested for impairment when an event is identified that may signify a diminution in value. Under U.S. GAAP we are required to test for
impairment on an annual basis. Significant management judgment is required to determine the fair value of the reporting unit for example, in forecasting the underlying cash flows of the unit and in
determining the fair value of the assets and liabilities of the unit. If alternative management judgments were adopted in implementing this impairment exercise then different outcomes could be arrived
at.

Deferred taxation

Deferred tax is recognised, without discounting, in respect of all timing differences between the treatment of certain items for taxation and accounting purposes
which have arisen but not reversed by the balance sheet date. We regularly review our unrecognised deferred tax assets to determine whether or not they should be recognised in accordance with
Financial Reporting Standard 19. Significant management judgment is required in assessing our future profitability and our likelihood of realising our deferred tax assets in the foreseeable future. If
alternative management judgments were adopted then this may result in different outcomes.

A.    OPERATING RESULTS

We prepare our financial statements in accordance with U.K. GAAP, and expressed in pounds sterling. A detailed analysis of the differences between U.K. and U.S.
GAAP is set forth in note 25 to our financial statements.

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Throughout
the year we made very good progress toward our goal to return the Company to profitability, as illustrated by the following accomplishments:



22

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Operating results

The following table summarises the results of our operations, prepared in accordance with U.K. GAAP and expressed in pounds sterling:

|                                               |  | 2003    |    | Change |    | 2002     |    | Change |   | 2001     |   
|---------------------------------------------- |  | ------- | -- | ------ | -- | -------- | -- | ------ | - | -------- | --
|
|Licence fees                                   |  | 29,636  |    | -11    | %  | 33,387   |    | -21    | % | 42,193   |   
|Maintenance subscriptions                      |  | 38,902  |    | -2     | %  | 39,779   |    | 13     | % | 35,065   |   
|Training and consulting                        |  | 10,054  |    | -27    | %  | 13,902   |    | -22    | % | 17,817   |   
|                                               |  |         |    |        |    |          |    |        |   |          |   
|Revenue: continuing business                   |  | 78,592  |    | -10    | %  | 87,068   |    | -8     | % | 95,075   |   
|Revenue: discontinued business                 |  |        |    |        |    | 31,207   |    |        |   | 120,358  |   
|                                               |  |         |    |        |    |          |    |        |   |          |   
|Total revenue                                  |  | 78,592  |    | -33    | %  | 118,275  |    | -45    | % | 215,433  |   
|                                               |  |         |    |        |    |          |    |        |   |          |   
|Cost of revenue: continuing business           |  | (16,203 | )  | -23    | %  | (21,116  | )  | -15    | % | (24,852  | ) 
|Cost of revenue: discontinued business         |  |        |    |        |    | (5,510   | )  |        |   | (29,534  | ) 
|                                               |  |         |    |        |    |          |    |        |   |          |   
|Total cost of revenue                          |  | (16,203 | )  | -39    | %  | (26,626  | )  | -51    | % | (54,386  | ) 
|                                               |  |         |    |        |    |          |    |        |   |          |   
|Gross profit                                   |  | 62,389  |    |        |    | 91,649   |    |        |   | 161,047  |   
|Research and development                       |  | (17,792 | )  | -26    | %% | (24,187  | )  | -39    | % | (39,774  | ) 
|Sales and marketing                            |  | (32,158 | )  | -45    | %  | (58,922  | )  | -43    | % | (103,667 | ) 
|                                               |  |         |    |        |    |          |    |        |   |          |   
|Amortisation of goodwill and other intangibles |  | (13,485 | )  | -62    | %  | (35,896  | )  | -18    | % | (43,967  | ) 
|Other general and administrative               |  | (9,646  | )  | -46    | %  | (18,042  | )  | 35     | % | (13,401  | ) 
|                                               |  |         |    |        |    |          |    |        |   |          |   
|Total general and administrative               |  | (23,131 | )  | -57    | %  | (53,938  | )  | -6     | % | (57,368  | ) 
|                                               |  |         |    |        |    |          |    |        |   |          |   
|Total operating expenses                       |  | (73,081 | )  | -47    | %  | (137,047 | )  | -32    | % | (200,809 | ) 
|                                               |  |         |    |        |    |          |    |        |   |          |   
|Operating (loss): continued business           |  | (10,692 | )  | -75    | %  | (41,953  | )  | 46     | % | (28,798  | ) 
|Operating (loss): discontinued business        |  |        |    |        |    | (3,445   | )  |        |   | (10,964  | ) 
|                                               |  |         |    |        |    |          |    |        |   |          |   
|Total operating (loss)                         |  | (10,692 | )  | -76    | %  | (45,398  | )  | 14     | % | (39,762  | ) 
|                                               |  |         |    |        |    |          |    |        |   |          |   
|Exceptional items                              |  | (2,921  | )  |        |    | (18,242  | )  |        |   | (14,571  | ) 
|Net interest                                   |  | 815     |    |        |    | 1,614    |    |        |   | 4,287    |   
|                                               |  |         |    |        |    |          |    |        |   |          |   
|(Loss) on ordinary activities before taxation  |  | (12,798 | )  |        |    | (62,026  | )  |        |   | (50,046  | ) 
|                                               |  |         |    |        |    |          |    |        |   |          |   
|Taxation                                       |  | 300     |    |        |    |         |    |        |   | (868     | ) 
|                                               |  |         |    |        |    |          |    |        |   |          |   
|Retained (loss) for the year                   |  | (12,498 | )  |        |    | (62,026  | )  |        |   | (50,914  | ) 
|                                               |  |         |    |        |    |          |    |        |   |          |   
|(Loss) per share: basic and diluted            |  | (12.4   | )p |        |    | (49.6    | )p |        |   | (37.9    | )p

Revenue:Revenue from continuing operations declined £8.5 million or 10% relative to fiscal 2002. The
decrease in revenue is attributable to the downturn in the information technology market, including the market for enterprise change management software, during 2003. Licence fee revenue decreased by
£3.7 million, primarily due to economic conditions that resulted in a decline in the number of large enterprise deals. Maintenance subscriptions decreased by
£0.9 million, caused by general economic conditions, although the decrease was far lower in percentage terms (2%) than licence fees which shows a high retention rate from our
existing customer base. Training and consulting revenue declined by £3.9 million because of the decline in license fees and in particular a decrease in the number of large
enterprise deals.

Revenue
from continuing business was £87.1 million in fiscal 2002, a decrease of £8.5 million or 8% relative to 2001, due to the downturn in the
information technology market, including the market for enterprise change management software, during 2002.

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The
following table analyses total revenue for the last three fiscal years by geographic market:

|                        |  | 2003   |  | Change |   | 2002    |  | Change |   | 2001   
|----------------------- |  | ------ |  | ------ | - | ------- |  | ------ | - | -------
|
|United Kingdom          |  | 13,972 |  | -20    | % | 17,517  |  | -44    | % | 31,271 
|United States           |  | 48,977 |  | -35    | % | 75,468  |  | -43    | % | 132,190
|Europe (excluding U.K.) |  | 11,329 |  | -39    | % | 18,519  |  | -51    | % | 37,625 
|Other                   |  | 4,314  |  | -36    | % | 6,771   |  | -53    | % | 14,347 
|                        |  |        |  |        |   |         |  |        |   |        
|Total revenue           |  | 78,592 |  | -33    | % | 118,275 |  | -45    | % | 215,433
|                        |  |        |  |        |   |         |  |        |   |        

In
fiscal 2003, the United States contributed 62% of total revenue, compared to 64% in 2002 and 61% in 2001. The United Kingdom contributed 18%, compared to 15% in 2002 and 15% in 2001.
Europe contributed 14%, compared to 16% in 2002 and 17% in 2001.

Cost of revenue:Cost of revenue includes the cost of product materials, packaging and distribution costs, royalties to third
party software developers for the licencing of add-on software products, and salaries and benefits for technical support and training and consulting personnel. These costs represented 21%
of continuing revenue in 2003, compared to 24% in 2002 and 26% in 2001. The decreases reflect continuing savings in product materials arising from the supply of documentation on CD-ROM,
and the increasing share of continuing maintenance revenue which has low associated cost of sales, which increased to 50% in 2003, from 46% in 2002 and 37% in 2001.

Operating expenses:Operating expenses include our research and development, sales and marketing and general and
administrative costs (which include amortisation of goodwill and other intangibles). Our total operating expenses decreased by 47% in 2003 relative to 2002 as a direct result of the aggressive
restructuring actions and general spending controls initiated over the year. Total operating expenses decreased by 32% in 2002 relative to 2001as a result of the disposal of Microfocus and Data
Direct.

Amortization of goodwill:We amortize goodwill over its estimated economic life, but we review goodwill for impairment if
events or circumstances indicate that the carrying value may not be recoverable. In fiscal 2003 and 2002, we made no acquisitions and no goodwill was capitalized, in 2001 we began amortizing goodwill
that arose on the acquisition of the Enterprise Division of NetObjects, Inc. In fiscal 2003 we completed the amortization of Intersolv goodwill, therefore recording lower charges in 2003
compared to 2002 and 2001.

Operating (loss):In fiscal 2003 we reported an operating loss from continuing operations of
£10.7 million, compared to a loss of £41.9 million in 2002 and £28.8 million in 2001.

Discontinued operations

The following table summarises the results of our discontinued operations:

|                 |  | 2003 |  | 2002   |   | 2001    |  
|---------------- |  | ---- |  | ------ | - | ------- | -
|
|Revenue          |  |     |  | 31,207 |   | 120,358 |  
|Operating (loss) |  |     |  | (3,445 | ) | (10,964 | )

Discontinued
operations consists of the pre-disposal operations of our ACT and EDC Divisions, which we sold in fiscal 2002, and our E-Solutions Division, which we
terminated in fiscal 2001. We sold our ACT Division at the end of the first quarter of 2002, and our EDC Division at the end of the second quarter of fiscal 2002. In 2001, the ACT and EDC Divisions
contributed revenue of £114.7m, and our E-Solutions business contributed £5.7m.

24

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Revenue:The decrease in revenue in 2002 reflects the disposal of the ACT Division at the end of the first quarter, and the
sale of the EDC Division at the end of the second quarter. In fiscal 2001, the ACT and EDC Divisions contributed 39% and 14%, respectively, of our total revenue. In fiscal 2000, the ACT and EDC
Divisions contributed 44% and 13%, respectively, of our total revenue. Our E-Solutions Division, from which we withdrew in February 2001, contributed approximately 3% of our revenue
in 2001 and 9% in 2000. Revenue growth in new service offerings focused on E-Solutions was not great enough to offset the decrease in demand for Year 2000 consulting solutions.

Operating loss:In fiscal years 2002 and 2001 we reported operating losses on discontinued operationsfor the
periods prior to disposalof £3.4m and £11.0m respectively. In fiscal 2000, our discontinued operations generated an operating income of £3.3m.

Total operating (loss)

In fiscal 2003, we reported a total operating loss (incorporating continuing and discontinued operations) of £10.7 million, compared to
£45.4 million in fiscal 2002 and £39.8 million in 2001. The reduction in the total operating loss in Fiscal 2003 was related to the disposal of the ACT and EDC
Division in Fiscal 2002 and the aggressive restructuring and expense controls that have been implemented over the prior 18 months, and the reduced charges in relation to amortisation of
goodwill. The increase in the total operating loss in 2002, compared to 2001 relates to the restructuring costs in connection with the disposal of the ACT and EDC divisions.

Non-Operating exceptional items:

In the fiscal years 2003, 2002 and 2001, we reported exceptional items as disclosed in the following table and discussed in the commentary below:

|                                                  |  | 2003   |   | Change |   | 2002    |   | Change |   | 2001    |  
|------------------------------------------------- |  | ------ | - | ------ | - | ------- | - | ------ | - | ------- | -
|
|Fundamental restructuring                         |  | (3,515 | ) | -74    | % | (13,342 | ) | n/a    |   |        |  
|Loss on disposal of fixed assets                  |  |       |   | -100   | % | (1,761  | ) | n/a    |   |        |  
|Gain/(loss) on termination of business operations |  | 594    |   | -119   | % | (3,139  | ) | -72    | % | (11,317 | )
|Amounts written off on investments                |  |       |   | n/a    |   |        |   | 100    | % | (3,254  | )

In
the year ended April 30, 2003 we:



In
the year ended April 30, 2002 we:



25

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In
the year ended April 30, 2001, we:



Income taxes

Our tax rate in each of the last three years has been significantly distorted by the permanent differences between accounting profits and taxable profits,
primarily the difference in the treatment of amortization of goodwill, which is generally not an allowable expense for tax purposes. The tax rate is also impacted by reserves being established for tax
benefits of net operating losses for which realization is not assured and by the distribution of taxable profits and losses among the tax jurisdictions in which we operate. We include an analysis of
the charge for income taxes, and an analysis of differences between the effective rate and the U.K. statutory rates, in note 9 to the consolidated financial statements.

The
tax credit for 2003 was £0.3m which related to the release of previous accrued tax provisions in the fiscal year. There was a tax charge of £0.9m in fiscal
2001. There was no tax charge in 2002.

The
income tax returns of some of our U.S. subsidiary undertakings for the years ended January 31 1996 to 1997 have been examined by the IRS, which has proposed increases to the
amount of U.S. income taxes due in respect of those years. We do not expect that any adjustments that may result from this examination will have a material adverse impact on our consolidated operating
results or financial position.

Loss for the year

Net loss for 2003 was £12.5 million or 12.4p per share. This compares to a net loss of £62.0 million or 49.6p per share in
2002 and £50.9 million or 37.9p per share in 2001. The reduction in the retained loss in Fiscal 2003 was related to the disposal of the ACT and EDC Division in Fiscal 2002 and the
aggressive restructuring and expense controls that have been implemented over the prior 18 months, and the reduced charges in relation to amortisation of goodwill. The increase in the total
operating loss in 2002, compared to 2001 relates to the restructuring costs in connection with the disposal of the ACT and EDC divisions.

26

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Business combinations

We have made several acquisitions in recent years but none in fiscal 2003 or 2002. Each of these transactions was accounted for using the acquisition method
(similar to the "purchase method" under U.S. GAAP). Where the purchase price exceeded the estimated fair value of the net tangible assets acquired, the excess was allocated to goodwill. We provide for
amortization of the goodwill over its economic life, which we estimate to be five years.

On
February 20 2001, we completed the acquisition of the Enterprise Division of NetObjects, Inc., a developer of web content management software based in Redwood City,
California. Through this acquisition, we bought products and services for the continuing operations of our ECM Division. The total consideration was approximately £12.6m, payable in cash.
Goodwill arising on this transaction totalled £13.1m.

On
December 6 1999, we acquired all of the outstanding stock of Trillium Software Corporation, a privately held supplier of change management software based in Eden Prairie,
Minnesota. Through this acquisition, we bought products and services for the continuing operations of our ECM Division. The total consideration was £2.8m. Goodwill arising on this
transaction totalled £2.7m.

In
fiscal 2000, we also completed three acquisitions for divisions of our business which we now report as discontinued operations:

On
August 3 1999, we acquired all of the share capital of Essential Software, Inc., a privately held Internet professional services firm based in Raleigh, North Carolina.
The total consideration for the transaction, which amounted to £10.1m, was payable in cash. Essential Software, Inc. formed part of our E-Solutions business, and when we
terminated the E-Solutions Division, we included the unamortised portion of the goodwill, which amounted to £6.5m, in the loss on discontinued operations (see note 3 to
the financial statements included in Item 17 of this Form 20-F).

On
November 23 1999, we acquired all of the share capital of EnterpriseLink Technology Corporation, a privately held supplier of enterprise extension software based in Campbell,
California. The total consideration was £8.7m. The EnterpriseLink technology was incorporated into the ACT Division, and the unamortised portion of the goodwill which arose on this
acquisition was added to the net loss on the disposal of the ACT Division reported in 2002.

On
January 8, 2000, we acquired for the ACT Division the remaining 79.9% of the outstanding stock of Northern Software Partners AS, its distributor for the Nordic region, based in
Oslo, Norway. The total
consideration for the transaction was £2.6m, payable in cash. Northern Software Partners AS, which changed its name to Merant Nordic AS on January 21 2000, was incorporated into the
ACT Division, and the unamortised portion of the goodwill which arose on this acquisition was added to the net loss on the disposal of the ACT Division reported in 2002.

Exchange rate fluctuations

For an explanation of the impact to our business of exchange rate fluctuations, see Item 11.

B.    LIQUIDITY AND CAPITAL RESOURCES

During fiscal 2003, our cash balances decreased £26.1m to £45.5m. We used £14.1m to fund our operating activities and
£11.7m to repurchase approximately 11.99m of our ordinary shares for cancellation.

In
fiscal 2002, our cash balances increased by £10.4m to £71.6m. We earned £10.8m from the sale of our Newbury facility, and
£45.0 million from the sale of our ACT and EDC Divisions. We used £22.7m to fund our operating activities and £23.1m to repurchase approximately 20.25m of
our ordinary shares for cancellation.

27

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In
fiscal 2001, operating activities generated £19.7m in cash. We spent £12.6m on the acquisition of the Enterprise Division of NetObjects, Inc, and invested
£6.8m in computer and telecommunications equipment and other fixed assets. In addition, £1.4m, net, was absorbed by corporate share plans, as the amount we invested in our own
shares exceeded the proceeds we earned from selling shares to option-holders on the exercise of their options and to participants in the Employee Share Purchase Plan. We also spent £13.8m
on the shares which we purchased for cancellation in August 2000. Our cash balances declined in the year by £18.3m to £61.2m.

We
expect to continue our investing activities, including expenditures for computer systems for research and development, sales and marketing and administrative staff. Furthermore, we
may use cash reserves to purchase our shares and to acquire software companies, products or technologies that are complementary to our business.

During
fiscal 2003 we were authorized to acquire our own shares, subject to market and business conditions, for the benefit of our employee share plans. In accordance with this
authority, Merant Trustees Limited acquired 1.8m ordinary shares at a cost of £2.4m in 2003, and 5.4m ordinary shares during 2001 at a cost of £5.2m. Merant Trustees Limited
did not acquire any shares under this authority in fiscal 2002.

Our
cash and bank deposits consist of high interest deposit accounts. At April 30, 2003 we had no debt. We had a line of credit in place during fiscal 2002 under the terms of
which unsecured financing of up to £5.0m was available. This facility was cancelled voluntarily in April 2002. At April 30, 2001, we had borrowings of £1.4m
against this line of credit.

The
following table summarises our contractual obligations at April 30, 2003 and the effect these contractual obligations are expected to have on our liquidity and cash flows in
future periods;

|                    |  | 2004  |  | 2005  |  | 2006  |  | 2007  |  | 2008  |  | Later years
|------------------- |  | ----- |  | ----- |  | ----- |  | ----- |  | ----- |  | -----------
|
|Operating leases    |  | 3,624 |  | 3,317 |  | 2,690 |  | 2,021 |  | 1,629 |  | 6,409      
|Capital commitments |  | 360   |  |      |  |      |  |      |  |      |  |           
|                    |  |       |  |       |  |       |  |       |  |       |  |            
|                    |  | 3,984 |  | 3,317 |  | 2,690 |  | 2,021 |  | 1,629 |  | 6,409      
|                    |  |       |  |       |  |       |  |       |  |       |  |            

We
believe it is important to maintain a conservative capital structure and a strong cash position. Our investment policy is designed to minimize risk while maximizing return on cash
given such levels of risk, and to keep uninvested cash at a minimum. Cash management is centralized, although some cash is held at various subsidiaries around the world to meet local operating
requirements.

We
believe that our existing cash and bank deposits, in combination with internally generated funds, will be more than sufficient to meet cash requirements in fiscal 2004.

We
believe that, following an extensive review of the business, there are no other financing arrangements requiring disclosure.

C.    RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC.

For a discussion of our research and development activities, patents and licenses, see Item 4.B "Business Overview".

D.    TREND INFORMATION

For a discussion of our expectations regarding our future operating expenses and capital resources, see Items 5.A. "Operating Results" and 5.B "Liquidity
and Capital Resources".

28

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ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A.    DIRECTORS AND SENIOR MANAGEMENT

The directors and senior management (and their ages) as of April 30, 2003 were as follows:

|NAME               |  | AGE |  | POSITION                                           
|------------------ |  | --- |  | ---------------------------------------------------
|J. Michael Gullard |  | 58  |  | Chairman of the Board                              
|Gerald Perkel      |  | 48  |  | President and Chief Executive Officer              
|Harold Hughes      |  | 57  |  | Non-executive director                             
|Michel Berty       |  | 64  |  | Non-executive director                             
|Barry X Lynn       |  | 52  |  | Non-executive director                             
|Don C. Watters     |  | 60  |  | Non-executive director                             
|Scott Hildebrandt  |  | 47  |  | Senior Vice President, Chief Financial Officer     
|Stephen King       |  | 44  |  | Senior Vice President & General Manager            
|Robert F. Dunne    |  | 49  |  | Senior Vice President, Sales                       
|Robert Blaskowsky  |  | 38  |  | Chief Information Officer                          
|Diane Williams     |  | 49  |  | Vice President, Human Resources                    
|John Stuart(1)     |  | 47  |  | Vice President & General ManagerEMEA Region       
|Stephen M. Going   |  | 39  |  | Vice President, General Counsel & Company Secretary

---

Mr. Gullard
was appointed a non-executive director in May 1995 and was elected chairman in March 1996. He is general partner of Cornerstone Management, a
California based venture capital and consulting firm that provides strategic focus and direction for technology companies primarily in the software and data communications industries. He is also a
director of JDA Software Group, Inc., and Celeritek, Inc., and is Chairman of Netsolve, Inc., each a publicly-traded U.S. company. Mr. Gullard's 28 years in the
technology industry include a number of executive and management posts at Telecommunications Technology Inc. and Intel Corporation. He holds a masters of business administration and a bachelor
of arts degree from Stanford University in California.

Mr. Perkel
joined us on September 20, 2001 as the company's President and Chief Executive Officer, and was appointed an executive director on the same date. He joined us
from Xerox Corporation where he served as senior vice president and president of the Office Printing Business. He joined Xerox in January 2000 when Xerox acquired the Color Printing and Imaging
Division of Tektronix, Inc., where he served as president. Mr. Perkel serves as a board member for the Juvenile Diabetes Research Foundation. He holds a bachelor of science degree in
system science engineering from the University of California at Los Angeles.

Mr. Hughes
was appointed a non-executive director in December 1993. Mr. Hughes worked for 26 years with Intel Corporation, where he held senior
positions in financial and operational management. He is currently a director of the London Pacific Group Ltd., a publicly traded financial services company, Xilinx, Inc., a publicly
traded provider of programmable logic solutions, Atsana Semiconductor Corp., a venture-backed semiconductor company, eVineyard, a privately held company and Remec Inc., a publicly traded
communications company.

Mr. Berty
was appointed a non-executive director of the Company following the acquisition of Intersolv, Inc. in September 1998. He had been a
non-executive director of Intersolv, Inc. since 1997. In July, 2003, Mr. Berty commenced service as CEO and Chairman of Security Biometrics Inc., a U.S. company
publicly traded on the over-the-counter market. He is also on the boards of directors of Sapiens International Corporation N.V., a publicly-traded software solutions provider
based in the Netherlands Antilles. He is also a director of iGate Corporation, a U.S. publicly traded company listed

29

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on
NASDAQ, and Dataraid, e-Vantage Solutions, Inc., and NetGain, all of which are privately-owned U.S. based corporations. From 1972 until 1997 he was an executive of the Cap Gemini
Group and served as Chairman of Cap Gemini America from 1993 to 1997.

Mr. Lynn
was appointed a non-executive director in September 1999. He is the President and CEO of Be eXceL management, inc. and Director/General Partner
of Shoreline Venture Management. Prior to founding Be eXceL, Mr. Lynn was with Wells Fargo for 16 years, his last position as the President of Wells Fargo Technology Services.
Previously, he served as the company's Chief Information Officer. Before that, he ran Wells Fargo's Private Banking Operations and their Investment Operations. Mr. Lynn founded and became the
first President of Wells Fargo Securities.

Mr. Watters
was appointed a non-executive director in December 1999. He retired from McKinsey & Co in 1997 after 28 years service, most recently
as a director, and continues to act as a consultant and as a member of the McKinsey Advisory Board.

Mr. Hildebrandt
joined the company as Senior Vice President and Chief Financial Officer in November 2001. He has over 24 years experience in executive and financial
management positions primarily focused in the high technology industry. Before joining Merant, Mr. Hildebrandt served as the Senior Vice President, Finance and Chief Financial Officer of
InFocus Corporation. Prior to InFocus, he spent over 14 years in various executive and financial management positions at Tektronix, Inc. and 6 years with Deloitte and Touche,
CPA's. Mr. Hildebrandt is a CPA.

Mr. King
joined the company as Senior Vice President and General Manager in February 2002. Before joining Merant, he led Terayon Communications Systems' cable solutions
group and was Chief
Operating Officer at Imedia Corporation, a digital video startup that was acquired by Terayon. Mr. King began his career as a software engineer in the United Kingdom, and later went on to hold
several key sales, marketing and general management positions with Tektronix, Inc. in Europe and the United States.

Mr. Dunne
joined the company as Senior Vice President, Sales, in February 2002. Previously, he led worldwide sales for RadiSys Corporation and Webridge, Inc. Prior
to that, Mr. Dunne spent 12 years at Tektronix, Inc. in a variety of key management positions, including Vice President of Sales and General Manager of its Network Computing
Group.

Mr. Stuart
joined Merant in April 2000 as U.K. general manager. In April 2001, he was promoted to the role of Vice President, Sales, EMEA, before gaining general
management responsibility for EMEA in April 2002. Mr. Stuart has been involved in the software industry for more than 20 years and has been instrumental in the growth and
profitability of companies such as Informix, Software AG and Pansophic within their EMEA operations.

Mr. Withers
joined Merant in May 2003 as Senior Vice President and General Manager EMEA. Mr Withers graduated as an engineer from The University of Bath in the UK, and has
held sales and marketing positions with Xerox. He was hired by Tektronix, Inc. in Europe to develop its international distribution and was subsequently appointed to Tektronix' international
marketing group in the United States. He then moved into the healthcare industry, firstly as Vice President of European Sales and Marketing of Invacare. In the late 90's he joined with Warburg Pincus,
a major US private equity investor, to create, as CEO, a new European healthcare group.

Mr. Blaskowsky
joined the company as Chief Information Officer in January 2002. Before joining Merant, Rob was Vice President and Chief Information Officer of Niku
Corporation. Prior to Niku, Rob served as information systems director, Color Printing and Video and Networking Divisions of Tektronix, Inc.

Ms. Williams
joined the company in December 2001 as Vice President of Human Resources. Before joining Merant, she served as Vice President of Human Resources for
Tektronix, Inc., for

30

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RadiSys
Corporation and for Sequent Computer Systems. She also held sales management positions at Sequent and at Compaq Computer Corporation.

Mr. Going
joined the company as Vice President and General Counsel in March 2002. Mr. Going was appointed Corporate Secretary in April 2002. Prior to joining
Merant, Mr. Going was a Partner in the Portland, Oregon office of Perkins Coie LLP serving emerging growth companies in the areas of
corporate finance and mergers and acquisitions. Prior to joining Perkins Coie as a Partner in September 2000, Mr. Going was a Partner in the Portland office of Ater Wynne LLP.

There
is no family relationship among any of the above named persons. There are no arrangements or understandings with major shareholders, customers, suppliers or others, pursuant to
which any person named above was selected as a director or member of senior management.

B.    COMPENSATION

The following table sets forth information concerning total compensation earned or paid to our directors, and to our senior management (as a group) for the fiscal
year ended April 30, 2003:

|NAME                                      |  | SALARY |  | BONUS |  | OTHER |  | TOTAL
|----------------------------------------- |  | ------ |  | ----- |  | ----- |  | -----
|
|J. Michael Gullard                        |  | 102    |  |      |  |      |  | 102  
|Harold Hughes                             |  | 26     |  |      |  |      |  | 26   
|Michel Berty                              |  | 24     |  |      |  |      |  | 24   
|Barry X Lynn                              |  | 23     |  |      |  |      |  | 23   
|Don C. Watters                            |  | 27     |  |      |  |      |  | 27   
|Gerald Perkel                             |  | 288    |  | 474   |  | 11    |  | 773  
|Senior management, as a group (7 persons) |  | 1,045  |  | 443   |  | 446   |  | 1,934
|                                          |  |        |  |       |  |       |  |      
|                                          |  | 1,535  |  | 917   |  | 457   |  | 2,909
|                                          |  |        |  |       |  |       |  |      

On
1 April 2003 each non-executive director agreed to cancel and terminate all outstanding options held in exchange for a one-time cash payment based on
the spread of the market value over the exercise price, given a hypothetical share appreciation over the remaining period of exercisability. The total cash payment to all the directors was
£116,000.

The
following table sets forth information concerning options granted to our directors and senior management during the fiscal year ended April 30, 2003:

|NAME              |  | NUMBER OF OPTIONS
TO PURCHASE
ORDINARY SHARES
GRANTED |  | EXERCISE PRICE PER
SHARE IN POUNDS
STERLING |  | EXPIRATION        
|----------------- |  | ----------------------------------------------------- |  | ------------------------------------------- |  | ------------------
|Gerald Perkel     |  | 687,500                                               |  | 0.84                                        |  | September 24, 2012
|Scott Hildebrandt |  | 250,000                                               |  | 0.84                                        |  | September 23, 2012
|Stephen King      |  | 312,500                                               |  | 0.76                                        |  | December 4, 2012  
|Robert F. Dunne   |  | 187,500                                               |  | 0.76                                        |  | December 4, 2012  
|Robert Blaskowsky |  | 87,500                                                |  | 0.76                                        |  | December 4, 2012  
|Diane Williams    |  | 125,000                                               |  | 0.76                                        |  | December 4, 2012  
|Stephen M. Going  |  | 75,000                                                |  | 1.21                                        |  | March 30, 2013    

31

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C.    BOARD PRACTICES

The following table sets forth information concerning our directors and executive officers as of April 30, 2003:

|NAME               |  | CURRENT OFFICE(S) HELD                              |  | COMMENCEMENT OF
OFFICE |  | TERMINATION/
RENEWAL DATE
OF OFFICE
|------------------ |  | --------------------------------------------------- |  | ---------------------- |  | -----------------------------------
|J. Michael Gullard |  | Chairman of the Board                               |  | May 1995               |  | Annual general meeting 2004        
|Gerald Perkel      |  | President and Chief Executive Officer               |  | September 2001         |  | Annual general meeting 2003        
|Harold Hughes      |  | Non-executive director                              |  | December 1993          |  | Annual general meeting 2005        
|Michel Berty       |  | Non-executive director                              |  | September 1998         |  | Annual general meeting 2005        
|Barry X Lynn       |  | Non-executive director                              |  | September 1999         |  | Annual general meeting 2004        
|Don C. Watters     |  | Non-executive director                              |  | December 1999          |  | Annual general meeting 2003        
|Scott Hildebrandt  |  | Senior Vice President, Chief Financial Officer      |  | November 2001          |  | Not applicable                     
|Stephen King       |  | Senior Vice President & General Manager             |  | February 2002          |  | Not applicable                     
|Robert F. Dunne    |  | Senior Vice President, Sales                        |  | February 2002          |  | Not applicable                     
|Robert Blaskowsky  |  | Chief Information Officer                           |  | January 2002           |  | Not applicable                     
|Diane Williams     |  | Vice President, Human Resources                     |  | December 2001          |  | Not applicable                     
|John Stuart(1)     |  | Vice President & General ManagerEMEA Region        |  | April 2000             |  | Not applicable                     
|Stephen M. Going   |  | Vice President, General Counsel & Company Secretary |  | March 2002             |  | Not applicable                     

---

Remuneration
for non-executive directors is determined by the Board as a whole, based upon the advice of an independent advisor who has provided details of compensation
awarded to directors of comparable companies. Non-executive directors receive an annual retainer and earn additional fees for attendance at Board meetings and for time spent on other
Company-related business. Fees are set within the limits stipulated in our Articles of Association.

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Non-executive
directors are eligible to participate in the Merant 1998 Share Option Plan, details of which are set out in note 23 to the financial statements. However,
the Board of Directors has elected to suspend the use of stock options as a means of compensating non-executive directors and, effective 1 April 2003, each non-executive
director agreed to terminate and cancel all the outstanding options in exchange for a one-time cash payment. The aggregate amount paid to all directors in the exchange was £116,000.

The
Board has appointed a remuneration committee (see below, under Item 6.C "Sub-committees of the Board"). The remuneration committee evaluates executive
compensation and advises the Board regarding the compensation package for our executive director, based on the need to attract, motivate, and retain individuals of the necessary calibre. It is
determined by reference to relevant market data for the countries in which the director performs his duties, and recognises the continuing competitive market in the sectors in which we operate. The
chief components of the executive director's remuneration, as they applied to the holder of that office during the year ended 30 April 2003, are as follows:

Basic salary:the salary rate for the executive director is reviewed annually, taking into account our financial performance,
individual job performance, market trends and data relating to executive director compensation of companies in comparable circumstances.

Performance-related bonus:the executive director is eligible for an annual performance-related bonus. The philosophy is to
offer greater than market opportunities in terms of bonus compensation, scaling upwards if our performance exceeds the targets set. The bonus is based on fixed formulae measuring our performance
against targets set at the beginning of the financial year. In the case of Mr. Perkel, the annual target bonus was based on a plan presented to and approved by the Board of Directors prior to
the commencement of the fiscal year.

Pension contributions:we do not operate a pension scheme for our directors. The executive director is eligible to
participate in our retirement plan for U.S.-based employees (401(k) plan), whereby we will partially match employee contributions to the plan, subject to the rules of the U.S. Internal Revenue
Service.

Other benefits:the executive director is entitled to participate in all welfare plans and policies provided to other senior
executives, including tax and financial planning, medical, dental, disability, life, accidental death and travel insurance.

Compensation for loss of office:the level of compensation we offer is determined by the need to provide the executive
director with a competitive package in accordance with the criteria described above. In the case of Mr. Greenfield, our former chief executive officer and executive director who was replaced by
Mr. Perkel in September 2001, this entitlement did not exceed the equivalent of two years' pay and consisted of a maximum of one year's salary and bonus as severance and an additional
one year's salary and bonus for services rendered for twelve months following termination and as consideration for certain non-compete covenants. In addition, his welfare benefits would
continue for eighteen months. In the event that Mr. Perkel's employment is terminated without cause or he resigns under certain defined circumstances, Mr. Perkel will be entitled to
receive twelve monthly severance payments equal to his monthly base salary, plus a proportion of his bonus. The bonus amount due in each month will be the greater of one-twelfth of
(i) his annualised actual bonus over the twelve months preceding the termination, or (ii) 50% of the annual target bonus. In addition, his welfare benefits would continue for the
duration of the severance period. Mr. Perkel has agreed to a 12-month non-competition covenant on termination preventing him from engaging in competition with the Group.
If Mr. Perkel is terminated without cause or resigns for good reason, at any time, from the date the Board of Directors approves a transaction which, if consummated, will result in a change of
control and continuing for 12 months following the effective date of the change of control, Mr. Perkel is

33

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entitled
to receive, for a period of 24 consecutive months following the termination or resignation, an amount equal to the sum of monthly base salary plus one twelfth of his annual target bonus.

Share plans:the executive director is eligible to participate in the Merant share option plans. Option prices are set at the
market price at date of grant, and are not offered at a discount. The grant of share options to the executive director, vesting over four years, is designed to ensure that an element of his
remuneration is directly related to long-term growth in shareholder value. The options are not subject to any performance conditions. We do not impose specific Group performance thresholds
or criteria for the vesting of options, choosing instead to manage directly the performance of each employee and take corrective actions as necessary. The executive director is also eligible to
participate in our Employee Share Purchase Plan on the same terms as apply to all employees. Under the plan, employees may purchase shares at discounted rates. Details of these employee benefit plans
are set out in note 23 to the financial statements.

Long term incentives:the executive director is not eligible for any other long-term incentive payments.

Sub-committees of the board:

The
Board is assisted by committees that have been established with written terms of reference. Their roles and composition are set out below.

Audit Committee

The Audit Committee is appointed by the Board of Directors for the purpose of assisting the Board in fulfilling its oversight responsibilities and, to this end,
with review of:



The
audit committee has the authority granted by the shareholders to set the compensation of the external auditor and is responsible for overseeing the external auditor's independence and performance.
The audit committee also has the authority to fill a vacancy in the office of the external auditor by recommending a new auditor for approval by the Board and the shareholders. The external auditor
reports directly to the audit committee, which is also responsible for resolving any disagreements between management and the external auditor regarding financial reporting.

The
audit committee consists of Mr. Hughes (chairman), Mr. Gullard and Mr. Watters, all of whom are non-executive directors. The audit committee meets at
least quarterly to consider the adequacy of our system of internal controls, policies and procedures and the outcome of the external audit, and to review our annual and quarterly reports and accounts.
It focuses particularly on compliance with legal requirements, accounting standards and the requirements of the U.K. Financial Services Authority, the SEC and Nasdaq, and on an ongoing basis reviews
the effectiveness of our systems of internal financial controls. It also advises the Board on the appointment of our auditors together with their remuneration for both audit and non-audit
work. The committee is authorized to investigate any activity within its charter, to seek any information it requires from any employee and to obtain independent professional advice if it considers
this necessary. Members of senior management and the external auditor normally attend its meetings. The committee regularly meets in private session to confer with the auditors without the attendance
of executive officers and other members of our

34

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management.
The ultimate responsibility for reviewing and approving our annual and quarterly reports and accounts remains with the Board of directors.

Management
prepares a comprehensive system of budgets and forecasts with monthly reporting of actual results against targets, and provides the directors with regular updates on our
financial performance. At its quarterly meetings, the Board is provided with an analysis of financial information that includes key performance and risk indicators. Our auditors are engaged to review
our reported results and balance sheet at each quarter end, and to audit the annual results and balance sheet. The Board is responsible for reviewing and approving for publication the financial
results for the previous quarter.

We
are responsible for providing the Audit Committee with educational resources related to accounting principles and procedures, current accounting topics pertinent to the Group, and
other material as requested by the committee. We will assist the committee in maintaining appropriate financial literacy.

We
do not currently have an internal audit function. The Board has reviewed the need for an internal audit function but has decided that the current control mechanisms are sufficient for
our size. The Board reviews the situation on an annual basis.

Remuneration Committee

The remuneration committee consists of three non-executive directors, Mr. Berty (Chairman), Mr. Lynn and Mr. Watters.
Mr. Berty has been a member of the committee since 1999, and was appointed committee chairman in 2000. Mr. Watters was appointed a member of the committee in 2000, and Mr. Lynn
was appointed a member of the committee in April 2002. None of the committee members has any personal financial interests (other than as shareholders and/or optionholders),
conflicts of interests arising from cross-directorships or day-to-day involvement in running the business. The committee is responsible for recommending to the Board the
framework of executive remuneration and then determining individual terms of employment. These responsibilities cover salary and bonus arrangements, benefits, contracts of employment and share option
grants. The committee operates in accordance with written terms of reference and is authorized to seek appropriate professional advice if it considers this necessary. It ensures that remuneration is
appropriate to each executive director's responsibilities, taking into consideration our overall financial and business position, the highly competitive industry of which we are a part, salary scales
within the company, and the importance of recruiting and retaining management of the appropriate calibre.

The
nomination committee presently consists of Mr. Gullard (chairman), Mr. Perkel and Mr. Berty. The committee meets from time to time when required to do so, and
makes recommendations to the Board on all proposed new appointments of directors. Such appointments are subject to subsequent confirmation by the shareholders.

D.    EMPLOYEES

As of April 30, 2003, we had 590 full-time employees, with 135 based in the U.K., 67 based outside of the U.K. in Europe, 359 based in North
America and 29 based in Australia, Japan, Korea and Singapore. These employees include 144 in product development, 66 in consulting, 20 in marketing, 194 in sales, 67 in answerline and 99 in finance,
legal, administration and information technology. Our employees are not represented by any collective bargaining organizations and we have never experienced any work stoppages. We consider our
relations with our employees to be good.

35

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E.    SHARE OWNERSHIP

The following table sets forth information concerning the share ownership (including outstanding share options) of our directors and executive officers as of
April 30, 2003:

|NAME               |  | NUMBER OF
ORDINARY
SHARES
OWNED |  | NUMBER OF
ORDINARY
SHARES WHICH
MAY BE
ACQUIRED UNDER
OPTION SCHEMES |  | RANGE OF
EXERCISE
PRICE OF
OPTIONS IN
POUNDS
STERLING |  | EXPIRATION DATE OF
OPTIONS           
|------------------ |  | ------------------------------- |  | -------------------------------------------------------------------- |  | ----------------------------------------------------- |  | -------------------------------------
|J. Michael Gullard |  | 126,774                         |  |                                                                     |  |                                                      |  |                                     
|Gerald Perkel      |  | 34,865                          |  | 2,750,000
687,500                                                    |  | 0.69
0.84                                             |  | September 20, 2011
September 24, 2012
|Harold Hughes      |  | 134,758                         |  |                                                                     |  |                                                      |  |                                     
|Michel Berty       |  | 24,758                          |  |                                                                     |  |                                                      |  |                                     
|Barry X Lynn       |  | 24,758                          |  |                                                                     |  |                                                      |  |                                     
|Don C. Watters     |  | 24,758                          |  |                                                                     |  |                                                      |  |                                     
|Scott Hildebrandt  |  | 34,865                          |  | 1,000,000
250,000                                                    |  | 0.89
0.84                                             |  | November 18, 2011
September 23, 2012 
|Stephen King       |  | 12,910                          |  | 1,250,000
312,500                                                    |  | 1.08
0.76                                             |  | February 3, 2012
December 4, 2012    
|Robert F. Dunne    |  | 3,273                           |  | 750,000
187,500                                                      |  | 1.04
0.76                                             |  | February 24, 2012
December 4, 2012   
|Robert Blaskowsky  |  | 8,114                           |  | 350,000
87,500                                                       |  | 1.11
0.76                                             |  | January 1, 2012
December 4, 2012     
|Diane Williams     |  | 2,749                           |  | 500,000
125,000                                                      |  | 1.02
0.76                                             |  | December 9, 2011
December 4, 2012    
|John Stuart        |  | 12,000                          |  | 40,000
200,000                                                       |  | 3.10
1.07                                             |  | April 5, 2010
February 11, 2012      
|Stephen M. Going   |  |                                |  | 250,000
75,000                                                       |  | 1.16
1.21                                             |  | March 17, 2012
March 30, 2013        

We
currently operate four share option plans: the 1996 and 1998 share option plans, and the 1994 and 2003 employee benefit trusts. These plans provide for the grant of options to acquire
shares to persons who devote substantially all their working time to the company and other eligible persons as determined by the board. The exercise price of options issued under these plans is the
fair market value at the time the options are granted. Options are generally exercisable in monthly or annual instalments commencing one year after the date of grant. Unexercised options lapse when
the option holder ceases to be employed by the company or at a predetermined expiry date (of up to ten years from the date of grant), whichever occurs first.

In
September 1998 shareholders approved the 1998 Share Option Plan, which authorised the Company to grant options over a maximum of 21,552,000 shares. This authority will expire
on September 24 2008.

Options
are also outstanding as a result of grants made under our previous share option plans and under share option plans we adopted when we acquired Intersolv, Inc. Authority to
grant new options under these plans has expired, but options granted under those plans continue to be exercisable in accordance with the original grant rules, or the acquisition agreement.

At
April 30, 2003, there were outstanding stock options under the Merant plans and the Intersolv plan to purchase a total of 22,914,704 ordinary shares with exercise prices
ranging from £0.65 to £6.28 and expiration dates ranging from May 2003 to March 2013.

36

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ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A.    MAJOR SHAREHOLDERS

At October 1, 2003, the following interests of 5% or more in our share capital have been reported:

|                                       |  | SHARES HELD |  | PERCENTAGE
HOLDING |  
|-------------------------------------- |  | ----------- |  | ------------------ | -
|Schroder Investment Management Limited |  | 19,462,891  |  | 18.49              | %
|Merant Trustees Limited                |  | 7,324,930   |  | 6.96               | %
|UBS Asset Management Limited           |  | 5,747,161   |  | 5.46               | %

We
have previously reported interests of 5% or more in our share capital, as shown below:



At
April 30, 2003, The Bank of New York, acting as Depositary Bank, held approximately 10% of our ordinary shares in respect of which American depositary shares (or ADSs) have
been issued, evidenced by American depositary receipts (or ADRs). The Bank of New York held 11% of our ordinary shares at April 30, 2002 and 12% at April 30, 2001. The ADRs are traded on
the Nasdaq National Market. On March 13, 1998, we split our ordinary shares on a 5-for-1 basis, but our ADSs did not split and, consequently, each ADS now represents
five ordinary shares. Some of the holdings reported above may be held in the form of ADSs, but for the purposes of the table, numbers of ADSs have been converted to numbers of ordinary shares.

We
are not directly or indirectly owned or controlled by another corporation, by any foreign government or by any other natural or legal person.

Our
major shareholders do not have different voting rights.

B.    RELATED PARTY TRANSACTIONS

In fiscal 2000, one of our subsidiaries, Merant Inc., a California corporation, entered a loan agreement with Mr. Greenfield, who was Chief
Executive Officer at the time. Details of the loan are set out in note 24 to the financial statements. The loan has been repaid in full subsequent to 30 April 2003.

On
February 20, 2002, Merant Inc. made a loan in the principal amount of $120,000 to Robert F. Dunne, the company's Senior Vice President of Sales. Under the terms
of this loan, the outstanding principal
balance bears interest at a rate of 5.25% per annum and the loan must be repaid through fixed and regular payroll deductions from salary and bonuses, if any, until such time as the loan is repaid in
full.

C.    INTERESTS OF EXPERTS AND COUNSEL

Not required.

37

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ITEM 8. FINANCIAL INFORMATION

A.    CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

The "Consolidated Profit and Loss Account", "Consolidated Balance Sheet", "Consolidated Cash Flow Statement", "Notes to the Consolidated Cash Flow Statement",
"Consolidated Statement of Total Recognised Gains and Losses", "Reconciliation of Movements in Shareholders' Funds", "Notes to the Financial Statements", and "Independent Auditors Reports" are
included elsewhere in this Form 20-F.

Legal Proceedings

In December 1998 and January 1999 seven class action securities complaints were filed in the United States District Court for the Southern District
of New York against the Company and certain of its officers and directors. The Court ordered the seven cases consolidated, appointed lead plaintiffs and lead counsel, and ordered the filing of a
consolidated amended complaint, which was filed on 9 June 1999. The lead plaintiffs sought to have the matter certified as a class action of purchasers of American Depositary Shares of the
Company during the period from 27 June 1998 to 12 November 1998, including the former shareholders of Intersolv, Inc. who acquired American Depositary Shares of the Company in
connection with the merger involving the two companies. The consolidated complaint alleged various violations of the U.S. Securities Act of 1933 and the U.S. Securities Exchange Act of 1934 and sought
unspecified compensatory damages for alleged failure to disclose material non-public information concerning the Company's business condition and prospects. In May 1999, the Company
filed a motion to transfer the matter to the Northern District of California, and the Court granted the
Company's motion in November 1999. The action was transferred in December 1999 to the Northern District of California. After the action was transferred to California, plaintiffs again
amended their complaint alleging the same claims as described in the prior amended complaint but without the 1934 Act claims or the class period. The defendants filed a motion to dismiss the
newly-amended complaint in June 2000 and plaintiffs opposed this motion. A hearing on the motion took place in September 2000. On 20 December 2000 the Court issued a ruling
granting in part and denying in part the defendant's motion to dismiss. The court dismissed all of plaintiffs' allegations, with the exception of certain allegations that defendants misled the market
regarding the Company's plans for its Y2K business. On 16 February 2001, the defendants answered the second consolidated amended complaint, denying the remaining allegations and asserting
affirmative defences against the claim. On 19 June 2001 the Court entered a Stipulation and Order Regarding Class Certification ("Class Certification Order")

On
21 August 2002 the parties entered into a Stipulation of Settlement (the "Settlement Agreement") under which all claims in this litigation were settled. All payments made under
the Settlement Agreement to settle this litigation and all associated costs were paid by the Company's insurance carrier. On December 18 2002, the United States District Court for the Northern
District of California finally approved the settlement and the case was dismissed.

The
Company and its subsidiaries are also involved in legal proceedings, claims and litigation arising in the ordinary course of business. Although the ultimate results of these legal
proceedings, claims and litigation are not currently determinable, in the opinion of management these matters will not materially affect Merant's financial position, results of operations, or
liquidity.

Dividend Distribution Policy

We have never paid cash dividends on our ordinary shares, and we do not anticipate paying any regular cash dividends in the near future.

B.    SIGNIFICANT CHANGES

There have been no significant changes since the balance sheet date.

38

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ITEM 9. THE OFFER AND LISTING

A.    OFFER AND LISTING DETAILS

Market Price Information

Our ordinary shares are listed on the Official List of the U.K. Listing Authority and traded on the London Stock Exchange under the symbol MRN. They are also
traded on the Nasdaq National Market in the United States in the form of ADSs under the symbol MRNT. In March 1998, we undertook a subdivision (or stock split) of our ordinary shares on a
5-for-1 basis and adjusted the value of our ADSs such that each ADS now represents five ordinary shares. All share and per-share amounts included in this report
reflect the impact of this stock split.

The
following table sets forth the highest and lowest middle market quotation as reported in the Daily Official List of the United Kingdom Listing Authority (in respect of ordinary
shares) for the periods indicated:

|                           |  |                |  | HIGH |      | LOW
|-------------------------- |  | -------------- |  | ---- | ---- | ---
|Year ended April 30, 1999  |  |                |  | £    | 6.75 |    
|Year ended April 30, 2000  |  |                |  | £    | 4.87 |    
|Year ended April 30, 2001: |  | First quarter  |  | £    | 1.65 |    
|                           |  | Second quarter |  | £    | 1.41 |    
|                           |  | Third quarter  |  | £    | 1.10 |    
|                           |  | Fourth quarter |  | £    | 1.03 |    
|Year ended April 30, 2002: |  | First quarter  |  | £    | 1.17 |    
|                           |  | Second quarter |  | £    | 1.13 |    
|                           |  | Third quarter  |  | £    | 1.18 |    
|                           |  | Fourth quarter |  | £    | 1.18 |    
|Year ended April 30, 2003: |  | First quarter  |  | £    | 1.10 |    
|                           |  | Second quarter |  | £    | 0.89 |    
|                           |  | Third quarter  |  | £    | 1.01 |    
|                           |  | Fourth quarter |  | £    | 1.23 |    

The
following table sets forth the highest and lowest bid price as reported by the Nasdaq National Market System in respect of ADSs, (each of which represents five ordinary shares) for
the periods indicated:

|                           |  |                |  | HIGH |       | LOW
|-------------------------- |  | -------------- |  | ---- | ----- | ---
|Year ended April 30, 1999  |  |                |  | $    | 57.25 |    
|Year ended April 30, 2000  |  |                |  | $    | 39.00 |    
|Year ended April 30, 2001: |  | First quarter  |  | $    | 14.75 |    
|                           |  | Second quarter |  | $    | 10.88 |    
|                           |  | Third quarter  |  | $    | 8.69  |    
|                           |  | Fourth quarter |  | $    | 8.00  |    
|Year ended April 30, 2002: |  | First quarter  |  | $    | 8.43  |    
|                           |  | Second quarter |  | $    | 8.43  |    
|                           |  | Third quarter  |  | $    | 8.49  |    
|                           |  | Fourth quarter |  | $    | 8.65  |    
|Year ended April 30, 2003: |  | First quarter  |  | $    | 8.40  |    
|                           |  | Second Quarter |  | $    | 6.90  |    
|                           |  | Third Quarter  |  | $    | 5.60  |    
|                           |  | Fourth Quarter |  | $    | 10.00 |    

39

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B.    PLAN OF DISTRIBUTION

Not required.

C.    MARKETS ON WHICH OUR ORDINARY SHARES TRADE

Our ordinary shares are listed on the Official List of the U.K. Listing Authority and traded on the London Stock Exchange under the symbol MRN. Our shares are
also traded on the Nasdaq National Market in the United States in the form of ADSs under the symbol MRNT. In March 1998, we undertook a subdivision (or stock split) of our ordinary shares on a
5-for-1 basis and adjusted the value of our ADSs such that each ADS now represents five ordinary shares. All share and per-share amounts included in this report
reflect the impact of this stock split.

D.    SELLING SHAREHOLDERS

Not required.

E.    DILUTION

Not required.

F.     EXPENSES OF THE ISSUE

Not required.

ITEM 10. ADDITIONAL INFORMATION

A.    SHARE CAPITAL

Not required.

B.    MEMORANDUM AND ARTICLES OF ASSOCIATION

Our Memorandum of Association, as amended, filed as Exhibit 2.01 to our annual report on Form 20-F for the fiscal year ended
January 1, 1997 (SEC File No. 0-19696) and our Articles of Association filed as Exhibit 2.02 to our annual report on Form 20-F for the fiscal year ending 30 April
1999, are incorporated in this Form 20-F by reference. In addition, we incorporate by reference the "Description of Securities to be Registered" included in the annual report on
Form 20-F for the fiscal year ended April 30, 2000. The Transfer Agent and Registrar for our ADS's is Bank of New York.

C.    MATERIAL CONTRACTS

Acquisitions

We have made several acquisitions in recent years but none in fiscal 2003 or 2002. Each of these transactions was accounted for using the acquisition method
(similar to the "purchase method" under U.S. GAAP). Where the purchase price exceeded the estimated fair value of the net tangible assets acquired, the excess was allocated to goodwill. We provide for
amortization of the goodwill over its economic life, which we estimate to be five years.

On
February 20 2001, we completed the acquisition of the Enterprise Division of NetObjects, Inc., a developer of web content management software based in Redwood City,
California. Through this acquisition, we bought products and services for the continuing operations of our ECM Division. The total consideration was approximately £12.6m, payable in cash.
Goodwill arising on this transaction totalled £13.1m.

40

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On
December 6 1999, we acquired all of the outstanding stock of Trillium Software Corporation, a privately held supplier of change management software based in Eden Prairie,
Minnesota. Through this acquisition, we bought products and services for the continuing operations of our ECM Division. The total consideration was £2.8m. Goodwill arising on this
transaction totalled £2.7m.

In
fiscal 2000, we also completed three acquisitions for divisions of our business which we now report as discontinued operations:

On
August 3 1999, we acquired all of the share capital of Essential Software, Inc., a privately held Internet professional services firm based in Raleigh, North Carolina.
The total consideration for the transaction, which amounted to £10.1m, was payable in cash. Essential Software, Inc. formed part of our E-Solutions business, and when we
terminated the E-Solutions Division, we included the unamortised portion of the goodwill, which amounted to £6.5m, in the loss on discontinued operations (see note 4 to
the financial statements included in Item 17 of this Form 20-F).

On
November 23 1999, we acquired all of the share capital of EnterpriseLink Technology Corporation, a privately held supplier of enterprise extension software based in Campbell,
California. The total consideration was £8.7m. The EnterpriseLink technology was incorporated into the ACT Division, and the unamortised portion of the goodwill which arose on this
acquisition was set against the net loss on the disposal of the ACT Division reported in 2002.

On
January 8, 2000, we acquired for the ACT Division the remaining 79.9% of the outstanding stock of Northern Software Partners AS, its distributor for the Nordic region, based in
Oslo, Norway. The total consideration for the transaction was £2.6m, payable in cash. Northern Software Partners AS, which changed its name to Merant Nordic AS on January 21 2000,
was incorporated into the ACT Division, and the unamortised portion of the goodwill which arose on this acquisition was set against the net loss on the disposal of the ACT Division reported in 2002.

On
September 24, 1998, we acquired all of the share capital of Intersolv Inc, a publicly owned corporation based in Rockville, Maryland, U.S.A. and listed on the Nasdaq
National Market, for £160.9m. Intersolv was a provider of software solutions, focused primarily in the areas of application development management, enterprise data connectivity and
enterprise application renewal.

Dispositions

On August 10, 2001, we completed the sale of our ACT Division to Golden Gate Capital and Parallax Partners. The transaction was conditional upon
shareholder approval and other customary conditions of closing. Our shareholders approved the transaction at an extraordinary general meeting held on July 23, 2001. On completion, we received
an initial cash payment of £37.6m.

On
November 8, 2001, we completed the sale of our EDC Division to Golden Gate Capital for £20.5m, payable in cash, subject to adjustments based on the value of assets
transferred. The transaction was conditional upon shareholder approval and other customary conditions of closing.

In
October 2001 we completed the sale of our real estate in Newbury, England, for £10.8m. Following the disposal of the ACT Division, we decided it was no longer
appropriate to retain ownership of this facility. We realized a pre-tax loss of £1.8m on the transaction.

41

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D.    EXCHANGE CONTROLS

There are currently no decrees or regulations under the laws of the United Kingdom restricting the import or export of capital or affecting the remittance of
dividends or other payments to holders of our ordinary shares or American depositary shares (ADSs) who are non-residents of the United Kingdom.

There
are no limitations relating only to non-residents of the United Kingdom under U.K. law or our Memorandum and Articles of Association or on the right to be a holder of,
and to vote, our ordinary shares.

Merant
plc and its subsidiaries are not permitted under English law to hold ordinary shares in the capital of Merant plc. Although we are presently authorized to repurchase our
outstanding ordinary shares, as detailed herein, any repurchased shares must be cancelled. Our investment in own shares represents shares held by Merant Trustees Limited, which are included in our
consolidated financial statements in accordance with U.K. GAAP (see note 13 to the financial statements).

We
are subject to legal restrictions on the amount of dividends we can pay our shareholders. In particular, the Companies Act 1985 of Great Britain provides that a publicly held company
may pay dividends only if:



In
addition, we may only declare a dividend if we have sufficient distributable profits available for this purpose. Distributable profits are accumulated realized profits not previously
distributed or capitalized
less accumulated realized losses not previously written off, in a reduction or reorganization of capital duly made.

Holders
of ADSs on the relevant record date will be entitled to receive any dividends payable on the ordinary shares underlying the ADSs, subject to the terms of the deposit agreement
under which the ADSs are issued. Subject to exceptions provided in the deposit agreement, cash dividends paid in pounds sterling will be converted by the depositary to U.S. dollars and paid by the
depositary to holders of ADSs, net of conversion expenses of the depositary, and in accordance with the deposit agreement. The rights of holders of ADSs to any dividends or other distributions on the
ordinary shares underlying the ADSs will be governed by the deposit agreement and may be different from the rights of holders of ordinary shares.

E.    TAXATION

The statements below are based on the laws in force in the United Kingdom and the United States at the date of this annual report. They are subject to any
subsequent changes in law. Changes could be made on a retroactive basis. The following summary does not purport to be a comprehensive description of all the tax considerations that may be relevant to
a decision to acquire, hold or dispose of shares, ADSs or bonds. It does not purport to deal with the tax consequences applicable to all categories of investors. Some investors may be subject to
special rules. We are not making any representations with respect to the tax consequences to any particular holder. You should consult your own tax advisors concerning the overall tax consequences of
your ownership of shares, ADSs or bonds.

42

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ADSs

You generally may be entitled to the benefits of the tax treaty between the United States and the United Kingdom and, therefore, will be a U.S. shareholder if you
are:



U.K. Taxation

The following generally applies to U.S. shareholders.

Taxation of dividends

Current U.K. taxation legislation does not require tax to be withheld at source from cash dividends paid on shares.

Taxation of capital gains

A U.S. shareholder who is not resident, and in the case of an individual also not ordinarily resident, in the United Kingdom for U.K. tax purposes will not be
liable for U.K. taxation on capital gains realized on the disposal of his or her shares or ADSs unless at the time of the disposal:



A
U.S. shareholder who is an individual and who has ceased to be resident or ordinarily resident for tax purposes in the United Kingdom on or after March 17, 1998 and continues
not to be resident or ordinarily resident in the United Kingdom for a period of less than five years of assessment and who disposes of shares or ADSs during that period will also be liable upon return
to the United Kingdom to U.K. tax on capital gains, subject to any available exemption or relief, even though the shareholder is not resident or ordinarily resident in the United Kingdom at the time
of the disposal.

U.K. stamp duty and stamp duty reserve tax

U.K. stamp duty or stamp duty reserve tax is payable upon the transfer or issue of shares to, or to a nominee or agent of, a person whose business is or includes
issuing depositary receipts or providing clearance services. For this purpose, the current rate of stamp duty and stamp duty reserve tax is 1.5%, rounded up, in the case of stamp duty, to the nearest
£5. The rate is applied, in each case, to the amount or value of the consideration or, in some circumstances, to the value of the shares.

Provided
that the instrument of transfer is not executed in the United Kingdom and remains at all subsequent times outside the United Kingdom, no U.K. stamp duty will be payable on the
transfer of ADSs. An agreement to transfer ADSs will not give rise to a liability to stamp duty reserve tax.

43

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The
purchase of shares, as opposed to ADSs, may give rise to a charge to U.K. stamp duty or stamp duty reserve tax at the rate of 0.5%, rounded up, in the case of stamp duty, to the
nearest £5. The rate is applied to the price payable for the shares at the time of the transfer or agreement to transfer. Stamp duty reserve tax is generally the liability of the purchaser
and U.K. stamp duty is usually paid by the purchaser.

U.S. Taxation

Introduction

The following narrative summarizes the principal U.S. federal income tax consequences of acquiring, holding and disposing of shares or ADSs. It does not consider:



U.S. federal income tax consequences to U.S. shareholders

The following applies to U.S. shareholders that are fully eligible for the benefits of the tax treaty between the United States and the United Kingdom.

For
U.S. federal income tax purposes, U.S. shareholders of ADSs will be treated as the owners of the shares represented by those ADSs.

Distributions on shares or ADSs

In general, if you are a U.S. shareholder, you will be required to include distributions made by us with respect to shares or ADSs in your gross income.

Dividends
paid by us will not be eligible for the dividends received deduction available to certain U.S. corporate shareholders under Internal Revenue Code Sections 243 and 245.

The
amount of any cash distribution paid in pounds sterling will equal the U.S. dollar value of the distribution, calculated by reference to the exchange rate in effect at the time the
dividends are included in income. You should not recognise any foreign currency gain or loss if such foreign currency is converted into U.S. dollars on the date included in income. Foreign currency
gain or loss recognised upon a subsequent sale or other disposition of the pounds sterling, if any, will be U.S. source ordinary income or loss for U.S. federal income tax purposes.

Sale or exchange of shares or ADSs

You will generally recognise capital gain or loss upon the sale or exchange of the shares or ADSs measured by the difference between the amount realized on the
sale or exchange and your tax basis in the shares or ADSs. Your gain or loss will be long-term capital gain or loss if you have held the shares

44

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or
ADSs for more than one year. In the case of non-corporate U.S. shareholders, the maximum tax rate on capital gains arising on the disposition of assets held for more than one year is
20%, but may be lower depending on the U.S. shareholder's tax bracket and holding period. In general, any capital gain or loss recognised upon the sale or exchange of shares or ADSs will be treated as
U.S. source income or loss, as the case may be, for U.S. foreign tax purposes. Your ability to deduct capital losses is subject to limitations.

U.S. federal income tax consequences to non-U.S. shareholders

The following summarizes the U.S. federal income tax consequences of acquiring, holding and disposing of shares or ADSs by a shareholder that is not a U.S. person
(a Non-U.S. shareholder).

Distributions on shares or ADSs and sale or exchange of shares or ADSs

Subject to the discussion below with respect to U.S. backup withholding, a foreign shareholder generally will not be subject to U.S. federal income tax on
distributions on shares or ADSs, or gain from the sale or exchange of shares or ADSs unless:



If
you are a corporate foreign shareholder, effectively connected income may, under some circumstances, be subject to an additional branch profits tax at a 30 per cent rate or at a lower
rate if you are eligible for the benefits of an income tax treaty that provides for a lower rate.

U.S. Information Reporting and Backup Withholding

In general, information reporting requirements may apply to payments of dividends and the proceeds from the sale or disposal of shares or ADSs paid within the
United States, unless, an exemption applies. In connection with this information reporting, back-up withholding tax at the rate of 30% for 2003 and 2004 (currently scheduled to be reduced
to 28% by 2006) may apply if;



Shareholders
should consult their own tax advisers regarding the application of information reporting and backup withholding tax in their particular situations, the availability of an
exemption and the procedure for obtaining such an exemption, if available. Shareholders should note U.S. Treasury regulations that have been in effect since January 1, 2001, generally have
expanded the circumstances

45

---

under
which information reporting and backup withholding tax may apply. For example, in the case of payments made within the United States to a foreign simple trust, a foreign grantor trust or a
foreign partnership (other than payments to a qualifying "withholding foreign trust" or "withholding foreign partnership" within the meaning of the applicable U.S. Treasury regulations and payments
that are effectively connected with the recipient's conduct of a U.S. trade or business), the beneficiaries, owners, or partners, as the case may be, will be required to provide the certification
discussed above in order to establish an exemption from backup withholding tax and information reporting requirements. Moreover, a payer or middleman may rely on a certification provided by a payee
that is not a U.S. person only if such payer or middleman does not have actual knowledge or a reason to know that any information or certification stated in such certificate is incorrect. Information
reporting on Form 5471 may be required by U.S. shareholders who acquire 10% or more of the shares of Merant plc.

F.     DIVIDENDS AND PAYING AGENTS

Not required.

G.    STATEMENT BY EXPERTS

Not required.

H.    DOCUMENTS ON DISPLAY

We are subject to the information requirements of the Securities Exchange Act of 1934, as amended. In accordance with these requirements, we file an annual report
on Form 20-F and furnish other information with the SEC. These materials, including this annual report and related exhibits, may be inspected at the SEC's public reference facility
located at:

Headquarters
Office
450 Fifth Street, N.W.,
Room 1200
Washington, DC 20549
+1 (202) 942-8090

You
may also obtain copies of these materials from the SEC, upon payment of a duplication fee. Please call the SEC at +1 (800) 732-0330 for further information.

I.     SUBSIDIARY INFORMATION

Not required.

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Merant's principal financial instruments comprise cash and short-term deposits. The main purpose of these financial instruments is to fund the
operations of the business. Merant has various other financial instruments, such as trade debtors and trade creditors, that arise directly from its operations. It is, and has been throughout the
period under review, the Group's policy that no trading in financial instruments is undertaken.

The
main risks arising from the Group's operations are liquidity risk and foreign currency risk. The Board reviews and agrees policies for managing each of these risks and they are
summarised below. These policies have remained unchanged during the period under review.

46

---



The Group's objective is to maintain a balance between maximisation of investment returns and liquidity by restriction of the permitted investments and the
duration to maturity of those investments.



As a result of the significant investment in overseas operations, movements in foreign currency exchange rates can significantly affect the Group's balance sheet.
Historically, the majority of our revenue arose in U.S. dollars, whereas our costs were incurred approximately equally in U.S. dollars and other currencies, predominately pounds Sterling. More
recently, however, the currencies of revenue and expenses have been closely aligned. Nevertheless, fluctuations in exchange rates, particularly between the U.S. dollar and the pound Sterling, may have
a significant impact on the Group's operating results. In 2003 and 2002 fluctuations between the U.S. dollar and the pound sterling have been significant, going from $1.4572 per £1 at
30 April 2002 to $1.5982 per £1 at 30 April 2003. However the Group has managed its assets and liabilities in such a way so as to minimize the overall net impact and, hence,
net exchange rate gains or losses on operational transactions have not been significant.

The
Group also has transactional exposures. Such exposures arise from sales or purchases by an operating unit in currencies other than that unit's functional currency.

We
prepare our consolidated financial statements in pounds sterling. Revenue, costs and expenses arising in currencies other than pounds sterling are translated using average exchange
rates. Assets and liabilities denominated in currencies other than pounds sterling are translated at exchange rates in effect at the balance sheet date.

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not required.

47

---



PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

None.

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

None

ITEM 15. DISCLOSURE CONTROLS AND PROCEDURES

Within 90 days prior to the filing date of this annual report on Form 20-F (the "Evaluation Date"), the Company carried out an
evaluation, under the supervision and with the participation of management, including the Company's Chief Executive Officer, Mr. Gerald Perkel, and the Company's Chief Financial Officer,
Mr. Scott Hildebrandt, of the effectiveness of the design and operation of the Company's disclosure controls and procedures, as such term is defined under Rule 13a-14(c) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Based on that evaluation, Messrs. Perkel and Hildebrandt concluded that, as of the Evaluation Date, the disclosure controls
and procedures in place at the Company were adequate to ensure that information required to be disclosed by the Company, including its consolidated subsidiaries, in reports that the Company files or
submits under the Exchange Act, is recorded, processed, summarized and reported on a timely basis in accordance with applicable rules and regulations.

The
Company has not made any significant changes to its internal controls subsequent to the Evaluation Date. The Company has not identified any significant deficiencies or material
weaknesses or other factors that could significantly affect these controls, and therefore, no corrective action was taken.

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

Not applicable

ITEM 16B. CODE OF ETHICS

Not applicable

ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Not applicable

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

Not applicable

48

---



PART III

ITEM 17. FINANCIAL STATEMENTS

The following consolidated financial statements, together with the report of KPMG Audit Plc. and Ernst & Young LLP, independent auditors, are filed as part
of this annual report:

|                               |                                                                                                               | Page
|------------------------------ | ------------------------------------------------------------------------------------------------------------- | ----
|Report of Independent Auditors |                                                                                                               | 50  
|Report of Independent Auditors |                                                                                                               | 51  
|Financial statements:          |                                                                                                               |     
|                               | Consolidated Profit and Loss Account for the years ended April 30, 2003, 2002 and 2001                        |     
|                               | Consolidated Balance Sheet as at April 30, 2003 and 2002                                                      |     
|                               | Consolidated Cash Flow Statement for the years ended April 30, 2003, 2002 and 2001                            |     
|                               | Notes to the Consolidated Cash Flow Statement for the years ended April 30, 2003, 2002 and 2001               |     
|                               | Consolidated Statement of Total Recognised Gains and Losses for the years ended April 30, 2003, 2002 and 2001 |     
|                               | Reconciliation of Movements in Shareholders' Funds for the years ended April 30, 2003, 2002 and 2001          |     
|                               | Notes to the Financial Statements for the years ended April 30, 2003, 2002 and 2001                           |     

49

---



MERANT plc        FINANCIAL STATEMENTS 2003        INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF MERANT PLC

We have audited the accompanying consolidated balance sheet of Merant plc and its subsidiaries, as of 30 April 2003 and the related consolidated profit and
loss account, consolidated statement of cash flows, total recognised gains and losses and reconciliation of movements in shareholders' funds for the year ended April 30, 2003. These
consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

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

In
our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of Merant plc as of April 30, 2003 and the
results of its operations and its cash flows for the year ended April 30, 2003 in conformity with generally accepted accounting principles in the United Kingdom.

Accounting
principles generally accepted in the United Kingdom vary in certain significant respects from accounting principles generally accepted in the United States of America.
Application of generally accepted accounting principles in the United States of America would have affected net income for the year ended April 30, 2003 and shareholders' equity as of
April 30, 2003, to the extent summarized in Note 25 to the consolidated financial statements.

KPMG
Audit Plc
Registered Auditor
St Albans
23 October 2003

50

---

REPORT OF INDEPENDENT AUDITORS

To
the Directors of Merant plc

We
have audited the accompanying consolidated balance sheet of Merant plc as at April 30, 2002 and the related consolidated profit and loss accounts and consolidated statements of
cash flow, total recognised gains and losses and movements in shareholders' funds for each of the two years in the period ended April 30, 2002. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

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

In
our opinion the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Merant plc at April 30,
2002 and the consolidated results of its operations and its consolidated cash flows for each of the two years in the period ended April 30, 2002 in conformity with accounting principles
generally accepted in the United Kingdom which differ in certain respects from those generally accepted in the United States (see note 25 of the Notes to the Financial Statements).

ERNST &
YOUNG LLP
Reading, England
October 25, 2002

51

---



MERANT plc        CONSOLIDATED PROFIT AND LOSS ACCOUNT

|Years ended April 30                                  |  | Notes |  | 2003    |    | 2002    |    | 2001    |   
|----------------------------------------------------- |  | ----- |  | ------- | -- | ------- | -- | ------- | --
|
|Turnover: continuing business                         |  |       |  |         |    |         |    |         |   
|Licence fees                                          |  |       |  | 29,636  |    | 33,387  |    | 42,193  |   
|Maintenance subscriptions                             |  |       |  | 38,902  |    | 39,779  |    | 35,065  |   
|Training and consulting                               |  |       |  | 10,054  |    | 13,902  |    | 17,817  |   
|                                                      |  |       |  |         |    |         |    |         |   
|                                                      |  |       |  | 78,592  |    | 87,068  |    | 95,075  |   
|Turnover: discontinued business                       |  | 3     |  |        |    | 31,207  |    | 120,358 |   
|                                                      |  |       |  |         |    |         |    |         |   
|Total turnover                                        |  | 2     |  | 78,592  |    | 118,275 |    | 215,433 |   
|                                                      |  |       |  |         |    |         |    |         |   
|Cost of sales: continuing business                    |  |       |  |         |    |         |    |         |   
|Cost of licence fees                                  |  |       |  | 1,852   |    | 1,429   |    | 2,164   |   
|Cost of maintenance revenue                           |  |       |  | 5,179   |    | 5,855   |    | 5,490   |   
|Cost of service revenue                               |  |       |  | 9,172   |    | 13,832  |    | 17,198  |   
|                                                      |  |       |  |         |    |         |    |         |   
|                                                      |  |       |  | 16,203  |    | 21,116  |    | 24,852  |   
|Cost of sales: discontinued business                  |  | 3     |  |        |    | 5,510   |    | 29,534  |   
|                                                      |  |       |  |         |    |         |    |         |   
|Total cost of sales                                   |  |       |  | 16,203  |    | 26,626  |    | 54,386  |   
|                                                      |  |       |  |         |    |         |    |         |   
|Gross profit                                          |  |       |  | 62,389  |    | 91,649  |    | 161,047 |   
|                                                      |  |       |  |         |    |         |    |         |   
|Operating expenses                                    |  |       |  |         |    |         |    |         |   
|Research and development                              |  |       |  | 17,792  |    | 24,187  |    | 39,774  |   
|Sales and marketing                                   |  |       |  | 32,158  |    | 58,922  |    | 103,667 |   
|                                                      |  |       |  |         |    |         |    |         |   
|Amortization of goodwill and other intangibles        |  |       |  | 13,485  |    | 35,896  |    | 43,967  |   
|Other general and administrative                      |  |       |  | 9,646   |    | 18,042  |    | 13,401  |   
|                                                      |  |       |  |         |    |         |    |         |   
|Total general and administrative                      |  |       |  | 23,131  |    | 53,938  |    | 57,368  |   
|                                                      |  |       |  |         |    |         |    |         |   
|Total operating expenses                              |  |       |  | 73,081  |    | 137,047 |    | 200,809 |   
|                                                      |  |       |  |         |    |         |    |         |   
|Operating (loss):                                     |  |       |  |         |    |         |    |         |   
|Continuing business                                   |  |       |  | (10,692 | )  | (41,953 | )  | (28,798 | ) 
|Discontinued business                                 |  |       |  |        |    | (3,445  | )  | (10,964 | ) 
|                                                      |  |       |  |         |    |         |    |         |   
|Total operating (loss)                                |  | 4     |  | (10,692 | )  | (45,398 | )  | (39,762 | ) 
|Exceptional items:                                    |  |       |  |         |    |         |    |         |   
|Continuing operations:                                |  |       |  |         |    |         |    |         |   
|Fundamental restructuring costs                       |  | 18    |  | (3,515  | )  | (13,342 | )  |        |   
|Loss on disposal of fixed assets                      |  |       |  |        |    | (1,761  | )  |        |   
|Amounts written off on investments                    |  |       |  |        |    |        |    | (3,254  | ) 
|Discontinued operations:                              |  |       |  |         |    |         |    |         |   
|Gain/(loss) on termination of business operation      |  | 3     |  | 594     |    | (3,139  | )  | (11,317 | ) 
|                                                      |  |       |  |         |    |         |    |         |   
|(Loss) on ordinary activities, before interest income |  |       |  | (13,613 | )  | (63,640 | )  | (54,333 | ) 
|Other interest receivable and similar income          |  | 7     |  | 843     |    | 1,751   |    | 4,466   |   
|Interest payable and similar charges                  |  | 8     |  | (28     | )  | (137    | )  | (179    | ) 
|                                                      |  |       |  |         |    |         |    |         |   
|(Loss) on ordinary activities before taxation         |  |       |  | (12,798 | )  | (62,026 | )  | (50,046 | ) 
|Taxation                                              |  | 9     |  | 300     |    |        |    | (868    | ) 
|                                                      |  |       |  |         |    |         |    |         |   
|Retained (loss) for the year                          |  |       |  | (12,498 | )  | (62,026 | )  | (50,914 | ) 
|                                                      |  |       |  |         |    |         |    |         |   
|(Loss) per share: basic                               |  | 10    |  | (12.4   | )p | (49.6   | )p | (37.9   | )p
|(Loss) per share: diluted                             |  | 10    |  | (12.4   | )p | (49.6   | )p | (37.9   | )p

The
accompanying notes form part of these financial statements.

52

---

MERANT plc        CONSOLIDATED BALANCE SHEET

|                                               |  |    |  | April 30
2003 |   | April 30
2002 |  
|---------------------------------------------- |  | -- |  | ------------- | - | ------------- | -
|
|
|Fixed assets                                   |  |    |  |               |   |               |  
|Intangible fixed assets                        |  | 11 |  | 8,606         |   | 21,782        |  
|Tangible fixed assets                          |  | 12 |  | 1,970         |   | 3,255         |  
|Investments                                    |  | 13 |  | 6,993         |   | 5,858         |  
|                                               |  |    |  |               |   |               |  
|Total fixed assets                             |  |    |  | 17,569        |   | 30,895        |  
|                                               |  |    |  |               |   |               |  
|Current assets                                 |  |    |  |               |   |               |  
|Stocks                                         |  |    |  | 90            |   | 94            |  
|Debtors                                        |  | 14 |  | 19,458        |   | 25,176        |  
|Cash and bank deposits                         |  |    |  | 45,538        |   | 71,620        |  
|                                               |  |    |  |               |   |               |  
|Total current assets                           |  |    |  | 65,086        |   | 96,890        |  
|Creditors: amounts falling due within one year |  | 15 |  | 44,860        |   | 58,271        |  
|                                               |  |    |  |               |   |               |  
|Net current assets                             |  |    |  | 20,226        |   | 38,619        |  
|                                               |  |    |  |               |   |               |  
|Total assets less current liabilities          |  |    |  | 37,795        |   | 69,514        |  
|Provisions for liabilities and charges         |  | 18 |  | 4,479         |   | 10,299        |  
|                                               |  |    |  |               |   |               |  
|Net assets                                     |  |    |  | 33,316        |   | 59,215        |  
|                                               |  |    |  |               |   |               |  
|Capital and reserves                           |  |    |  |               |   |               |  
|Called up share capital                        |  | 19 |  | 2,078         |   | 2,300         |  
|Share premium account                          |  | 20 |  | 201,741       |   | 200,865       |  
|Capital redemption reserve                     |  | 20 |  | 937           |   | 697           |  
|Profit and loss account                        |  | 20 |  | (171,440      | ) | (144,647      | )
|                                               |  |    |  |               |   |               |  
|Equity shareholders' funds                     |  |    |  | 33,316        |   | 59,215        |  
|                                               |  |    |  |               |   |               |  

The
accompanying notes form part of these financial statements.

53

---



MERANT plc        CONSOLIDATED CASH FLOW STATEMENT

|Years ended April 30                                                         |  | 2003    |   | 2002    |   | 2001    |  
|---------------------------------------------------------------------------- |  | ------- | - | ------- | - | ------- | -
|
|Net cash (outflow)/inflow from operating activities                          |  | (8,225  | ) | (22,752 | ) | 19,718  |  
|Returns on investments and servicing of finance:                             |  |         |   |         |   |         |  
|Interest received                                                            |  | 843     |   | 1,751   |   | 4,466   |  
|Interest paid                                                                |  | (28     | ) | (137    | ) | (179    | )
|                                                                             |  |         |   |         |   |         |  
|Net cash inflow from returns on investments and servicing of finance         |  | 815     |   | 1,614   |   | 4,287   |  
|                                                                             |  |         |   |         |   |         |  
|Taxation                                                                     |  | (475    | ) | (2,026  | ) | (1,889  | )
|Capital expenditure and financial investment:                                |  |         |   |         |   |         |  
|Purchases of tangible fixed assets                                           |  | (1,395  | ) | (2,592  | ) | (6,785  | )
|Capitalised software product assets and other intangibles                    |  |        |   |        |   | (62     | )
|Investment in own shares                                                     |  | (2,250  | ) |        |   | (5,212  | )
|Proceeds from sale of own shares                                             |  | 1,370   |   | 1,316   |   | 3,836   |  
|Disposal of tangible fixed assets                                            |  |        |   | 11,594  |   |        |  
|                                                                             |  |         |   |         |   |         |  
|Net cash (outflow)/inflow from capital expenditure and financial investment: |  | (2,275  | ) | 10,318  |   | (8,223  | )
|Acquisitions and disposals:                                                  |  |         |   |         |   |         |  
|Proceeds from/(investment in) subsidiary undertakings                        |  |        |   | 50,106  |   | (12,962 | )
|Net cash (sold) with subsidiary undertakings                                 |  |        |   | (5,122  | ) |        |  
|                                                                             |  |         |   |         |   |         |  
|Net cash inflow/(outflow) from acquisitions and disposals                    |  |        |   | 44,984  |   | (12,962 | )
|Cash (outflow)/inflow before financing                                       |  | (10,160 | ) | 32,138  |   | 931     |  
|Issue of ordinary shares                                                     |  | 897     |   | 161     |   | 207     |  
|Cancellation of ordinary shares                                              |  | (11,659 | ) | (23,052 | ) | (13,688 | )
|Expenses attributable to issue/cancellation of ordinary shares               |  | (118    | ) | (403    | ) | (150    | )
|Bank loan                                                                    |  |        |   | (1,404  | ) | (362    | )
|                                                                             |  |         |   |         |   |         |  
|Net cash (outflow) from financing                                            |  | (10,880 | ) | (24,698 | ) | (13,993 | )
|                                                                             |  |         |   |         |   |         |  
|(Decrease)/increase in cash                                                  |  | (21,040 | ) | 7,440   |   | (13,062 | )
|                                                                             |  |         |   |         |   |         |  

The
accompanying notes form part of these financial statements.

54

---

MERANT plc        NOTES TO CONSOLIDATED CASH FLOW STATEMENT

|Years ended April 30                                                                        |  | 2003    |   | 2002
Restated |   | 2001    |  
|------------------------------------------------------------------------------------------- |  | ------- | - | ------------- | - | ------- | -
|
|(i)Reconciliation of operating(loss) to Net cash (outflow)/inflow from operating activities |  |         |   |               |   |         |  
|Operating (loss)                                                                            |  | (10,692 | ) | (45,398       | ) | (39,762 | )
|Depreciation charges                                                                        |  | 2,257   |   | 10,661        |   | 8,789   |  
|Amortisation charges                                                                        |  | 13,485  |   | 35,896        |   | 43,967  |  
|Employee benefit trust costs                                                                |  | 250     |   |               |   |         |  
|(Loss)/gain on sale of tangible fixed assets                                                |  |        |   | (1,761        | ) | 837     |  
|Exceptional items                                                                           |  | (2,921  | ) | (8,854        | ) | (9,901  | )
|(Increase)/decrease in stocks                                                               |  | (3      | ) | 56            |   | 834     |  
|Decrease/(increase) in debtors                                                              |  | 4,296   |   | (5,149        | ) | 7,452   |  
|(Decrease)/increase in creditors                                                            |  | (14,897 | ) | (8,203        | ) | 7,502   |  
|                                                                                            |  |         |   |               |   |         |  
|                                                                                            |  | (8,225  | ) | (22,752       | ) | 19,718  |  
|                                                                                            |  |         |   |               |   |         |  
|(ii)Reconciliation to net funds                                                             |  |         |   |               |   |         |  
|(Decrease)/increase in cash during the year                                                 |  | (21,040 | ) | 7,440         |   | (13,062 | )
|Cash inflow from movement in debt                                                           |  |        |   | 1,404         |   | 362     |  
|                                                                                            |  |         |   |               |   |         |  
|                                                                                            |  | (21,040 | ) | 8,844         |   | (12,700 | )
|Translation difference                                                                      |  | (5,042  | ) | 2,977         |   | (5,281  | )
|                                                                                            |  |         |   |               |   |         |  
|                                                                                            |  | (26,082 | ) | 11,821        |   | (17,981 | )
|Net funds, beginning of year                                                                |  | 71,620  |   | 59,799        |   | 77,780  |  
|                                                                                            |  |         |   |               |   |         |  
|Net funds, end of year                                                                      |  | 45,538  |   | 71,620        |   | 59,799  |  
|                                                                                            |  |         |   |               |   |         |  

|                           |  | Balances
at April 30
2000 |   | Cash flow |   | Exchange
differences |   | Balances at
April 30
2001 |  
|-------------------------- |  | ------------------------- | - | --------- | - | -------------------- | - | ------------------------- | -
|
|(iii)Analysis of net funds |  |                           |   |           |   |                      |   |                           |  
|Cash                       |  | 79,543                    |   | (13,062   | ) | (5,281               | ) | 61,200                    |  
|Short term loans           |  | (1,763                    | ) | 362       |   | (112                 | ) | (1,401                    | )
|                           |  |                           |   |           |   |                      |   |                           |  
|                           |  | 77,780                    |   | 12,700    |   | (5,393               | ) | 59,799                    |  
|                           |  |                           |   |           |   |                      |   |                           |  

|                 |  | Balances
at April 30
2001 |   | Cash flow |  | Exchange
differences |   | Balances at
April 30
2002
|---------------- |  | ------------------------- | - | --------- |  | -------------------- | - | -------------------------
|
|Cash             |  | 61,200                    |   | 7,440     |  | 2,980                |   | 71,620                   
|Short term loans |  | (1,401                    | ) | 1,404     |  | (3                   | ) | 0                        
|                 |  |                           |   |           |  |                      |   |                          
|                 |  | 59,799                    |   | 8,844     |  | 2,977                |   | 71,620                   
|                 |  |                           |   |           |  |                      |   |                          

|     |  | Balances
at April 30
2002 |  | Cash flow |   | Exchange
differences |   | Balances at
April 30
2003
|---- |  | ------------------------- |  | --------- | - | -------------------- | - | -------------------------
|
|Cash |  | 71,620                    |  | (21,040   | ) | (5,042               | ) | 45,538                   

The
accompanying notes form part of these financial statements.

55

---



MERANT plc        CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES

|Years ended April 30                           |  | 2003    |   | 2002    |   | 2001    |  
|---------------------------------------------- |  | ------- | - | ------- | - | ------- | -
|
|(Loss) for the year                            |  | (12,498 | ) | (62,026 | ) | (50,914 | )
|Currency translation adjustment                |  | (2,518  | ) | 4,252   |   | (5,116  | )
|                                               |  |         |   |         |   |         |  
|Total recognised gains and losses for the year |  | (15,016 | ) | (57,774 | ) | (56,030 | )
|                                               |  |         |   |         |   |         |  

The
accompanying notes form part of these financial statements.

MERANT plc        RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS

|Years ended April 30                                  |  | 2003    |   | 2002    |   | 2001    |  
|----------------------------------------------------- |  | ------- | - | ------- | - | ------- | -
|
|(Loss) for the year                                   |  | (12,498 | ) | (62,026 | ) | (50,914 | )
|Share buy back                                        |  | (11,777 | ) | (23,455 | ) | (13,838 | )
|Share options exercised                               |  | 894     |   | 246     |   | 207     |  
|Shares cancelled                                      |  |        |   |        |   | (357    | )
|Goodwill taken to profit and loss account on disposal |  |        |   | 11,732  |   |        |  
|Currency translation adjustment                       |  | (2,518  | ) | 4,252   |   | (5,116  | )
|                                                      |  |         |   |         |   |         |  
|Net (reduction in) shareholders' funds                |  | (25,899 | ) | (69,251 | ) | (70,018 | )
|Opening shareholders' funds                           |  | 59,215  |   | 128,466 |   | 198,484 |  
|                                                      |  |         |   |         |   |         |  
|Closing shareholders' funds                           |  | 33,316  |   | 59,215  |   | 128,466 |  
|                                                      |  |         |   |         |   |         |  

The
accompanying notes form part of these financial statements.

56

---



MERANT plc        NOTES TO THE FINANCIAL STATEMENTS

Note 1 Significant accounting policies

The following accounting policies have been applied consistently in dealing with items that are considered material in relation to the Group's financial
statements.

Basis of preparation

The financial statements have been prepared in accordance with applicable accounting standards under the historical cost accounting rules.

Basis of consolidation

The consolidated financial statements include the financial statements of Merant Plc (the Company) and its subsidiary undertakings made up to 30
April 2003. The acquisition method of accounting has been adopted. Under this method, the results of subsidiary undertakings acquired or disposed of in the year are included in the consolidated
profit and loss account from the date of acquisition or up to the date of disposal.

Turnover

Turnover represents the amounts (excluding value added tax) derived from the provision of goods and services to customers.

The
Group's revenue recognition policies are in accordance with the principles of AICPA's Statement of Position 97-2 (SOP 97-2) Software Revenue
Recognition, amendments to SOP 97-2 in SOP 98-4 and 98-9 Software Revenue Recognition with respect to Certain Transactions, and the associated AICPA
Technical Practice Aids.

Licence fees:the standard end user licence agreement for the Group's products provides for an initial fee to use the product
in perpetuity up to a maximum number of users. We also enter into other types of licence arrangements, typically with major end user customers, which allow for the use of our products, usually
restricted by the number of employees, the number of users, or the licence term. Licence fees are recognized as revenues upon product shipment, provided a legally binding agreement is in place, fees
are fixed or determinable and collection of the resulting debt is deemed probable. Fees from licences sold together with consulting services are generally recognized upon shipment if the above
criteria have been met and payment of the licence fees is not dependent upon the performance of the consulting services. Where these criteria have not been met, both the licence and consulting fees
are recognized as the services are performed.

Maintenance subscriptions:maintenance agreements generally call for the Group to provide technical support and software
updates to customers. Revenue on technical support and software update rights is recognised over the term of the support agreement on a pro-rata basis. Payments for maintenance fees are
generally made in advance and are non-refundable.

Training and consulting:the Group recognises revenue from consulting and education as the services are performed.

Software product assets

Costs related to the initial development and design of new software products prior to the establishment of technological feasibility are written off to research
and development costs when

57

---

incurred.
Purchased software assets are amortised using the straight line method over the useful economic life, which is no more than five years.

Goodwill

Purchased goodwill arising on business combination in respect of acquisitions before 1 February 1998, when FRS 10Goodwill
and intangible assetswas adopted, was written off to reserves in the year of acquisition. When a subsequent disposal occurs any related goodwill previously written off to
reserves is written back through the profit and loss account as part of the profit or loss on disposal.

Purchased
goodwill (representing the excess of the fair value of the consideration given over the fair value of the separable net assets acquired) arising on business combinations in
respect of acquisitions since 1 February 1998 is capitalised. Goodwill is amortised to nil by equal annual instalments over its estimated useful life.

Tangible fixed assets

Depreciation is provided to write off the cost less the estimated residual value of tangible fixed assets over their estimated useful economic lives as follows:

Freehold land & buildings

40 yearsLeasehold improvements

over the shorter of the lease term and life of assetComputer equipment

3 - 5 years straight lineOffice equipment

5 - 11 years straight line


The
carrying values of tangible fixed assets are reviewed for impairment when events or circumstances indicate that the carrying value may not be recoverable.

Investments

In the Group's financial statements investments are stated at cost unless, in the opinion of the Directors, there has been an impairment to their value in which
case they are immediately written down to the estimated recoverable amount.

Leasing

Rentals payable under operating leases are charged to the profit and loss account on a straight-line basis over the term of the lease.

Deferred taxation

Deferred tax is recognised, without discounting, in respect of all timing differences between the treatment of certain items for taxation and accounting purposes
which have arisen but not reversed by the balance sheet date, except as otherwise required by FRS 19.

Cash and bank deposits

Cash, for the purpose of the cash flow statement, comprises cash in hand and deposits repayable on demand, less overdrafts payable on demand.

Translation of foreign currencies

Transactions in foreign currencies are recorded using the rate of exchange ruling at the date of the transaction. Monetary assets and liabilities denominated in
foreign currencies are translated using the

58

---

rate
of exchange ruling at the balance sheet date and the gains or losses on translation are included in the profit and loss account.

The
assets and liabilities of overseas subsidiary undertakings are translated at the closing exchange rates. Profit and loss accounts of such undertakings are consolidated at the average
rates of exchange during the year. Gains and losses arising on these translations are taken to reserves, net of exchange differences arising on related foreign currency borrowings.

Pensions

Merant has entered into arrangements under which it makes matching contributions to retirement plans independently administered by insurance companies and other
financial institutions. Contributions are charged to the profit and loss account in the year in which they become payable.

Employee share schemes

The cost of awards to employees that take the form of shares or rights to shares are recognised over the period of the employee's related performance.

Note 2 Segmental information

The Group previously operated in four business divisions. The Group withdrew from its E Solutions Division during the year ended 30 April 2001, and
disposed of its Application Creation & Transformation (ACT) and Enterprise Data Connectivity (EDC) Divisions during the year ended 30 April 2002. The operating results of those
businesses are disclosed as discontinued operations. The Group now operates in one business segment, Enterprise Change Management. The following table analyses revenue by business segment, based on
the Group's operating divisions

Years ended April 30

2003

2002

2001£'000

£'000

£'000Turnover:Enterprise Change Management Division

78,592

87,068

95,075Discontinued operations:Application Creation & Transformation Division



17,481

83,513Enterprise Data Connectivity Division



13,726

31,196E-Solutions Division





5,64978,592

118,275

215,433Net operating (liabilities)/assets:Enterprise Change Management Division

(19,215
)
(18,263
)
39,305Discontinued operations:Application Creation & Transformation Division





16,777Enterprise Data Connectivity Division





5,725(19,215
)
(18,263
)
61,807


59

---

The
following table analyses worldwide operations by geographical area, based on the location of Group facilities.

Years ended April 30

2003

2002

2001£'000

£'000

£'000Total turnover:United Kingdom

13,972

21,368

36,561United States

48,977

75,468

132,316Europe (excluding U.K.)

11,329

18,836

39,473Other

4,314

6,771

14,34778,592

122,443

222,697Inter-segment turnover:United Kingdom



(3,851
)
(5,290
)United States





(126
)Europe (excluding U.K.)



(317
)
(1,848
)Other





0

(4,168
)
(7,264
)Third party turnover:United Kingdom

13,972

17,517

31,271United States

48,977

75,468

132,190Europe (excluding U.K.)

11,329

18,519

37,625Other

4,314

6,771

14,34778,592

118,275

215,433(Loss) on ordinary activities before interest and taxUnited Kingdom

(4,999
)
(40,834
)
(39,944
)United States

(2,873
)
(1,377
)
1,550Europe (excluding U.K.)

(2,397
)
875

(2,205
)Other

(423
)
(4,062
)
837(10,692
)
(45,398
)
(39,762
)Net operating (liabilities)/assets:United Kingdom

188,738

(2,422
)
73,166United States

(201,909
)
(14,049
)
(17,500
)Europe (excluding U.K.)

(1,405
)
(666
)
4,253Other

(4,639
)
(1,126
)
1,888(19,215
)
(18,263
)
61,807


Turnover
to third parties is disclosed by origin above. This does not differ significantly from turnover to third parties by destination.

Inter-segment
turnover principally represents charges for product transfers and for administrative costs between locations. Operating (loss) excludes interest income and expense and,
correspondingly,

60

---

net
operating (liabilities)/assets exclude interest-bearing assets and liabilities. The following table reconciles net operating (liabilities)/assets as shown above to net assets as shown in the
balance sheet:

Years ended April 30

2003

2002

2001£'000

£'000

£'000Net operating (liabilities)/assets

(19,215
)
(18,263
)
61,807Cash and bank deposits

45,538

71,620

61,200Bank loan





(1,401
)Investment in own shares

6,993

5,858

6,860Net assets

33,316

59,215

128,466


Note 3 Discontinued business

In the year ended 30 April 2002, the Group disposed its Application Creation and Transformation (ACT) Division and its Enterprise Data Connectivity (EDC)
Division. The Group withdrew from its E Solutions Division during the year ended 30 April 2001. The Group reported the operating results of these businesses as discontinued operations. The
following table discloses the operating results of each division for the years ended 30 April 2001 and 2002:

|                                                  |  | ACT
Division |   | EDC
Division |   | E-
Solutions
Division |   | TOTAL   |  
|------------------------------------------------- |  | ------------ | - | ------------ | - | --------------------- | - | ------- | -
|
|Year ended April 30, 2001                         |  |              |   |              |   |                       |   |         |  
|Revenue                                           |  | 83,513       |   | 31,196       |   | 5,649                 |   | 120,358 |  
|Cost of revenue                                   |  | (18,170      | ) | (2,841       | ) | (8,523                | ) | (29,534 | )
|                                                  |  |              |   |              |   |                       |   |         |  
|Gross profit                                      |  | 65,343       |   | 28,355       |   | (2,874                | ) | 90,824  |  
|Research and development costs                    |  | (17,358      | ) | (5,609       | ) |                      |   | (22,967 | )
|Sales and marketing costs                         |  | (38,322      | ) | (13,168      | ) | (4,893                | ) | (56,383 | )
|General and administrative costs                  |  | (9,428       | ) | (11,500      | ) | (1,510                | ) | (22,438 | )
|                                                  |  |              |   |              |   |                       |   |         |  
|Operating profit/(loss) before and after taxation |  | 235          |   | (1,922       | ) | (9,277                | ) | (10,964 | )
|                                                  |  |              |   |              |   |                       |   |         |  
|Year ended April 30, 2002                         |  |              |   |              |   |                       |   |         |  
|Revenue                                           |  | 17,481       |   | 13,726       |   |                      |   | 31,207  |  
|Cost of revenue                                   |  | (3,833       | ) | (1,677       | ) |                      |   | (5,510  | )
|                                                  |  |              |   |              |   |                       |   |         |  
|Gross profit                                      |  | 13,648       |   | 12,049       |   |                      |   | 25,697  |  
|Research and development costs                    |  | (3,738       | ) | (2,616       | ) |                      |   | (6,354  | )
|Sales and marketing costs                         |  | (6,215       | ) | (5,803       | ) |                      |   | (12,018 | )
|General and administrative costs                  |  | (4,866       | ) | (5.904       | ) |                      |   | (10,770 | )
|                                                  |  |              |   |              |   |                       |   |         |  
|Operating (loss) before and after taxation        |  | (1,171       | ) | (2,274       | ) |                      |   | (3,445  | )
|                                                  |  |              |   |              |   |                       |   |         |  

61

---

The
gain or loss arising on the termination of the divisions consists of the following:

|Years ended April 30                                        |  | ACT
Division |  | EDC
Division |  | Total
2003 |  | Total
2002 |   | Total
2001 |  
|----------------------------------------------------------- |  | ------------ |  | ------------ |  | ---------- |  | ---------- | - | ---------- | -
|
|Net proceeds                                                |  |             |  |             |  |           |  | 56,301     |   |           |  
|Deduct:                                                     |  |              |  |              |  |            |  |            |   |            |  
|Carrying value of goodwill now written off                  |  |             |  |             |  |           |  | (16,196    | ) | (6,520     | )
|Severance payments                                          |  |             |  |             |  |           |  |           |   | (620       | )
|Final settlement                                            |  |             |  | 594          |  | 594        |  |           |   |           |  
|Other disposal costs                                        |  |             |  |             |  |           |  | (43,244    | ) | (4,177     | )
|                                                            |  |              |  |              |  |            |  |            |   |            |  
|                                                            |  |             |  | 594          |  | 594        |  | (59,440    | ) | (11,317    | )
|                                                            |  |              |  |              |  |            |  |            |   |            |  
|Gain/(loss) on business disposal, before and after taxation |  |             |  | 594          |  | 594        |  | (3,139     | ) | (11,317    | )
|                                                            |  |              |  |              |  |            |  |            |   |            |  

The
year ended 30 April 2003 saw the finalisation of the disposal of two business units, ACT and EDC. The disposal of these business units occurred in the year ended
30 April 2002, however, final settlement of all post closing contractual adjustments was not reached until 2003, resulting in an exceptional gain of £594,000 being recorded in the
year ended 30 April 2003.

Note 4 Operating (loss)

Operating (loss) is stated after charging (or crediting):

|Years ended April 30                                |                   | 2003   |       | 2002   |       | 2001   |      
|--------------------------------------------------- | ----------------- | ------ | ----- | ------ | ----- | ------ | -----
|
|Auditors' remuneration:                             |                   |        |       |        |       |        |      
|Audit (Group)                                       |                   | 481    |       | 623    |       | 692    |      
|Audit (Company)                                     |                   | 192    |       | 123    |       | 109    |      
|Non audit fees paid to the auditor (Ernst & Young)* |                   | 120    |       | 197    |       | 488    |      
|Non audit fees paid to the auditor (KPMG)           |                   | 52     |       |       |       |       |      
|Operating lease rentals:                            |                   |        |       |        |       |        |      
|                                                    | Plant & machinery |        | 590   |        | 1,964 |        | 3,455
|                                                    | Other             |        | 2,114 |        | 4,863 |        | 6,033
|Rental income                                       |                   |       |       | (277   | )     | (339   | )    
|Depreciation of tangible fixed assets               |                   | 2,257  |       | 7,632  |       | 8,789  |      
|Amortisation of intangible fixed assetsgoodwill    |                   | 13,371 |       | 35,322 |       | 42,482 |      
|other                                              |                   | 114    |       | 574    |       | 1,485  |      
|Research and development costs                      |                   | 17,792 |       | 24,187 |       | 39,774 |      
|(Gain)/loss on foreign exchange                     |                   | (51    | )     | 869    |       | (443   | )    

---

Note 5 Remuneration of directors

|Years ended 30 April                     |  | 2003  |  | 2002  |  | 2001
|---------------------------------------- |  | ----- |  | ----- |  | ----
|
|Directors' emoluments                    |  | 1,088 |  | 2,572 |  | 458 
|Company contributions to pension schemes |  | 3     |  | 3     |  | 3   
|Compensation for loss of office          |  |      |  | 844   |  |    
|                                         |  |       |  |       |  |     
|                                         |  | 1,091 |  | 3,419 |  | 461 
|                                         |  |       |  |       |  |     

62

---

The
aggregate of emoluments of the highest paid director was £770,000 (2002: £1,801,000, 2001: £327,000), and pension contributions of
£3,000 (2002: £3,000, 2001: £3,000) were made on his behalf. In the year ended 30 April 2002 Mr. Greenfield, the Group's former chief executive
officer, received additional compensation for loss of employment, approved by the board of directors, of approximately £844,000.

On
1 April 2003 each non-executive director agreed to cancel and terminate all outstanding options held in exchange for a one-time cash payment based on
the spread
of the market value over the exercise price, given some assumed share appreciation over the remaining period of exercisability. The total cash payment to all the directors was £116,000.

None
of the directors exercised share options during the year.

Note 6 Staff numbers and costs

The average monthly numbers of staff, including directors, employed by the Group was as follows:

Years ended 30 April

2003
No.

2002
No.

2001
No.By locationUnited Kingdom

144

199

448United States

368

575

1,027Other

92

180

402604

954

1,877By categorySales and marketing

214

241

469General and administration

99

167

328Other

291

546

1,080604

954

1,877


Staff
costs, which include salaries, bonus and commissions, amounted to:

Years ended April 30

2003

2002

2001£'000

£'000

£'000United Kingdom

8,169

13,890

21,225United States

29,574

44,235

70,962Other

5,298

10,577

18,56943,041

68,702

110,756Social security costs

3,979

5,701

9,773Other pension costs

448

1,570

2,69947,468

75,973

123,228


Other
pension costs principally represent amounts paid by Merant to personal pension schemes operated by its employees. In the United Kingdom, Merant contributes to employee pensions on
a percentage-of-salary basis, subject to certain predetermined limits. Arrangements for employees in other countries have been established on similar bases, subject to local
regulations and practices in the countries concerned.

63

---

Note 7 Interest receivable and similar income

Years ended 30 April

2003

2002

2001£'000

£'000

£'000Interest receivable and similar income

843

1,751

4,466


Note 8 Interest payable and similar charges

Years ended April 30

2003

2002

2001£'000

£'000

£'000On bank loans and overdrafts



124

110Other

28

13

6928

137

179


Note 9 Taxation

The taxation charge consists of the following:

|Years ended April 30                    |  | 2003 |   | 2002 |   | 2001
|--------------------------------------- |  | ---- | - | ---- | - | ----
|
|U.K. corporation tax                    |  |      |   |      |   |     
|Current tax on income for the period    |  | (476 | ) | (307 | ) | 659 
|Double taxation relief                  |  | (192 | ) |     |   |    
|                                        |  |      |   |      |   |     
|                                        |  | (668 | ) | (307 | ) | 659 
|Foreign tax                             |  |      |   |      |   |     
|Current tax on income for the period    |  | 370  |   | 269  |   | 209 
|Adjustments in respect of prior periods |  | 34   |   | 38   |   |     
|Other                                   |  | (305 | ) |     |   |    
|                                        |  |      |   |      |   |     
|Total current tax                       |  | (569 | ) | 307  |   | 209 
|Deferred Tax                            |  | 269  |   |     |   |    
|                                        |  |      |   |      |   |     
|Total tax (credit)/charge               |  | (300 | ) |     |   | 868 
|                                        |  |      |   |      |   |     

The
following table analyses differences between taxes at the U.K. statutory tax rate and taxes at the effective rate:

|Years ended 30 April                     |  | 2003    |   | 2002    |   | 2001    |   
|---------------------------------------- |  | ------- | - | ------- | - | ------- | --
|
|(Loss) on ordinary activities before tax |  | (12,798 | ) | (62,026 | ) | (50,046 | ) 
|Current tax                              |  | (3,839  | ) | (18,608 | ) | (15,014 | ) 
|Expenses not deductible for tax purposes |  | 4,598   |   | 10,597  |   | 12,745  |   
|Tax losses                               |  | 1,607   |   | 8,122   |   | 2,269   |   
|Others                                   |  | (2,935  | ) | (111    | ) | 868     |   
|                                         |  |         |   |         |   |         |   
|Total current tax credit                 |  | (569    | ) |        |   | 868     |   
|                                         |  |         |   |         |   |         |   
|Effective tax rate                       |  | 4.4     | % | 0       | % | (1.7    | )%

The
Group's effective tax rate in each of the past two years has been significantly distorted by the impact of permanent differences between accounting profits and taxable profits,
principally the provisions for amortisation of goodwill which are not an allowable expense for tax purposes. The tax

64

---

rate
is also impacted by the distribution of corporate profits and losses among the tax jurisdictions in which the Group operates. The Group expects that its effective tax rate will continue to be
significantly impacted by provisions for amortisation of goodwill in the year ended 30 April 2004.

Merant
has unrecognised deferred tax assets at 30 April 2003 of £12,493,000 (2002: £15,480,000). These assets relate to losses brought forward from
previous years. The directors do not consider it appropriate to recognise this asset at the year end as the Group is not expected to be tax paying in the foreseeable future in the countries where the
losses are held.

The
corporation tax returns of certain U.S. subsidiary undertakings for the financial years ended 31 January 1996 to 31 January 1997 have been examined by the U.S. Internal
Revenue Service, which has proposed increases to the amount of U.S. income taxes due in respect of those years. Based upon initial discussions with the UK Inland Revenue the Group believes that the
outcome of the examination will not give rise to any adverse material profit and loss account adjustment to the financial statements.

Note 10 (Loss) per share

Basic (loss) per share is computed as the (loss) for the year after taxation, divided by the weighted average number of ordinary shares outstanding during the
year. Shares held by the employee share ownership trust are excluded, except for those which are contingently issuable, and for which all the conditions of issue have been met.

Diluted
(loss) per share is computed based on basic (loss) per share, as adjusted for shares issuable upon exercise of dilutive share options. The computation assumes the proceeds from
the exercise of dilutive share options are used to repurchase the Company's ordinary shares at their average market price during each period.

|Years ended 30 April                                 |                                         | 2003    |         | 2002    |         | 2001    |        
|---------------------------------------------------- | --------------------------------------- | ------- | ------- | ------- | ------- | ------- | -------
|
|(Loss) after taxation                                |                                         | (12,498 | )       | (62,026 | )       | (50,914 | )      
|                                                     |                                         |         |         |         |         |         |        
|Weighted average number of ordinary shares:          |                                         |         |         |         |         |         |        
|                                                     | In issue                                |         | 105,796 |         | 130,702 |         | 139,952
|                                                     | Owned by employee share ownership trust |         | (5,057  | )       | (5,610  | )       | (5,647 
|                                                     |                                         |         |         |         |         |         |        
|Used in computing basic and diluted (loss) per share |                                         | 100,739 |         | 125,092 |         | 134,305 |        
|                                                     |                                         |         |         |         |         |         |        
|(Loss) per share: basic                              |                                         | (12.4   | )p      | (49.6   | )p      | (37.9   | )p     
|(Loss) per share: diluted                            |                                         | (12.4   | )p      | (49.6   | )p      | (37.9   | )p     

Share
options were anti-dilutive and therefore excluded from the computations.

65

---

Note 11 Intangible fixed assets

|                                 |  | Software
product
assets |   | Goodwill |   | Total   |  
|-------------------------------- |  | ----------------------- | - | -------- | - | ------- | -
|
|Cost:                            |  |                         |   |          |   |         |  
|At 1 May 2001                    |  | 35,882                  |   | 174,154  |   | 210,036 |  
|Currency fluctuations            |  | (77                     | ) | 0        |   | (77     | )
|Amounts written off on disposals |  | (31,749                 | ) | (54,791  | ) | (86,540 | )
|                                 |  |                         |   |          |   |         |  
|At April 30, 2002                |  | 4,056                   |   | 119,363  |   | 123,419 |  
|Currency fluctuations            |  | (351                    | ) |         |   | (351    | )
|Additions                        |  | 313                     |   |         |   | 313     |  
|                                 |  |                         |   |          |   |         |  
|At 30 April 2003                 |  | 4,018                   |   | 119,363  |   | 123,381 |  
|Amortisation:                    |  |                         |   |          |   |         |  
|At 1 May 2001                    |  | 33,712                  |   | 100,941  |   | 134,653 |  
|Currency fluctuations            |  | (67                     | ) | 0        |   | (67     | )
|Amounts written off on disposals |  | (30,250                 | ) | (38,595  | ) | (68,845 | )
|Provision for the period         |  | 574                     |   | 35,322   |   | 35,896  |  
|                                 |  |                         |   |          |   |         |  
|At April 30 2002                 |  | 3,969                   |   | 97,668   |   | 101,637 |  
|Currency fluctuations            |  | (347                    | ) |         |   | (347    | )
|Provision for the period         |  | 114                     |   | 13,371   |   | 13,485  |  
|                                 |  |                         |   |          |   |         |  
|At 30 April 2003                 |  | 3,736                   |   | 111,039  |   | 114,775 |  
|Net book values:                 |  |                         |   |          |   |         |  
|At April 30 2002                 |  | 87                      |   | 21,695   |   | 21,782  |  
|                                 |  |                         |   |          |   |         |  
|At 30 April 2003                 |  | 282                     |   | 8,324    |   | 8,606   |  
|                                 |  |                         |   |          |   |         |  

Goodwill
is amortised over its useful economic life which is a period of no longer than five years.

66

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Note 12 Tangible fixed assets

|                         |  | Freehold
land and
buildings |   | Leasehold
improvements
Restated |   | Office
equipment
Restated |   | Computer
hardware and
software
Restated |   | Total
Restated |  
|------------------------ |  | --------------------------- | - | ------------------------------- | - | ------------------------- | - | --------------------------------------- | - | -------------- | -
|
|Cost:                    |  |                             |   |                                 |   |                           |   |                                         |   |                |  
|At 1 May 2001            |  | 13,833                      |   | 7,870                           |   | 9,607                     |   | 47,180                                  |   | 78,490         |  
|Currency fluctuations    |  |                            |   | (85                             | ) | (48                       | ) | (25                                     | ) | (158           | )
|Additions                |  |                            |   | 730                             |   | 146                       |   | 1,716                                   |   | 2,592          |  
|Disposals                |  | (13,833                     | ) | (1,705                          | ) | (4,283                    | ) | (36,449                                 | ) | (56,270        | )
|                         |  |                             |   |                                 |   |                           |   |                                         |   |                |  
|At 30 April 2002         |  |                            |   | 6,810                           |   | 5,422                     |   | 12,422                                  |   | 24,654         |  
|Currency fluctuations    |  |                            |   | (521                            | ) | (324                      | ) | (749                                    | ) | (1,594         | )
|Additions                |  |                            |   | 202                             |   | 25                        |   | 1,168                                   |   | 1,395          |  
|Disposals                |  |                            |   | (4,299                          | ) | (1,514                    | ) | (2,097                                  | ) | (7,910         | )
|                         |  |                             |   |                                 |   |                           |   |                                         |   |                |  
|At 30 April 2003         |  |                            |   | 2,192                           |   | 3,609                     |   | 10,744                                  |   | 16,545         |  
|Depreciation:            |  |                             |   |                                 |   |                           |   |                                         |   |                |  
|At 1 May 2001            |  | 729                         |   | 4,855                           |   | 6,833                     |   | 37,760                                  |   | 50,177         |  
|Currency fluctuations    |  |                            |   | (50                             | ) | (43                       | ) | (19                                     | ) | (112           | )
|Provision for the period |  | 9                           |   | 2,579                           |   | 1,621                     |   | 6,452                                   |   | 10,661         |  
|Disposals                |  | (738                        | ) | (1,701                          | ) | (3,454                    | ) | (33,434                                 | ) | (39,327        | )
|                         |  |                             |   |                                 |   |                           |   |                                         |   |                |  
|At 30 April 2002         |  |                            |   | 5,683                           |   | 4,957                     |   | 10,759                                  |   | 21,399         |  
|Currency fluctuations    |  |                            |   | (235                            | ) | (262                      | ) | (674                                    | ) | (1,171         | )
|Provision for the period |  |                            |   | 204                             |   | 194                       |   | 1,859                                   |   | 2,257          |  
|Disposals                |  |                            |   | (4,299                          | ) | (1,514                    | ) | (2,097                                  | ) | (7,910         | )
|                         |  |                             |   |                                 |   |                           |   |                                         |   |                |  
|At 30 April 2003         |  |                            |   | 1,353                           |   | 3,375                     |   | 9,847                                   |   | 14,575         |  
|Net book values:         |  |                             |   |                                 |   |                           |   |                                         |   |                |  
|At 30 April 2002         |  |                            |   | 1,127                           |   | 465                       |   | 1,663                                   |   | 3,255          |  
|                         |  |                             |   |                                 |   |                           |   |                                         |   |                |  
|At 30 April 2003         |  |                            |   | 839                             |   | 234                       |   | 897                                     |   | 1,970          |  
|                         |  |                             |   |                                 |   |                           |   |                                         |   |                |  

Re-classificationsCertain
prior year amounts have been re-classified to comply with current year presentation.

Note 13 Investments

Investment in own shares represents the cost of ordinary shares in Merant plc acquired by Merant Trustees Limited on behalf of the Merant Employee Benefit Trust
1994 ("the 1994 Trust") and the

67

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Merant
Employee Benefit Trust 2003 ("the 2003 Trust"). The shares have been acquired for the employee share option plans and the Employee Share Purchase Plan (see note 23).

|                          |  | Cost   |   | Provisions |   | Value  |  
|------------------------- |  | ------ | - | ---------- | - | ------ | -
|
|1994 Trust                |  |        |   |            |   |        |  
|At 1 May 2001             |  | 8,808  |   | (1,948     | ) | 6,860  |  
|Sold to ESPP participants |  | (2,056 | ) | 1,054      |   | (1,002 | )
|                          |  |        |   |            |   |        |  
|At 30 April 2002          |  | 6,752  |   | (894       | ) | 5,858  |  
|Sold to ESPP participants |  | (1,370 | ) | 506        |   | (864   | )
|Shares purchased          |  | 366    |   |           |   | 366    |  
|Additional provision      |  |       |   | (250       | ) | (250   | )
|                          |  |        |   |            |   |        |  
|End of year               |  | 5,748  |   | (638       | ) | 5,110  |  
|                          |  |        |   |            |   |        |  
|2003 Trust                |  |        |   |            |   |        |  
|At 1 May 2002             |  |       |   |           |   |       |  
|Shares purchased          |  | 1,883  |   |           |   | 1,883  |  
|                          |  |        |   |            |   |        |  
|At 30 April 2003          |  | 1,883  |   |           |   | 1,883  |  
|                          |  |        |   |            |   |        |  
|Total as at 30 April 2003 |  | 7,631  |   | (638       | ) | 6,993  |  
|                          |  |        |   |            |   |        |  

As
at 30 April 2003 the 1994 Trust owned 4,768,087 shares, representing 4.6% of the Company's issued ordinary shares, with a nominal value of £95,000 and a market
value of £5,110,000. As at 30 April 2002 the 1994 Trust owned 5,565,869 shares, representing 4.8% of the Company's issued ordinary shares, with a nominal value of
£111,000 and a market value of £5,955,000.

During
the year ended 30 April 2003 the Company established a new Trust, the Merant Employee Benefit Trust 2003 ("the 2003 Trust"). As at 30 April 2003 the 2003
Trust owned 1,550,000 (2002: nil) shares, representing 1.5% of the Company's issued ordinary shares, with a nominal value of £31,000 and a market value of £1,883,000.

The
Company has made provisions to reflect anticipated losses on the future sale of these shares to option holders and participants in the Employee Share Purchase Plan. The Trusts have
not waived their right to dividends in respect of this shareholding. The assets and liabilities of the Trusts, as well as their operating costs, are included in Merant's consolidated financial
statements.

Note 14 Debtors

|                                   |  | 30 April
2003 |  | 30 April
2002
|---------------------------------- |  | ------------- |  | -------------
|
|Trade debtors                      |  | 15,878        |  | 22,115       
|Deferred tax asset                 |  |              |  | 269          
|Other debtors and prepaid expenses |  | 3,580         |  | 2,792        
|                                   |  |               |  |              
|                                   |  | 19,458        |  | 25,176       
|                                   |  |               |  |              

All
amounts are due within one year.

Merant
has unrecognised deferred tax assets at 30 April 2003 of £12,493,000 (2002: £15,480,000). These assets relate to losses brought forward from
previous years. The directors do not consider it appropriate to recognise this asset at the year end as the Group is not expected to be tax paying in the foreseeable future in the countries where the
losses are held.

68

---

Included
within other debtors and prepaid expenses is £392,000 (2002: £429,000) in relation to a loan outstanding from the Group's previous Chief Executive
Officer, Mr. Greenfield and £75,000 ($120,000) in relation to a loan outstanding from the Group's Senior Vice President of Sales, Mr. Dunne (see note 24).

Provision
for Bad and Doubtful Debts

|                                     |  | Balance at
1 May 2002 |  | Charged to
operating
expenses |  | Charged to
(credited from)
other accounts |   | Amounts
written
off |   | Balance at
30 April 2003
|------------------------------------ |  | --------------------- |  | ----------------------------- |  | ----------------------------------------- | - | ------------------- | - | ------------------------
|
|Provision for bad and doubtful debts |  |                       |  |                               |  |                                           |   |                     |   |                         
|Year ended April 30:                 |  |                       |  |                               |  |                                           |   |                     |   |                         
|2001                                 |  | 3,028                 |  | 1,905                         |  | 419                                       |   | (1,592              | ) | 3,760                   
|2002                                 |  | 3,760                 |  | 1,433                         |  | (1,253                                    | ) | (2,744              | ) | 1,196                   
|2003                                 |  | 1.196                 |  | 227                           |  |                                          |   | (240                | ) | 1.183                   

Note 15 Creditors: amounts falling due within one year

|                                              |  | 30 April
2003 |  | 30 April
2002
|--------------------------------------------- |  | ------------- |  | -------------
|
|Trade creditors                               |  | 1,237         |  | 2,612        
|Current corporation tax                       |  | 5,988         |  | 6,950        
|Other taxes and social security costs         |  | 1,202         |  | 4,533        
|Product royalties and purchases               |  | 401           |  | 789          
|Accrued employee compensation and commissions |  | 5,549         |  | 5,220        
|Deferred revenue                              |  | 25,983        |  | 27,967       
|Other accrued expenses                        |  | 4,500         |  | 10,200       
|                                              |  |               |  |              
|                                              |  | 44,860        |  | 58,271       
|                                              |  |               |  |              

Re-classificationsCertain
prior year amounts have been re-classified to comply with current year presentation.

Note 16 Lease commitments

Annual commitments under non-cancelable operating leases are as follows:

|                               |                                        | Land and buildings |       | Other
|------------------------------ | -------------------------------------- | ------------------ | ----- | -----
|
|
|Operating leases which expire: |                                        |                    |       |      
|                               | Within one year                        |                    | 307   |      
|                               | In the second to fifth years inclusive |                    | 2,052 |      
|                               | Over five years                        |                    | 1,265 |      
|                               |                                        |                    |       |      
|                               |                                        | 3,624              |       | 5,331
|                               |                                        |                    |       |      

69

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Note 17 Capital commitments

Capital commitments at the end of the financial year for which no provision has been made, are as follows:

|           |  | 30 April
2003 |  | 30 April
2002
|---------- |  | ------------- |  | -------------
|
|Contracted |  | 360           |  |             
|           |  |               |  |              

Note 18 Provisions for liabilities and charges

|                      |  | Restructuring
provisions
Restated |  
|--------------------- |  | --------------------------------- | -
|
|As at 1 May 2001      |  | 1,544                             |  
|Charge for the year   |  | 9,237                             |  
|Utilised              |  | (472                              | )
|Currency fluctuations |  | (10                               | )
|                      |  |                                   |  
|As at 30 April 2002   |  | 10,299                            |  
|Charge for the year   |  | 3,515                             |  
|Utilised              |  | (9,335                            | )
|                      |  |                                   |  
|As at 30 April 2003   |  | 4,479                             |  
|                      |  |                                   |  

Re-classificationsCertain
prior year amounts have been re-classified to comply with current year presentation.

The
provision for restructuring as at 30 April 2002 relates to the fundamental restructuring following the disposal of the Application Creation and Transformation Division and the
Enterprise Data Connectivity Division in the year ended 30 April 2002.

During
the year the Group recorded fundamental restructuring charges of £3.5m. The amounts were all related to the Group's previously announced restructuring programme with
the aim of re-focusing the Group into the software configuration management market, plus growth initiatives, and to return the Group to profitability.

Note 19 Called up share capital

|                        |  | Ordinary shares of 2p each: | 
|----------------------- |  | --------------------------- | 
|
|
|Balance, 30 April 2000  |  | 212,000                     | 
|Share buy-back          |  |                            | 
|Share options exercised |  |                            | 
|Shares cancelled        |  |                            | 
|Balance, 30 April 2001  |  | 212,000                     | 
|Share buy-back          |  |                            | 
|Share options exercised |  |                            | 
|                        |  |                             | 
|Balance, 30 April 2002  |  | 212,000                     | 
|                        |  |                             | 
|Share buy-back          |  |                            | 
|Share options exercised |  |                            | 
|                        |  |                             | 
|Balance, 30 April 2003  |  | 212,000                     | 
|                        |  |                             | 

70

---

The
issued shares are allotted, called up and fully paid.

Merant
plc has been authorised by its members to make market purchases of its own shares (within the meaning of section 163(3) of the Companies Act 1985). Between 11 June
2002 and 15 January 2003 the Company purchased for cancellation 11,991,229 ordinary shares with a nominal value of £240,000, representing approximately 10% of the Company's issued
share capital at the time the authority was granted. The aggregate consideration was £11,777,000, representing an average price of approximately £0.98 per ordinary share.
During the year ended April 30, 2002 the Company purchased for cancellation 20,247,291 ordinary shares at an average price of approximately £1.14 per share for an aggregate
consideration of £23,052,000. During the year ended April 30, 2001 the Company purchased for cancellation 14,408,798 ordinary shares at an average price of approximately
£0.95 per share for an aggregate consideration of £13,688,000. The shares were purchased on the London Stock Exchange and were cancelled immediately.

In
the year ended April 30 2003, 900,000 ordinary shares with a nominal value of £18,000 were issued for £894,000, representing an average price of
approximately £0.99 per share. In 2002 312,000 ordinary shares with a nominal value of £6,235 were issued for £246,000, representing an average price of
approximately £0.79 per share. In 2001 182,000 ordinary shares with a nominal value of £3,645 were issued for £207,000, representing an average price of
approximately £1.97 per share.

Note 20 Share premium and reserves

|                                |  | Share
premium
account |  | Capital
redemption
reserve |  | Profit
and loss
account |  
|------------------------------- |  | --------------------- |  | -------------------------- |  | ----------------------- | -
|
|Balance, 30 April 2000          |  | 200,421               |  |                           |  | (4,925                  | )
|Share buy-back                  |  |                      |  | 288                        |  | (13,838                 | )
|Retained loss for the year      |  |                      |  |                           |  | (50,914                 | )
|Share options exercised         |  | 204                   |  |                           |  |                        |  
|Shares cancelled                |  |                      |  | 4                          |  | (357                    | )
|Currency translation            |  |                      |  |                           |  | (5,116                  | )
|                                |  |                       |  |                            |  |                         |  
|Balance, 30 April 2001          |  | 200,625               |  | 292                        |  | (75,150                 | )
|                                |  |                       |  |                            |  |                         |  
|Share buy-back                  |  |                      |  | 405                        |  | (23,455                 | )
|Retained loss for the year      |  |                      |  |                           |  | (62,026                 | )
|Share options exercised         |  | 240                   |  |                           |  |                        |  
|Goodwill previously written off |  |                      |  |                           |  | 11,732                  |  
|Currency translation            |  |                      |  |                           |  | 4,252                   |  
|                                |  |                       |  |                            |  |                         |  
|Balance, 30 April 2002          |  | 200,865               |  | 697                        |  | (144,647                | )
|                                |  |                       |  |                            |  |                         |  
|Share buy-back                  |  |                      |  | 240                        |  | (11,777                 | )
|Retained loss for the year      |  |                      |  |                           |  | (12,498                 | )
|Share options exercised         |  | 876                   |  |                           |  |                        |  
|Currency translation            |  |                      |  |                           |  | (2,518                  | )
|                                |  |                       |  |                            |  |                         |  
|Balance, 30 April 2003          |  | 201,741               |  | 937                        |  | (171,440                | )
|                                |  |                       |  |                            |  |                         |  

The
cumulative value of goodwill written off on acquisitions between December 23 1989 and April 30 2003 was £nil (2002: £nil). Goodwill previously
eliminated against reserves has been taken to loss on termination of business operations. The amount of goodwill written off prior to December 23 1989 is not readily available and has been
omitted on the grounds that it is not likely to be material.

71

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Note 21 Financial instruments

An explanation of the Group's objectives, policies and strategies for the role of financial instruments in creating and changing the risks of the Group in its
activities is set out below.

Merant's
principal financial instruments comprise cash and short-term deposits. The main purpose of these financial instruments is to fund the operations of the business.
Merant has various other financial instruments, such as trade debtors and trade creditors, that arise directly from its operations. It is, and has been, throughout the period under review, the Group's
policy that no trading in financial instruments is undertaken.

The
main risks arising from the Group's operations are liquidity risk and foreign currency risk. The Board reviews and agrees policies for managing each of these risks and they are
summarised below. These policies have remained unchanged during the period under review.



The Group's objective is to maintain a balance between maximisation of investment returns and liquidity by restriction of the permitted investments and the
duration to maturity of those investments.



As a result of the significant investment in overseas operations, movements in foreign currency exchange rates can significantly affect the Group's balance sheet.
Historically, the majority of our revenue arose in U.S. dollars, whereas our costs were incurred approximately equally in U.S. dollars and other currencies, predominately pounds sterling. More
recently, however, the currencies of revenue and expenses have been closely aligned. Nevertheless, fluctuations in exchange rates, particularly between the U.S. dollar and the pound sterling, may have
a significant impact on the Group's operating results. In 2003 and 2002 fluctuations between the U.S. dollar and the pound sterling have been significant, going from $1.4572 per £1 at
30 April 2002 to $1.5982 per £1 at
30 April 2003. However the Group has managed its assets and liabilities in such a way so as to minimize the overall net impact and, hence, net exchange rate gains or losses on operational
transactions have not been significant.

The
Group also has transactional exposures. Such exposures arise from sales or purchases by an operating unit in currencies other than that unit's functional currency.

Interest rate exposures:

The interest rate risk profile of the Group's financial assets, excluding short-term debtors and creditors, is as
follows:

|                                |  | 30 April
2003 |  | 30 April
2002
|------------------------------- |  | ------------- |  | -------------
|
|Floating rate financial assets: |  |               |  |              
|U.S. dollars                    |  | 37,283        |  | 64,466       
|Euro                            |  | 5,067         |  | 4,352        
|Sterling                        |  | 1,733         |  | 1,299        
|Japanese yen                    |  | 363           |  | 594          
|Australian dollars              |  | 560           |  | 332          
|Korean won                      |  | 308           |  | 295          
|Indian rupees                   |  | 216           |  | 244          
|Other currencies                |  | 8             |  | 38           
|                                |  |               |  |              
|                                |  | 45,538        |  | 71,620       
|                                |  |               |  |              

72

---

Floating
rate financial assets comprise cash balances on current accounts and money market deposits at call. Where these assets are interest bearing, interest rates are set by the
respective depositaries.

Currency exposures:

The Group's objectives in managing currency exposures arising from its net investments overseas are explained above. Net foreign currency monetary
assets/liabilities held by the Group's sterling operations are as follows:

|                 |  | 30 April
2003 |  | 30 April
2002
|---------------- |  | ------------- |  | -------------
|
|U.S. dollar      |  | 20,044        |  | 19,198       
|Euro             |  | 1,267         |  | 926          
|Japanese yen     |  |              |  | 354          
|Other currencies |  |              |  | 20           
|                 |  |               |  |              
|                 |  | 21,311        |  | 20,498       
|                 |  |               |  |              

Fair values:

The fair values of all the Group's financial assets and liabilities, excluding short-term debtors and creditors, which have been determined on the
basis of market value, are not materially different from the book values shown below:

|                               |  | 30 April
2003 |  | 30 April
2002
|------------------------------ |  | ------------- |  | -------------
|
|Primary financial instruments: |  |               |  |              
|Cash and bank deposits         |  | 45,538        |  | 71,620       
|                               |  |               |  |              
|                               |  | 45,538        |  | 71,620       
|                               |  |               |  |              

Note 22 Contingent liability

In December 1998 and January 1999 seven class action securities complaints were filed in the United States District Court for the Southern District
of New York against the Company and certain of its officers and directors. The Court ordered the seven cases consolidated, appointed lead plaintiffs and lead counsel, and ordered the filing of a
consolidated amended complaint, which was filed on 9 June 1999. The lead plaintiffs sought to have the matter certified as a class action of purchasers of American Depositary Shares of the
Company during the period from 27 June 1998 to 12 November 1998, including the former shareholders of Intersolv, Inc. who acquired American Depositary Shares of the Company in
connection with the merger involving the two companies. The consolidated complaint alleged various violations of the U.S. Securities Act of 1933 and the U.S. Securities Exchange Act of 1934 and sought
unspecified compensatory damages for alleged failure to disclose material non-public information concerning the Company's business condition and prospects. In May 1999, the Company filed a
motion to transfer the matter to the Northern District of California, and the Court granted the Company's motion in November 1999. The action was transferred in December 1999 to the Northern District
of California. After the action was transferred to California, plaintiffs again amended their complaint alleging the same claims as described in the prior amended complaint but without the 1934 Act
claims or the class period. The defendants filed a motion to dismiss the newly-amended complaint in June 2000 and plaintiffs opposed this motion. A hearing on the motion took place in September 2000.
On 20 December 2000 the Court issued a ruling granting in part and denying in part the

73

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defendant's
motion to dismiss. The court dismissed all of plaintiffs' allegations, with the exception of certain allegations that defendants misled the market regarding the Company's plans for its Y2K
business. On 16 February 2001, the defendants answered the second consolidated amended complaint, denying the remaining allegations and asserting affirmative defences against the claim. On
19 June 2001 the Court entered a Stipulation and Order Regarding Class Certification ("Class Certification Order").

On
21 August 2002 the parties entered into a Stipulation of Settlement (the "Settlement Agreement") under which all claims in this litigation were settled. All payments made under
the Settlement Agreement to settle this litigation and all associated costs were paid by the Company's insurance carrier. On December 18 2002, the United States District Court for the Northern
District of California finally approved the settlement and the case was dismissed.

The
Company and its subsidiaries are also involved in legal proceedings, claims and litigation arising in the ordinary course of business. Although the ultimate results of these legal
proceedings, claims and litigation are not currently determinable, in the opinion of management these matters will not materially affect Merant's financial position, results of operations, or
liquidity.

Note 23 Share Plans

Employee share option plans

The Company's share option plans provide for the grant of options to acquire shares to persons who devote substantially all their working time to Merant. The
exercise price of options issued under these plans is 100% of the fair market value at the time such options are granted. Options are generally exercisable in monthly or annual installments commencing
one year after the date of grant. Unexercised options lapse as a consequence of the option holder ceasing to be employed by Merant or at a predetermined expiry date (of up to ten years from the date
of grant), whichever occurs first.

In
September 1998 shareholders approved the 1998 Share Option Plan, which authorised the Company to grant a maximum of 21,552,000 under the 1998, 1996 and 1991 Share Option Plans. This
authority will expire on 24 September 2008.

Options
are also outstanding as a result of grants made under Merant's previous share option plans and under share option plans adopted by Merant as a result of corporate acquisitions.
Authority to grant new options under these plans has expired, but options granted under those plans continue to be exercisable in accordance with the original grant rules, or the acquisition
agreements.

In
addition to options granted by the Company, Merant Trustees Limited ("MTL") is permitted to acquire ordinary shares in the Company and to grant options over them, under
the terms of the Merant Employee Benefit Trust 1994 and the Employee Benefit Trust 2003 ("the Trusts"). The Trusts were established to further the Company's policy of encouraging employee share
ownership. At 30 April 2003 MTL owned 6,318,087 shares, of which 2,000,000 were reserved for options which had been granted by MTL and remained outstanding as at 30 April 2003. The
remaining 4,318,087 shares were available for the grant of further options and for the Employee Share Purchase Plan (see "Employee Share Purchase Plans", below). The shares held by the Trusts are
included in investment (see note 13).

74

---

Share
option activity under all of the share option plans is summarised below:

|                           |  | Number
of shares |   | Option price
per share
|-------------------------- |  | ---------------- | - | ----------------------
|Outstanding, 1 May 2001    |  | 22,548,223       |   | £0.34-£7.15           
|Options granted            |  | 12,755,650       |   | £0.65-£1.18           
|Options exercised          |  | (311,765         | ) | £0.73-£1.06           
|Options cancelled          |  | (9,930,732       | ) | £0.34-£7.15           
|                           |  |                  |   |                       
|Outstanding, 30 April 2002 |  | 25,061,376       |   | £0.65-£7.15           
|Options granted            |  | 7,543,850        |   | £0.72-£1.23           
|Options exercised          |  | (854,581         | ) | £0.65-£1.08           
|Options cancelled          |  | (10,385,941      | ) | £0.65-£7.15           
|                           |  |                  |   |                       
|Outstanding, 30 April 2003 |  | 21,364,704       |   | £0.65-£6.28           

Options
outstanding at 30 April 2003 were granted under the authorities indicated below:

|Authority for grant of options |  | Number
of shares |  | Option price
per share
|------------------------------ |  | ---------------- |  | ----------------------
|1996 Share Option Plan         |  | 13,250           |  | £2.12-£6.28           
|1998 Share Option Plan         |  | 18,417,264       |  | £0.65-£4.54           
|INTERSOLV plans                |  | 934,190          |  | £1.48-£3.64           
|                               |  |                  |  |                       
|                               |  | 19,364,704       |  | £0.65-£6.28           
|The 1994 Trust                 |  | 2,000,000        |  | £0.69-£0.94           
|                               |  |                  |  |                       
|Outstanding, 30 April 2003     |  | 21,364,704       |  | £0.65-£6.28           

These
options are exercisable between 2003 and 2013. The proceeds on exercise of all outstanding options at 30 April 2003 would be £25,693,000 (2002:
£35,497,000).

Not
all of the outstanding options are currently exercisable. At 30 April 2003 options for 6,350,000 shares (2002: 9,759,000 shares) were currently exercisable at prices per share
of between £0.65 and £6.28; the proceeds from exercise of these options at 30 April 2003 would be £8,862,000 (2002: £19,077,000).

Employee share purchase plans

All full-time employees are eligible to participate in the Employee Share Purchase Plan (ESPP), which was approved by shareholders at the 1999 annual
general meeting. Under the terms of the ESPP, payroll deductions are made during approximate six-month offering periods for the purpose of purchasing ordinary shares at the end of an
offering period. Participants may purchase shares at a price equivalent to 85% of the market value at either the beginning or the end of the offering period, whichever is the lower. In the year ended
30 April 2003, employees participating in
the ESPP acquired approximately 1,097,000 ordinary shares in the Company. At 30 April 2003, amounts totaling £255,000 had been collected under the plan's seventh offering period,
which expired in June 2003.

Note 24 Related party transactions

"Other debtors and prepaid expenses" (note 14) includes a loan to Mr. Greenfield, a former director of the Company, amounting to U.S. $627,000
(equivalent to £429,000 using year-end exchange rates).

In
August 1999, one of the Company's subsidiary undertakings, Merant Inc., a California corporation, entered into a loan agreement with Mr. Greenfield, who was Chief
Executive Officer of

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the
Company at the time. The loan was made in conjunction with a home purchase by Mr. Greenfield and is secured by that property.

The
following table shows the movements on the loan account:

|Years ended 30 April                          |  | 2003 |   | 2002 |  
|--------------------------------------------- |  | ---- | - | ---- | -
|
|Loan outstanding, beginning of year           |  | 429  |   | 873  |  
|Repaid during the year                        |  | (30  | ) | (476 | )
|Interest charged during the year              |  | 30   |   | 41   |  
|Difference arising from currency fluctuations |  | (37  | ) | (9   | )
|                                              |  |      |   |      |  
|Loan outstanding, end of year                 |  | 392  |   | 429  |  
|                                              |  |      |   |      |  
|Of which:                                     |  |      |   |      |  
|Principal                                     |  | 392  |   | 429  |  
|Interest                                      |  |     |   |     |  

The
loan is denominated in U.S. dollars and accrues interest at a rate of 7.5% per annum, which is comparable to mortgage interest rates in the United States and higher than the rate that Merant
generally earned on invested cash. The maximum principal outstanding during 2003 was £429,000 (2002: £880,000). The loan matured on 30 August 2003 and was repaid
on that date.

On
February 20, 2002, Merant Inc. made a loan in the principal amount of $120,000 to Robert Dunne, the company's Senior Vice President of Sales. Under the terms of this
loan, the outstanding principal balance bears interest at a rate of 5.25% per annum and the loan must be repaid through fixed and regular payroll deductions from salary and bonuses, if any, until such
time as the loan is repaid in full.

Note 25 Reconciliation of U.K. GAAP financial statements to U.S. GAAP financial statements

The consolidated financial statements have been prepared in accordance with Accounting Principles Generally Accepted in the United Kingdom (U.K. GAAP) which
differ in certain material respects from U.S. Generally Accepted Accounting Principles (U.S. GAAP). The following table

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provides
a reconciliation of the loss for the year and shareholders' funds prepared under U.K. GAAP to the equivalent information prepared under U.S. GAAP.

|                                                                  |                          | 2003    |          | 2002    |          | 2001    |        
|----------------------------------------------------------------- | ------------------------ | ------- | -------- | ------- | -------- | ------- | -------
|
|Loss for the period, in accordance with U.K. GAAP                 |                          | (12,498 | )        | (62,026 | )        | (50,914 | )      
|Purchase accounting differences(a)                                |                          | 13,371  |          | 31,614  |          | 29,233  |        
|Employee benefit trust costs(b)                                   |                          | 250     |          |        |          |        |        
|Amounts written off investments(b)                                |                          |        |          |        |          | 3,254   |        
|Loss on termination of operations(a)                              |                          |        |          | 11,732  |          |        |        
|                                                                  |                          |         |          |         |          |         |        
|Net Income / (loss) in accordance with U.S. GAAP                  |                          | 1,123   |          | (18,680 | )        | (18,427 | )      
|                                                                  | Continuing operations    |         | 529      |         | (28,674  | )       | (4,552 
|                                                                  | Discontinued operations  |         | 594      |         | 9,994    |         | (13,875
|                                                                  |                          |         |          |         |          |         |        
|Net Income / (loss)                                               |                          | 1,123   |          | (18,680 | )        | (18,427 | )      
|Shareholders' funds as reported in the consolidated balance sheet |                          | 33,316  |          | 59,215  |          |         |        
|Intangible fixed assets:                                          |                          |         |          |         |          |         |        
|                                                                  | Goodwill(a)Cost         |         | (107,821 | )       | (106,704 | )       |        
|                                                                  | Accumulated amortisation |         | 106,629  |         | 92,830   |         |        
|Investment in own shares(b)                                       |                          | (6,993  | )        | (5,858  | )        |         |        
|                                                                  |                          |         |          |         |          |         |        
|Shareholders' equity in accordance with U.S. GAAP                 |                          | 25,131  |          | 39,483  |          |         |        

The
accompanying Group financial statements included in this report are prepared in accordance with UK GAAP. The significant differences between UK GAAP and US GAAP which affect the
Group's net income and shareholders' equity are set out below:

(a)  Purchase accounting adjustments

Under U.S. GAAP, prior to the adoption of FAS 141Business Combinations,certain business combinations were
accounted for as mergers ("poolings-of-interest") and no goodwill arises on such transactions. The Company's acquisition of Intersolv, Inc. in Fiscal 1999 (year ended
April 30 1999) qualified as a pooling-of-interest under U.S. GAAP and accordingly no goodwill was recognized for US GAAP purposes. Under U.K. GAAP, the transaction was
accounted for as an acquisition and the excess of the consideration over the fair value of the assets and liabilities acquired was recorded as goodwill. This goodwill was amortised over a
4 year period which ended in September 2002.

Under
US GAAP the computation of value attributable to goodwill on an acquisition differs from the computation under UK GAAP. Amounts contingently payable on an acquisition are omitted
from a US GAAP computation until they crystallise, whereas an estimate of their value is included under UK GAAP. The Company's acquisition of Trillium in December 1999 involved estimating
amounts contingently payable for UK GAAP purposes as part of the original purchase price allocation whereas the final payments were only settled and added to the cost of goodwill for US GAAP purposes
in the year ended 30 April 2002

In
addition as part of the fair value exercise, U.S. GAAP requires an allocation of consideration to identifiable intangible assets, including any resulting from research and
development. A valuation is made of the in-process research and development of an acquired business by estimating future cash flows related to products in development. The estimated value
of products for which technological feasibility has not been established and no future alternative use exists, is required, under U.S. GAAP, to be written off against income in the first reporting
period after the business combination. Acquired research and development is not recognised as a separate asset under U.K. GAAP. When the Company acquired the Enterprise Division of
NetObjects, Inc., in February 2001, the value of in-process research

77

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and
development was identified as £5,011,000. Under U.S. GAAP, that amount was excluded from goodwill and written off against income in fiscal 2001

The
Group fully adopted the provisions of SFAS No. 142 on 1 May 2002. The standard requires that intangible assets with finite lives be amortised over their estimated
useful lives. Intangible assets with indefinite useful lives are tested for impairment annually in lieu of being amortised. Goodwill is no longer amortised on a straight-line basis over
its estimated useful life but instead is tested for impairment annually and whenever indicators of impairment arise.

At
the point of adoption the Group had unamortised goodwill of £7.8m and intangible assets with a gross carrying amount of £4.1m less accumulated amortisation of
£4.0m, under US GAAP. The definite life intangible assets are being amortised over a period of generally 5 years (amortisation expense for the period £0.1m). In
accordance with SFAS No. 142 amortisation of goodwill ceased from 1 May 2002, resulting in an increase in US GAAP net income of £2.1m.

Prior
to the full adoption of SFAS No. 142Goodwill and other Intangible Assets,on 1 May 2002, under US GAAP all goodwill
was capitalised and amortised through charges against income over its estimated life not exceeding 5 years. Provision for impairment under US GAAP was calculated where there were indications of
an impairment to the carrying value of capitalised goodwill and intangible assets, based on a projection of future undiscounted cash flows.

Under
U.K. GAAP, goodwill previously written off against reserves is included in the computation of the loss on termination of business operations recorded in the year ended
30 April 2002. Under U.S. GAAP, such goodwill is not included in the loss on termination of business operations as it has previously been fully amortised.

(b)  Investment in own shares

An employee share trust has been established in order to hedge obligations in respect of options issued under certain employee share option schemes. Under UK
GAAP, the Company's Ordinary Shares held by the employee share trust are included at the lower of cost and estimated net realisable value in fixed asset investments. In the year ended 30 April
2001, under UK GAAP the Company wrote down the book value of the shares held in the trust to below cost to reflect the net realizable value, and this cost was charged to the profit and loss account in
that year. Under US GAAP, such shares are treated as treasury stock and deducted from shareholders' equity at historic cost and accordingly this write down has been excluded from US GAAP net income.

The
Group issues options to certain executives to buy shares from the employee benefit trust. Under UK GAAP these options are compensatory if the exercise price is less than the net book
value of the shares held in trust on the date of grant. Any compensation expense is recognized ratably in the UK GAAP profit and loss account over the vesting period of the options. Under UK GAAP the
cost of the employee benefit trust is treated as an operating expense whereas under US GAAP there is no impact on profitability as the options were issued at market price on the date of issue.

Exceptional items

Certain exceptional items are shown on the face of the profit and loss account statement after operating profit. These items are mainly gains or losses on the
sale of businesses and fixed assets, and the costs of fundamental reorganizations. Under U.S. GAAP these items would be classified as operating profit or expenses.

Future accounting standards

In 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Correction,", which is effective for the financial

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year
commencing May 1, 2003. SFAS 145 rescinds SFAS No. 4, "Reporting Gains and Losses from Extinguishment of Debt"; SFAS No. 64, "Extinguishments of Debt Made to Satisfy
Sinking-Fund Requirements"; SFAS No. 44, "Accounting for Intangible Assets of Motor Carriers"; and amends SFAS No. 13, "Accounting for Leases". Merant does not expect
SFAS 145 to have a material effect.

In
November 2002, the Emerging Issues Task Force issued its consensus on EITF 00-21,Revenue Arrangements with Multiple Deliverables("EITF 00-21") on an approach to determine whether an entity should
divide an arrangement with multiple deliverables into separate units of accounting.
According to the EITF, in an arrangement with multiple deliverables, the delivered item(s) should be considered a separate unit of accounting if all of the following criteria are met: (1) the
delivered item(s) has value to the customer on a standalone basis, (2) there is objective and reliable evidence of the fair value of the undelivered item(s), and (3) if the arrangement
includes a general right of return, delivery or performance of the undelivered item(s) is considered probable and substantially in the control of the vendor. If all the conditions above are met and
there is objective and reliable evidence of fair value for all units of accounting in an arrangement, the arrangement consideration should be allocated to the separate units of accounting based on
their relative fair values. The guidance in this Issue is effective for revenue arrangements entered into in fiscal periods beginning after 15 June 2003. Merant has not yet completed an
analysis of EITF 00-21 and the related impact on its shareholders' equity or results.

In
January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities" (FIN 46). FIN 46 requires a variable interest entity to be
consolidated by a company, if that company is subject to a majority of the risk of loss from the variable interest entity's activities or entitled to receive a majority of the entity's residual
returns or both. FIN 46 also requires disclosures about variable interest entities that a company is not required to consolidate but in which it has a significant variable interest. The
consolidation requirements of FIN 46 apply immediately to variable interest entities created after 31 January 2003 and to existing entities in the first fiscal year ending after
15 December 2003. The initial adoption of this accounting pronouncement is not expected to have a material impact on Merant's consolidated shareholders' equity or results.

In
April, 2003, the FASB issued FASB Statement No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities", which amends FASB Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities," to address (1) decisions reached by the Derivatives Implementation Group, (2) developments in other Board projects that
address financial instruments, and (3) implementation issues related to the definition of a derivative. Statement 149 has multiple effective date provisions depending on the nature of
the amendment to Statement 133. Merant does not expect the adoption of this statement to have a material effect on its shareholders' equity or results.

On
15 May 2003, the FASB issued FASB Statement No. 150,Accounting for Certain Financial Instruments with Characteristics of both Liabilities and
Equity. Statement 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity.
Statement 150 is effective for all financial instruments entered into or modified after 31 May 2003. For unmodified financial instruments existing at 31 May 2003,
Statement 150 is effective at the beginning of the first interim period beginning after 15 June 2003, except for mandatorily redeemable financial instruments of non-public
entities. Merant does not expect the new standard to have an effect on its shareholders' equity or results.

In
August 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 143, "Accounting for Asset Retirement Obligations"
("SFAS 143") which requires companies to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred and a corresponding increase in the
carrying amount of the related long-lived asset. SFAS 143 will be effective for financial statements for fiscal years beginning after June 15, 2002.

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We
believe the adoption of SFAS 143 will not have a material impact on our financial position or results of consolidated operations.

Net income (loss) per share

The following table discloses net income (loss) per share, in pence, computed in accordance with U.S. GAAP:

|                                                            |                            | 2003    |     | 2002    |       | 2001    |      
|----------------------------------------------------------- | -------------------------- | ------- | --- | ------- | ----- | ------- | -----
|Basic net income (loss) per share                           |                            | 1.1     | p   | (14.9   | )p    | (13.7   | )p   
|                                                            | Continuing operations      |         | 0.5 | p       | (22.9 | )p      | (3.4 
|                                                            | Discontinued operations(1) |         | 0.6 | p       | 8.0   | p       | (10.3
|Diluted net income (loss) per share(2)                      |                            | 1.1     | p   | (14.9   | )p    | (13.7   | )p   
|                                                            | Continuing operations      |         | 0.5 | p       | (22.9 | )p      | (3.4 
|                                                            | Discontinued operations(1) |         | 0.6 | p       | 8.0   | p       | (10.3
|Weighted average number of shares in issue, in thousands(2) |                            | 100,739 |     | 125,263 |       | 134,305 |      

---

Comprehensive income

The following table reconciles net income (loss) to comprehensive (loss), computed in accordance with U.S. GAAP:

|                            |                                                      | 2003   |        | 2002    |       | 2001    |       
|--------------------------- | ---------------------------------------------------- | ------ | ------ | ------- | ----- | ------- | ------
|
|Net income (loss)           |                                                      | 1,123  |        | (18,680 | )     | (18,427 | )     
|Other comprehensive income: |                                                      |        |        |         |       |         |       
|                            | Unrealized gain on marketable securities, net of tax |        |       |         | 69    |         | 87    
|                            | Currency translation difference                      |        | (3,207 | )       | 6,532 |         | (3,868
|                            |                                                      |        |        |         |       |         |       
|Comprehensive (loss)        |                                                      | (2,084 | )      | (12,079 | )     | (22,208 | )     

Consolidated statement of cash flows

The consolidated statement of cash flows prepared under U.K. GAAP presents substantially the same information as that required under U.S. GAAP but may differ with
regard to classification of items within the statements and as regards the definition of cash under U.K. GAAP and cash and cash equivalents under U.S. GAAP.

Under
U.S. GAAP cash and cash equivalents include short-term highly liquid investments but do not include bank overdrafts. Under U.K. GAAP, cash flows are presented
separately for operating activities, returns on investments and servicing of finance, taxation, capital expenditure and financial investment, acquisitions and management of liquid resources and
financing. U.S. GAAP, however, requires only three categories of cash flow activity to be reported: operating, investing and financing. Cash flows from taxation and returns on investments and
servicing of finance shown under U.K. GAAP would be included as operating activities under U.S. GAAP. The payment of dividends would be included as a financing activity under U.S. GAAP. Under U.K.
GAAP all interest is treated as part of

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returns
on investments and servicing of finance. Under U.S. GAAP capital expenditure and financial investment and acquisitions are reported within investing activities.

|                                                                |                  | 2003    |        | 2002    |        | 2001    |       
|--------------------------------------------------------------- | ---------------- | ------- | ------ | ------- | ------ | ------- | ------
|
|Cash flow from operating activities in accordance with U.S.GAAP |                  | (7,885  | )      | (23,164 | )      | 22,116  |       
|Cash flow on investing activities                               |                  | (2,275  | )      | 55,969  |        | (9,426  | )     
|Cash flow from financing activities                             |                  | (10,880 | )      | (23,379 | )      | (15,369 | )     
|                                                                |                  |         |        |         |        |         |       
|Cash and cash equivalents                                       |                  | (21,040 | )      | 9,426   |        | (2,679  | )     
|Effect of foreign exchange rate changes                         |                  | (5,042  | )      | 2,977   |        | (5,281  | )     
|                                                                |                  |         |        |         |        |         |       
|Cash and cash equivalents:                                      |                  | (26,082 | )      | 12,403  |        | (7,960  | )     
|                                                                | At start of year |         | 71,620 |         | 59,217 |         | 67,177
|                                                                | At end of year   |         | 45,538 |         | 71,620 |         | 59,217

At
April 30, 2001, cash and cash equivalents under U.K. GAAP included short-term investments totalling £1,983,000. The company had no
short-term investments at April 30, 2003 or April 30, 2002.

Note 26 Companies Act 1985

These financial statements do not comprise the company's "statutory accounts" within the meaning of Section 240 of the Companies Act 1985 of Great Britain.
Statutory accounts for the year ended April 30 2003 will be delivered to the Registrar of Companies for England and Wales in due course and statutory accounts for the year ended
April 30, 2002 and 2001 have been delivered. The auditors' reports on these accounts were unqualified.

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ITEM 18. FINANCIAL STATEMENTS

See Item 17

ITEM 19. EXHIBITS

|2.01(2)  |  | Memorandum of Association of Merant dated as of March 28, 1983, as amended and restated to date                                                                                                             
|-------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.02(1)  |  | Articles of Association of Merant adopted as of June 19, 1996, as amended and restated to date                                                                                                              
|2.03(1)  |  | Form of Specimen Certificate for Merant's ordinary shares at GBP 0.02 each                                                                                                                                  
|2.04(2)  |  | Amended and Restated Deposit Agreement dated as of March 16, 1998 among Merant, the Bank of New York and all owners and holders from time to time of American Depositary Receipts                           
|2.05(3)+ |  | Merant's 1994 Employee Benefit Trust                                                                                                                                                                        
|2.06(1)+ |  | Merant's 1998 Share Option Plan, as amended                                                                                                                                                                 
|2.07(1)+ |  | Merant's 1998 Inland Revenue Approved Share Option Scheme                                                                                                                                                   
|2.08(1)+ |  | Merant's 1999 Employee Share Purchase Plan                                                                                                                                                                  
|2.09(2)  |  | Form of Indemnification Agreement entered into by Merant with each of its directors and certain executive officers                                                                                          
|2.10(2)  |  | Form of Indemnity Agreement entered into by Merant Incorporated, a subsidiary of Merant ("Merant Incorporated"), with each of its directors and certain executive officers of Merant and Merant Incorporated
|2.11(4)  |  | Agreement and Plan of Reorganization among Micro Focus Group plc, Tower Merger Sub, Inc. and INTERSOLV, Inc. dated June 17, 1998.                                                                           
|2.12(5)  |  | Asset Sale and Purchase Agreement by and between NetObjects Inc. and Merant Inc. dated January 8, 2001.                                                                                                     
|2.13(5)  |  | Purchase Agreement by and between Merant plc and Micro Focus International Limited dated June 11, 2001.                                                                                                     
|2.14(5)  |  | Amendment No. 1 to Purchase Agreement by and between Merant plc and Micro Focus International Limited dated August 10, 2001.                                                                                
|2.15(5)  |  | Purchase Agreement by and between Merant plc and Data Direct International Limited dated September 10, 2001.                                                                                                
|2.16(5)  |  | Agreement for the Sale and Purchase of Land at The Lawn 22-30 Old Bath Road, Newbury, Berkshire.                                                                                                            
|2.17*+   |  | Merant Employee Benefit Trust 2003                                                                                                                                                                          
|2.18*+   |  | 2003 Merant Share Incentive Plan, as amended                                                                                                                                                                
|23.01*   |  | Consent of Ernst & Young LLP                                                                                                                                                                                
|23.02*   |  | Consent of KPMG Audit Plc                                                                                                                                                                                   
|         |  |                                                                                                                                                                                                             

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|21.01* |  | Schedule ofprincipal subsidiary undertakings at April 30, 2003                                                  
|------ |  | ----------------------------------------------------------------------------------------------------------------
|99.01* |  | Certification of Chief Executive Officer and Chief Financial Officer under Section 302 of the Sarbanes Oxley Act
|99.02* |  | Certification of Chief Executive Officer and Chief Financial Officer under Section 906 of the Sarbanes Oxley Act

---

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SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the
undersigned to sign this annual report on its behalf.

| |  | By:    |  | /s/SCOTT HILDEBRANDT                             
| |  | ------ |  | -------------------------------------------------
| |  | Name:  |  | Scott Hildebrandt                                
| |  | Title: |  | Senior Vice President and Chief Financial Officer

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